Q4 2019 Earnings Call

Dead dead dead dead. Ladies and gentlemen. Thank you for holding and welcome to the Q4 and full year 2019 birth.

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At this time all participants are in a listen-only mode after the speaker's presentation. There will be a question-and-answer session to ask a question. You will need to press star one on your telephone box. You see that this conference is being recorded today and I would not like to hunt the conference over to your first Speaker today taligent, please go ahead. Thank you. Good morning. Ladies and gentlemen, I'm Kelly Chen corporate vice president and chief marketing officer this big group Welcome to our fourth quarter and full-year 2019 earnings conference call on Thursday. We also have with us mr. Off earlier in chief executive officer and mr. Levi Chief Financial Officer before we begin I would like to remind you that during this conference call will be making forward-looking statements about our financial guidance for the first quarter of 2020 Revenue growth in 2020 growth initiatives being on an upward trajectory and being Prime.

Revenue drivers optimism about the

For engagement by thing with strategic customers recovery of unified Communications segment in twenty-twenty and momentum and growth of fuel in Europe and the us we assume no obligation to update it out for looking statement for more information about the risks and factors that could affect forward-looking statement made during please refer to the risk factor discussed in our 2018 from 10K another received a report. We have fine now, I would like to turn the call over to off earlier came our chief executive officer over the floor is yours.

Thank you, darling. Good morning, everyone and thanks for joining us today.

I hope that you have the opportunity to read or press release which we distributed earlier this morning. I would like to begin by reviewing our results for the fourth quarter and the full year off then commenting on the progression of our business plan and finally providing context for Outlook in a short while draw will provide you with detailed comments about our financial results for the fourth quarter and the full year and our outlook for the first quarter of 2020. Our fourth-quarter results were ahead of guidance on most Financial metrics revenues of twenty nine point three million dollars grew by 12% year-over-year while declined by 6% on a sequential basis.

we ended the

Order with record-high revenues from growth initiatives reaching nineteen point six million dollars and accounting for two-thirds of our revenues. This accomplishment drove quarterly gaap and non-gaap gross margin expansion to 50.9% and 51.2% respectively.

growth initiatives benefited from solid momentum across all product segments

smart Voice Smart Home and unified Communications each grew by 21% 63% and 17% year-over-year respectively off.

With annual revenues of 73.8 million from growth initiatives representing 63% of total revenues and driving gross margin to sustainable level or 50% plus throughout the quarters 2019 marks the year in which DSP groups succeeded in positioning itself as a leading voice in iot technology company while maintaining solid engineering and financial discipline.

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Of the year with revenues of 117.6 million dollars flat on a year-over-year basis and despite the demands shortfall in the unified communication system that we experience in 2019 growth initiative revenues still increased by 15% year-over-year surpassing the revenue growth level, 2018 or 12% and driving annual gaap and non-gaap gross margins to a record high of 50.6% and 51% respectively.

Lastly during the year. We generated 10.5 million dollars of cash flows from operations and ended the year with a cash balance of $131,000.

We're thrilled by the momentum and acceptance of our new products and Technologies and excited about the number of new engagements. We have secured with strategic customer at CVS twenty-twenty in January voice user interface in a I took center stage and our Solutions were an integral part of that during the show. We successfully demonstrated our leadership and best-in-class Technologies for voice and iot moreover. We presented a record number of newly launched products by Leading consumer Brands tier one service provider and leading oems integrating our smart Voice Smart Home and unified Communications products across iot mobile Computing Enterprise, and he rebelled applications and here are a few examples.

Today are smart voice.

Questions are driving voice e y and AI in a broad array of applications with over eighty products by forty plus vendors including tier-one Brands such as Arlo Facebook GoPro Logitech Lenovo Samsung that leverage our voice and solutions to design and bring to Market Hi-Life differentiated and Innovative product in our smart home segments three leading tier-one service providers selected are usually product as their Primer Wireless iot technology including Orange in France and ATT in the US and driving more over ends and odms to take advantage of active role in the growing usually ecosystem in the unified Communications. We establish our leadership position by securing engagements with all of the top certainly dead.

Enterprise the weekends including Cisco very apology link

Might tell a l e n n e c these strategic achievements along with our exceptional pipeline of design engagement solidify our success and validate that our growth initiatives will continue their upward trajectory and become the primary driver of our business going forward.

No, I'd like to move on to the business update by segment starting with smart voice during the quarter. We generated revenues of approximately 4.9 million dollars from Samsung Smart voice products representing a year-over-year growth of 21% versus the fourth quarter of 2018 while representing a decline of 1% off a sequential basis.

We're delighted with the performance of the smart voice segment since 2019 reaching record revenues of 19.3 million and growing by 58% versus 2018.

During the quarter we continue to expand our product reach and engagements with leading consumer electronics Brands as demonstrated by the following new product launches off Facebook launched a highly Innovative video conferencing system. It's portal TV integrating are high-performance Advanced Audio and machine-learning SLC off Leviton Decora dimmer with Alexa voice service in support leveraging our audio with our voice processing Factory Things featuring noise reduction beam forming an echo cancellation.

The hardware and the algorithms are optimized for small footprint fossil performance and low-cost nortech selected are smart voice product for its numerous personal emergency response system supporting long battery life while adding always listening features.

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Achievements coupled with the recent wins in the smartphone market including the newly launched up. Okay to smartphone continue to demonstrate the depth strength and diversity of our smart voice franchise and our ability to drive down power consumption while raising the bar on quality and performance devices at CES. We demonstrated how we are leveraging our voice expertise to create innovative solutions as the next Frontier in machine learning is now applied to voice as I'm processing gets performed at the edge to address privacy concerns reduce latency and to make better use of available bandwidth more efficient found where and Associated algorithms must be tightly coupled an optimized to meet consumers requirements.

We will continue to enrich our product portfolio with the suite of algorithms and Hardware that address the rising need to create increasingly accurate AI solution for each devices for applications such as sound detection proximity acoustic be cleaning and more all while maintaining the lowest power consumption. We believed that a smart waste bins will continue to be a pivotal growth driver powering a broad array of exciting new applications.

moving on to the Unified

Communication segment is the fourth quarter, which is revenues of ten million dollars representing a year-over-year increase of 17% by flat on a sequential basis wage. When did the year with revenues of 38.1 million dollars representing a year-over-year decrease of 2% And while we're disappointed by this resolved in a tribute the revenue shortfall mainly to a delaying timing of orders originating from uncertainties related to trade were concerns as well as weakness in Enterprise. I'm not spending we remain highly confident in the recovery of the segment this year propelled by the high-volume design. We we secured in 2019 that already commenced Mass shipment and is expected to contribute in a meaningful way to our 2020 revenues as well as additional designs. We secured include dead.

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And two other odms that launched new lines of IP phones with dual color displays a tier one that launched a new series of IP phones for the UK's Market to competition on premise portfolio.

Based on our engagement pipeline. We're confident that we are positioned well throughout performance and revenue growth in the unified communication segment this year.

Turning to our smart home product line during the fourth quarter. We generated four point seven million in revenues representing a year-over-year increase 63% an increase of 23% on a sequential basis full you're smart on revenues of 16.3 billion dollars grew by 12% year-over-year.

During the quarter. We accomplished a milestone event for this big room and secured our first significant win in the US.

we should

Paved the path for you release broad market adoption in the Americas ADT a leading US security service provider announced that it has selected are usually technology as its primary connectivity for its new wireless security offering the system, which was demonstrated at CS includes a lineup of iot sensors as well as a hub and camera and moreover. Some of these devices will also incorporate our smart voice technology. We're excited by the momentum of the technology package this achievement to propel faster expansion of the ecosystem with additional products and brand as well as adoption by additionally in service provider of this momentum is also evidenced by the following wind a new product launches. Golden Mark selected are usually technology for its new line of Wireless smart cam.

devices including an in-wall dimmer in

Switch plug-in dimmer plug-in switch and water leak detector.

Uma launch Smart Security keypad based on are usually technology the keypads allows allows control of smart security system that already includes a siren as well as emotion a sensor door window sensor water sensor to detect leaks and a garage door sensor all of which run are usually technology.

We're open Mystic about the design momentum and growth of this product category in 2020 and Beyond on the heels of the strong traction for usually both in Europe and the US and now to an update on the cornerstone Market a fourth-quarter quotas phone Revenue was in line with our expectations hold this revenues declined by 80% year-over-year nine point seven million dollars and accounted for only 33% of total for for the revenues for the full year 2019 our coldest business generating revenues or forty forty three point nine billion dollars representing a decline of 18% year-over-year, which is in line with the secular decline pattern of 15 to 20%

we continue to

Manage discussion Which business and reinvest is profit to fuel future growth in our well performing growth initiatives.

No for an update on our outlook for the first quarter taking into account the focus. We received from customers in our own assessment. We expect our first quarter revenues to be in a range of twenty eight million dollars to Thirty million dollars the midpoint of this guidance range implies a year-over-year revenue growth of three-per-cent the midpoint of the guidance office supplies. The growth initiatives should account for 60 to 64% of our first quarter revenues to summarize. We are excited by the market responds to our products and Technologies as well as the growing number of tier-one Engagement. We believe that these accomplishments with solidify our future success with heels of a strong pipeline of design green which are expected to contribute to solid performance and revenue growth this year now. I would like to turn the call over.

where to draw our chief financial

Officer draw the floor is yours. Thank you all so I will now review the income statement for the fourth quarter of 2019 from top to bottom for each line item. I will pass by the US gov results as well as equity-based compensation expenses included in that line item. The expenses related to previous acquisition and exchange rate differences related to a new age thing stands out related to long-term list.

All revenues for the fourth quarter of 2019 worth 29.3 million gross margin for the quarter was 50.9% gross margin for the quarter off include an equity-based compensation expenses in the amount of Point 1 million dollar warranty expenses were eight point eight million dollar including equity-based compensation expenses off the amount of point six million dollar.

Operating expenses for the quarter. We're 16.1 million including equity-based compensation expenses in the amount of 1.7 million dollars and amortization of the club. Did you belong in the amount of Point 1 billion dollars?

Finish your income for the quarter.

4.5 million total income for the quarter included $1000000 of exchange rate differences related to a new accounting standards related to long-term leasing office. This exchange rate differences were excluded from our results for the quarter.

Income tax benefit for the quarter was point six million dollar and include the tax benefit resulted from changes in federal taxes related to intangible assets and equity-based compensation expense wage in the net amount of point three million dollars.

Net loss was Point 1 million dollar including equity-based compensation expenses of 1.8 million dollar amortisation of intangible assets this point 1 million dollar exchange rate differences in the amount of $1 and the tax benefit effect of point three million dollars.

Non-gaap net income excluding. These items just described was one point six million dollar for the bottom with no Gap any pressure for the quarter the negative impact of the base compensation expenses. GPS was seven cents the positive income of the Deferred taxes on GPS was $0.01 and the non-gaap diluted earnings per share excluding these items. It's just described was $0.06 special. Please see the cars report on form 8-k that we filed with the SEC this morning for a full court conciliation of the non-com presentation to the presentation.

No.

So the balance sheet available in the end of the fourth quarter 2019 decreased to Fifteen point four million dollar compared to twenty one point six million dollar and the end of the summer representing a level of 47 days of six our inventory decreased from eight point seven million dollars in the end of the third quarter to seven point five million dollar representing a level of 47 days or cash and marketable securities increased by ten point four million dollar during the fourth quarter and where the level of 131.5 is on December 31st.

Okay, so marketable Securities position during the quarter was affected by the formula.

10.8 million of cash was provided operations point three million dollars cash was used for purchase of property and Equipment Point 1 million dollar sketch received collect sizes of options buying. Point two million dollar was the change in the market value and amortisation of multiple Securities. Now, I would like to provide you with a full attention for the first quarter of 2020 our first-quarter projections, including the impact of equity-based compensation extension and acquisition-related expensive or is that revenues are expected to be in the range of 28 million to 30 million.

we expect

Cross margin to be in the range of 50% and 52%

on the expected expected to be higher than our own weight in the range of ten million dollar to $11 for the remainder of the year are in the expenses. I expect it to be back to the level eight million dollar to ten million dollar per quarter.

Operating expenses are expected to be in the range of $17 to $19 Financial income is expected to be in the range of $500,000 to 7 a.m. We do not expect to have any taxes on income or a tax benefit for the water on a non-gaap basis.

And I was standing is expected to be in the range of 24 million shares to 25 million shares.

Our first call to projects and include point one in a dollar of our first-quarter projections. Also include the following amount forecasted for equity-based compensation package cost of goods sold include Point 1 million dollar. I earned the expenses include point seven million dollar two point nine billion dollar and total operating expenses incurred one point nine billion dollar two point 1 million dollar and now I would like to open up the line for questions and answers operator. Thank you, sir. Ladies and gentle and we will not begin the question-and-answer session. If you wish to ask a question, please press star one on your telephone keypad and wait for your name to be announced you can cancel your request at any time by pressing the key. Once again, it's star one to ask a question. And your first question comes from the line of Matt Ramsey from Cohen, please go ahead your line. He's open.

Thank you very much over. It was obviously at CES as well.

To hear about the ADT design win and it seems like you all these starting to get a little bit of a foothold. Maybe you could talk a bit about your expectations for the size of that design wind as it rolls out and and then secondly if I'm not mistaken, I think it's on their DIY platform and maybe you could talk if there's opportunities on song mainstream platform at ADT in as well and and what the difference is might be in between their mainstream platform and the DIY one. Thank you.

Hi Matt. And thanks for your question. So relating to the momentum and indeed we are excited and for the last couple of years usually was a phenomena that was mainly European one where we were mainly addressing in designing, uh, the technology package with the leading both security and Telecom service providers. And and and today have a both very sure which is part of securitized direct the entire smart home and magenta smartphone and also Amazon connect Amazon photos, which are the smart home and secured home of orange that are all based on faith the only technology and actually during 2019. We've made significant efforts to Market and promote the technology package.

the US

And we believe that the technology is unique characteristics in the form of the it's natural support for voice and voice is a key requirement for the security service providers, which is today is very important use case that will be deployed and used by a major security service providers. And when we look at this domain we do see in a way to different markets that are today wage is by many different security than those both coming from the do-it-yourself Ur. This is the ability to purchase a security system basically complete Security system in retail install it subscribe to a certain level of service and phone number.

then without run

And and get a certain level of of capabilities with respect to to home monitoring and the ability to have access to all kinds of additional Services versus the traditional Professional Security market and you know when we look at the job market like the US with about a hundred and twenty million households, we see a great opportunity if in security for you early for our products and Technologies, including a smart voice and we believe that there will be a continued growth in this market by the adoption of more DIY as as well as the existing a professional security.

We definitely see today that the DIY is Market is burgeoning and we see a lot of the activity and a lot of new brands the fact that the address in this this Market initiative and there's also of course the professional side which is handled by, you know, fairly stable and that's significant. So it's quite effective such as ADT from the the expectations point of view. I would say that it is still too early to say what the the impact would be but we definitely have the expectations to see that being a driver in our small town revenues this month as you could understand both from ACS as well as from the prepared comments that they each system is shipping with numerous dead.

It keeps its that'll basically existing in almost every

The sensor as well as in in in in many of the sensors it smart smart voice capabilities. So the dollar content here is is fairly rich and and we do expect also like to see the volumes. This product is now hitting retail and we will of course monitor it very closely and and then try to provide you with information as we can but in addition we are also hopeful that we will see following, you know, the the Bellwether wage type of service provider that has that has chosen the dissolution of the DIY that there will be also a further opportunities to penetrate also the professional side as well as the ability to engage and leverage what we have done so far and what we can it provide this Market with this natural support for to wait for Thursday.

voice activation a lot of AI capabilities

We believe that this will be very highly applicable to many other participants in this market. And this is definitely, you know, part of our operating plan took the next two years. So we are very excited about the momentum and and and and I think that you you've seen a lot of that at CS.

Thanks. So for for for all the detail there as my follow-up drawer. I wanted to ask about gross margin obviously mix helps but I remember when we were having the conversation of how to get the company out of the low 40s. And and now you're in the low fifties. So well done on that front. I wonder if you could give us some some commentary going forward how you think margins might change and and maybe remind us of the collection of your growth businesses. How far above the deck business are those just a separation of gross margin there on mix would be helpful. Thank you God. Yeah. Sure. Thanks for the question man. So so first of all I saw it is also when you looking at the first quarter of 2020 already see that the midpoint is at 55% This is better than we were in averaging in nineteen. So we are already looking to improve margins and we believe that when we look throughout the year we can even improve

the this number

To maybe something which is like closer to 5152 overall as you rightly indicated too fast to the first. This is like the mix of the products were revenues in that would say like you took Communications smart voice and also smart home tend to have better gross margin because that's as we see that from year to year. And this is also something that deals with, you know presentations. Once we see that the same question of this growth initiative increase. We also did margins went up with the settle for something sent to above 50. This is one thing the other thing that we expect to see in 2020 is gross revenue. So portion of our gross margin on the cost of good is also fixed and once Revenue growth this proportion of the fixed expenses decreases. So we also expect this to have some impact on Improvement on Gross margins in the first quarter also throughout the throughout the year. These are how we say the two main factors the mix and and the level of revenues dead.

Thanks again guys.

Appreciate it.

Thank you. And your next question comes from the line of Jason's metal. Flake Street, please go ahead your line is open.

Hey guys. Thanks for taking my questions. Just want to start on the unified communication segment. I know excess inventory in the channel. It really impacted 2019. Do you think that inventory is now closed.

Hi Jason, so if I understood correctly you question was on the the excess inventory that we we saw early last year or even back and forth quarter of 2018 whether this is this is a cleared or Not So based on our understanding about the market dynamics, you know 2019 as a as a calendar year was was quite challenging for for this category as you actually mentioned. We started the year with this pile of inventory that originated from the trade World Trade War concerns and the need to perhaps, you know, get off boots outside of of China and have them off show so that they won't be subject to any future terrorists and then during the year these concerned continued and actually in October the

Tourists were supposed to hit this.

Category and at the end of the day and the the the the was a deal that that that was signed in the way these these diets never really took place off but we also saw during 2019 in March slower spending that also hit this category and in a way slow down the depletion of of that inventory from where we are today. And again, it's not that we have very clear visibility into the channel inventory because this Market has multiple layers until you actually reach the empty and customer unlike retail. We believe we're of the belief in the bath no check that the levels of inventories are much much lower than where they were when we started last year meaning. Yep.

Inventories are much much closer to normal levels. And so right now we don't see, you know inventories or excess inventories as an issue for the execution during this year. And we believe that with the good pipeline of of new way a product of know we must production. We are well-positioned for a for Revenue growth this year and that the new design win. That was a prolong the into very late last year is now fully ramped up and in mass production and that basically, you know built a lot of confidence in in in our ability to wage. Actually they mitigate is that would be any any weakness with with growth in this category throughout twenty-twenty and I think that you know during this year we are very hopeful that wage.

to secure even more lucrative

It's okay. It's that will in a way fuel up our expectations and our ability to access form also in the next couple of years.

Okay, that's very helpful. And then just as a follow-up, I think last quarter non smart phone applications within smart boys was over seventy percent curious what it was in Q4 and if you expect sorry composition to remain relatively stable in 2020. Yes. So with respect to the smart voice Product Company took position smartphone versus the non smartphone categories. I believe that for the year for 2019. It was it was roughly a 25% off the smartphone and 75% non smart phones. And actually the 75 was you know, quite evenly allocated towards tablets cameras and and down payment these all the the the TV's remote controls and the over-the-top a products and if I look at Q4

You know I would tend.

To assume that it was you know, shy of twenty percent 2 smartphones and and about the 80% for non-smartphones. Um, and you know, smartphones will fluctuate depending on their lunch date and they usually the life cycle is especially short for model. So I think that will be the will continue to be fluctuation. So this year but I would assume that it will be about a 2018 split in favor of the non smartphone side there. We believe the fact that the we are actually building a lot of franchise businesses as you saw for instance in the entertainment side as well as all the camera front page and and and and the tablet side we believe there's a lot of value in the lot of ability to grow and to see many more products incorporating these capabilities birth.

and and I

That the next pillar of this growth over the next three years a lot of which will be around the AI so audio analytics all the way I own the edge and I think there will be a lot more value that will be driven there and on the smartphone front, I believe that you know audio analytics and the capability to replace a lot of sense in elements inside the phone with the Acoustics. This will be a major value proposition that will be well beyond the you know, whatever you can do with with oil invoice and always listening elements the ability to to do that that ultra-low power the ability to create the a lot more value while you know, supporting all of the new requirements for smart phones of you know, let's say screen and the the lack of ability to install any any hardware on the on the front of the device itself. So, yep.

Not that we believe that out smart voice friendships will continue to play.

Play a key role, you know in our growth going forward.

Okay. Thanks a lot.

Thank you. And your next question comes from the line of Charlie and the center of the company, please go ahead. Yeah, thanks for taking my questions a couple of ones on the guidance real quick. It looks like beige how much growth initiatives will be as a percent of Revenue that cordless will actually be up both sequential and year-over-year. So when would be good if you touch on what's going on there and maybe how that impacts the rest of the year if that's up and then secondly on the R&D, thank you for the commentary that it'll it'll go back to more normal levels rest of your budgets kind of curious. What was the the Boost that created the larger level you want? Thanks God. Thank you Charlie. So maybe we we start with the with the latter part of your question first. So this back to R&D and and Opex as drawer a comment Thursday. We believe that if you one will be a temporarily High mainly because of the certain a tape out expenditures that we have and and we're we're dead.

Basically doing it a tape out during this quarter and this will basically take the key one R&D expenses to be higher in.

An average and you know, they're expected to to go back to normal. So these are more on the energy Frances a non-recurring a type of expenses. So this is basically takes care of the of the objects and R&D expenditures in q1. And your other question has to do with the guidance for q1 and work home. So call this will fluctuate and you know again, there's very little control or that we have this kind of the the trend line there Thursday. I believe that the we're modeling and I think you guys should also model, you know, this decline in the 15 to 20% right now. We do not see a change in the level of declines and and yes that will be that will be fluctuations as you can can appreciate last few hours, you know artificially low birth.

When you know way the recovery was slow, you know, maybe that's kind of the mismatched with respect to the year, So it just like, you know an easy come in Q4 and and also q1, but I but I don't see it it change in the trend. I think that you know what we are going to see this year is further increase in the proportion between them, you know, the growth initiatives that you you know Trend into you know, 7030 type of a mix or maybe you know more than that. I think this is these are the trends that we are expected to see here and you know, there would be these kind of totally fluctuations that you know, it's very hard to understand why you know in q1, we actually see so, you know both men to men cordless and you know good backlog, but I have no way real explanations for for that. I

I can only lose that you know, we believe is you know, the 15 to 20% decline is you know, the right way to model is going for.

Ford and you know growth across are both initiatives for the year, and this is kind of how we see expansion with margin expansion and and and we believe that the athletes friends should also continue in 2020 great. Thank you so much for that color, and then for my follow-up on unified Communications, I know you have the the large wind for this year, but she sounded like you're optimistic of a potentially a few others as well. I wonder if something has changed in the pattern in terms of replacement cycle there in terms of you guys replacing incumbents, or is it just so happened that things that sort of wind up well in the past 12 months just any commentary and sort of the the trajectory of that business over time. Thanks.

It should also you see front. You know, I do believe that we have seen a lot of changes in in in the market it first of all, we've seen a few castles the the trunking or the unified communication as a service or becoming a major part of the market and we see a whole lot of Destruction there with new service providers they both for each media and the you know collaboration solution as well as endpoints a lot of new employees selling headsets and two other conferencing solutions for personal desktop in room conferencing et cetera. So there is I think a a lot of investment and change that is that is driving the market and and perhaps also creating a some opportunities for companies like us that have been investing.

in this market and today have

The you know, most comprehensive product portfolio and technologies that in a way meet all those requirements and I think that we are really Thursday the one-stop-shop for this market for any any vendor that is looking for a high-quality high-performing solution. So so what I'm doing is in the way making sure that they were supporting our partners or customers in this domain and enabling them to upgrade and and build a new capabilities better voice quality better video quality across the solutions. Um, and as you know as we've seen this has been a long type a long tails back of a market where you know design and refreshes then to happen once every couple of years and you know, we've waited patiently and then hopefully a lot of that is if we suck

frosting in the near future, so we're

I would say very optimistic and you know, we believe that we have all the right capabilities and merits to win the the the sockets that will be available for refresh. Thank you so much. Thank you. Once again, if you wish to ask a question, please press star one on your telephone keypad and wait for your name to be announced next question comes from the line of of Needham & Company, please go ahead.

Hibachi or line is open, please. Can you check your note on yet?

Okay moving on to your next question from the line of sushi off both Capital, please go ahead.

Hi over Hydra, if we can hear me the the non smart phone smart, boy. Can you rank order the top two or three Revenue contributors you expect in that segment and 2020 and which ones are going to be growing the fastest now. Hi Sue G. I think the question was around the, the main contributors in the smart voice segment. Right right outside smart, smart, smart voice outside smartphone. So if you take off 19.3 million dollars that we generated in 2019 about 25% of that was smart phone. So 75 was non smart choice and in these sockets in a way we have three key franchises one is the entertainment side which includes TV's remote key.

This is you know close to 25% It'll be charged 25% of revenues tablets off our around 20% of those nineteen point three million dollars, maybe a little bit ahead of that.

Cameras are about 25% And then we have other iot the other category that will include smart speakers and and the hero belt cetera. I think that when we look at the 2020, we expect the hillbillies and wearables to become more meaningful part of that business and and to start generating revenues there as well and that we hope to make it one of the kind of the key five categories including smartphones entertainment tablets and in camera, so I would say these are kind of the five categories that today we're focusing on our roadmap is is targeted to solve a lot of the future issues and provide a lot of capabilities and value-added the solutions as we discuss wage.

terms with a n d a

The ability to really drop the power consumption considerably while you know, elevating the performance the ability to conduct far field in very high quality check. The battery powered device is the ability to run a lot of machine learning classifier in the same time on Teavana battery operated device. So all of that, I think should go very well for each of these five key categories that were focusing on today. So I hope I answered your purchase with you you did. Thank you. And then the the inclusion of AI is a feature there and aib Edge that kind of upgrade if you would is that an incremental revenue or ASP opportunity is that just a couple of feature upgrade that keeps you in these platforms? And when does that layer in or is that really already being used by the customers? So first of all dead

It is it does basically increase the content so it does raise.

V a s t a full the devices that we were in I think that they also you know whenever there is a choice between, you know, just running software versus, you know, running 8 on a dedicated Channel power machine learning type of a chip off then the more capabilities that such a cheap can provide the higher the likelihood of the selection of a dedicated a process of just for that purpose, you know running software on the AP. And today we do have and we are running these on the edge capabilities the ability to do, you know sound event detection and the audio analytics are running to the input action on our on our website.

Okay, great. Thanks guys.

Thank you. Once again, it's star one to ask a question on your next question comes from the line of Irish whiskey of Needham. Hey guys, good job on the quarter. This is Ari taking the question for Rodger Gil. And my first question is about your unified Communications business. Can you talk about what you're seeing the business go this year, and I'm a bit about a design win pipeline in this business. Thank you.

I already and then thanks for the question. So on the unified Communication business for this year. I believe that we are optimistic that Jake the we are a going to outperform this year. I think you know we did see.

The shortfall is that we experience in 2019 due to the trade War as well as the lower demand and mainly related to your business. I T spend money and we believe that today with the additional wins with the additional products that were shipping. We're well-positioned to be able to generate a nice Revenue growth from the you see a product segment. I think that when addressing some of the the comments that were made earlier, we believe that the inventory level so today at closer to normal levels. This is the significant or excess inventories that that we saw just a year ago. So I took it by looking at all the fronts we do hope and believe that we are positioned well for our performance and and revenue growth in this business.

it mainly coming from

You know our ability to shift and wins a lot of new products that are shipping this year. They were not in last year. So, you know just these are off it creating the the revenue growth for us and I believe that they will be able to absorb even if there would be a certain hiccups which right now we don't participate but but we believed the the traction and the our ability to generate Revenue growth and you see this year the chances are are very very good and we're very optimistic.

Yeah, I think I want to ask if there any new markets of verticals to be beneficial to further growth and expansion pack or through organic means targeting new verticals already. I'm sorry, but we could not we had some problems hearing you age. Well, so, can you repeat the question, please God and margins.

You know, I think that they you know from New Market New Market penetration. I believe that today we are focusing on the edge of the three segments of smart home, you know with with everything that comes behind under this umbrella, you know iot consumer service provider professional as well as the industrial unified communication, which is the the professional business Market off Smart voice which you know also includes a broad array of many different Consumer Electronic products. We mentioned I think and also offer demonstrated a lot of capabilities around here bells in CS which you saw from glasses two headsets and I believe that this will be as a birth

You know a product cat.

I think this this for the Calgary we hold the a lot of potential growth and the need to incorporate a lot more technology in order to create more differentiation in the market and I believe that d s d group is well equipped with relevant very relevant technology to meet the market requirements. You know, we are serving for many years the markets of low-power voice the ability to do a low-power processing or value-added, you know doing a sensing abilities. So, you know, if you're asking about the new for the category, yes that that, you know, definitely here Bill does look as a promising a new product category for us and and we believe that we will be able to serve it with the several of you know, the new products that that we have learned that you've seen at the end.

Thank you. There are no further questions at this time. I would not like to hand the call back over to Terry Chen.

Thank you during the fourth quarter DSP group will participate in the 32nd annual conference on March 15th to 17th in Orange County. Thank you for listening and for your interest in this group, and we look forward to report back to you in 90 days.

Thank you. Ladies and gentlemen that does conclude your conference for today. Thank you for participating and you may not disconnect.

Thursday