Q4 2020 DSP Group Inc Earnings Call
Yeah.
Ladies and gentlemen.
For a standing by and welcome to the queue for and for your 2020 earnings Conference call.
At this time, all participants I didn't really think I'll email. After you figured per cent patron there'll be a question and answer session.
That's a question during session you will need to practice star one on your telephone.
Right at the discarded for it just for being recorded the day Thursday for February 2021, and I would not like to have you gone for himself with you for a two seater to day tabby kitten cheap for you to talk with Sir. Thank you. Please go ahead.
Thank you all for writer good morning, ladies and gentlemen, I'm fairly Chang Chief business Office, Sarah DSP group.
Come to our fourth quarter and for your 2020 earnings Conference Clutter on today's color. You also have was asked Mister offer you King Chief Executive Officer, and Mr draw Levy Chief Financial Officer.
Before we begin I would like to remind you that during this conference calls we will be making forward looking statements about the worst financial guidance for the first quarter of 2021 revenue growth in 2021 optimism buckler engagement pipeline with strategic customers optimism about DSP group leveraging trends arising from the pandemic.
Including accelerated voice centric product voice user interfaces and increased voice communication recovery of unified Communications Segmenting 22, 21 to return to solid growth optimism about Julie technology is a key wireless connectivity solution for the global Smart home and security interest.
Street, and our ability to sustain long term growth, we assume no obligation to a day before your looking statement for more information about the reef can factor that could affect our for goofing statements maybe green. Please refer to the risk factor, it's disgusting hour 2019 from them.
And other issues hearing for it we are fine now I would like to turn the call over to a hernia keim, our chief Executive Officer offered the floor is yours.
Thank you for telling good morning, everyone and thanks for joining us today.
I hope that you have the opportunity to read our press release, which we distributed earlier this morning.
I would like to begin by reviewing the results for the fourth quarter and then the full year and then to make some comments on the progression of a business plan.
And finally provide you with the context for outlook in a short while draw will provide you with detailed comments on all financial results.
For the fourth quarter and the full year 2020, and our outlook for the first quarter of 2021.
We're very pleased with our business performance and the momentum that lies ahead.
Fourth quarter results exceeded all guidance on most financial metrics.
Revenues of $31.9 million.
<unk> well ahead of our guidance range and grew by nine per cent, you're over a year and by 23 per cent sequentially.
These better than expected results are the outcome of improving the man across our diversified product offering we're excited about the solid momentum surrounding our business and the pivotal role that are innovative technologies are playing in the newly emerging.
Voice centric marketplace.
Highlighted by the following trends the first is a surge in voice calls.
The ongoing social distancing in global look down restrictions made the voice communications essentially.
And that's led to a much increased usage of phones at home.
Number two voice user interface, Oh V Y has evolved into a must have interface.
Potential health hazards associated with the height that surfaces have accelerated the adoption or voices user interface for a broader range of products and use cases.
Number three collaboration and work from home. These two trends have become essential for preserving business continuity and productivity Indian now elastic enterprise.
And while industrywide supply chain constraints are curbing product deliveries.
The above mentioned voice centric transit fuel demand for cordless and smartphone products drove faster than expected recovery of our unified Communications segment.
And solely demand for smart voice products following a record quarter. These achievements further drove record high non-GAAP quarterly gross margins for 51.9%.
Would you benefited from a proportionately lower fixed cost portion, which offset the product mix.
From an annual perspective, we ended 2020 with revenues of approximately $114.5 million versus $117 $6 million in 2019, representing 3% decrease.
Primarily due to weaker and volatile demand for a unified communication products as a result of a shift in enterprise I T.
Spending from on for him to work from home.
Nevertheless, DSP group is a major beneficiary.
Of the white adoption or voice centric technologies that thrive during the pandemic.
The diversity of our products and technology portfolio proved invaluable. This year is demonstrated by the strong performance of the call. This product line, which greatly off sick the weakness in the unified Communications segment.
Looking ahead, we're off to a solid start for the year on the heels of aerobics design pipeline and a record number of new tier one customer engagements across R. I O 80 businesses.
We're leveraging are proven leadership position in voice Hai Iot as demonstrated by the following major accomplishment in 2020.
The positioning of yearly as a prime connectivity in the home security market.
Establishing the smart voice franchise as the market leading solution in key consumer categories poorly.
Proliferation of a voice and video technologies in the evolving collaboration market.
These achievements coupled with the solid momentum positions us with for a success for 2021 <unk>.
<unk> I'd like to to provide you with more color on our performance in each of the photo equipment.
Starting with smart voice during.
During the fourth quarter, we generated revenues of approximately $5 million from sales of smart voice solution.
Reflecting your year over year growth of 2%.
While 30% down on a sequential basis following a record third standard.
We are pleased with the performance of the smartphone segment of 2020 and despite the weaker first half mainly impacted by demand short for for certain product application due to shelter in place restrictions demand for voice user interface based products recovered nicely in the second half ending the year.
With the record revenues of $22 million, representing an increase of for percent.
As compared to 2019.
These growth was driven by strong demand for devices, incorporating voice C Y underscoring a shift in consumer preference in favor of voice based interfaces a trend that accelerated during the year.
During the quarter, we continued to grow and strengthen our smart voice franchise by securing new design wins.
And command from US productions shipments ahead of new product launches by leading consumer electronic Oem's and established our leadership in key market segments, including here about.
Whereas the work from home environment drove increased demand for horrible products, such as true wireless stereo and over the ear headphones and drink a 2020, we entered into this rapidly growing market for the acquisition of sound chip.
And complimented are low-power DSP offering with best in class Smart codex with digital hybrid ANC.
During this quarter true next launch, it's Twa's headset, leveraging our solution, including always on voice and voice AI.
Number to establish 2020 marked a record year for screen based products driven by work from home and remote learning.
DSP group as the leading vendor or voice activated screens benefited from this from growing demand.
There are no more than 30 different voice activated tablets powered by our smart voice technology and.
And during the fourth quarter, a major U S retailer Lenovo and other leading brands launched new tablet model based on our smart voice solution to enable V y and.
An edge a I use cases.
Lastly, and leading platform brand.
Launched a commercial version of it's smart wearable product leveraging our advanced Smart voice H, a I S O C.
These customer wins and the record number of new product launches illustrate the depth and diversity Pulvar smart voice franchise as well as the strength of our customer relationships and our ability to continuously introduce new technologies and raise the bar on call.
At the end performance, while simultaneously driving down power consumption.
During the year, we announced the availability of the D. B M. S O C.
Member of our Smart voice family. The DBM 10 is a low-power H, a I and machine learning SLC with two processors.
Highly efficient and low power DSP and a dedicated neural network influence processor.
<unk> is a scalable solution based on an open platform architecture.
Which costs and power optimize designing nine to simplify and shorten time to market sales.
AI and machine learning products for mobile wearable here, the and Iot applications.
We believe.
Alright, so six pretty and signal processing proficiency combined with our ongoing technology innovation in the areas of ANC Smart Kodak and AI for voice devices will ensure that are smartphone that are smart voice business, we'd be a pivotal growth driver to our business at the time of rapid.
Change and new product innovation, and the introduction of exciting new applications.
Moving on to our unified Communications segment.
In the fourth quarter, we generated revenues over approximately $8.2 million, representing a year over year decrease of 17% in a sequential increase of 218%.
Demonstrating a faster than expected rebound.
From a stalemate situation in the third quarter.
We ended the year with total revenues of $31.2 million, representing a year over year decrease of 18%.
Were highly disappointed by these results and attribute.
The broad weakness and revenue decline to the fundamental change in the workplace environment drink 2020, enforcing shop I T budget shifts from on Prime two offerings.
This trend created less demand for traditional unified communication endpoints that typically serve an office desk in favor of work from home devices, including soft clients headsets loudspeakers cordless phones and more.
Nonetheless remain highly confident in the continued recovering of these segments as evidenced by better than expected demand in the fourth quarter, driven by a robust recovery and productive take by large enterprises and government institutions for unified communication products.
Moreover businesses around the globe are gradually returning to the office and adopting a hybrid model that supports on prim and remote work.
This strength.
Should stimulate budget chief toward renewed investment.
In office remodeling and infrastructure to incorporate more technology in high performance requirements to meet more elastic and user expectations.
In addition, the pandemic is created new opportunities to support the significance digital transformation. This market went through this year newer players as well as incumbents are in the process of defining and building new hardware and software designed to fit with a hybrid working models and our design within.
Achievements for this quarter reflect the strength.
Tier one unified communication OEM selected are high end DVS solution for a snake generation video collaboration system, leveraging our expertise to support high and voice and high definition video and a device targeted for the hybrid work environment that enables high quality.
Communications and collaborations.
A leading U S vendor for video collaboration equipment selected our best in class voice communication engine for a purpose built hardware serve the rising need of high quality collaboration assistant.
And lastly, yearly Inc announced it skew Microsoft teens wireless decked headset based on our technology.
The rapid and largely successful shift to remote working in response to the Corona virus slowed down has raised with demand for such product categories as people look to sustain and improve productivity, while enhancing the virtual collaborative experiences headsets have become a key tool for those trying to enhance collaborate.
<unk> and according to some analysts demand for such products grew by over 100% in 2020 and made the pandemic.
Looking forward.
These developments, the improving demand pattern and our new business wins position of swelled for solid revenue growth in the unified Communications segment this year and beyond.
Turning onto the smart home product line during the fourth quarter, we generate revenue for 8 million dollar posting a record quarter with a year over year increase of three per cent in a 31% sequential increase.
Full year smart on revenues were $16.8 million and grew by 3% year over year.
More importantly, 2020 was a breakthrough year for a smart home business. We successfully establish are usually technology as a key wireless connectivity solution for the global Smart home and security industries.
Furthermore, the surgeon voice call made from home drove more adoptions of Dicked annually in Cpe's by leading telecom service providers, creating a much larger deck Julie installed base.
During the quarter, we continued to grow and diversify are smart home ecosystem with leading global Iot vendors, that's recognized julie's unmatched characteristics for wireless indoor Iot, including superior range interference for a spectrum and native support for two way voice. These.
These include a leading European service provider that chose our deck Julie solution for a snake generation Smart security offerings.
Brand selected are <unk> solution for its elderly care system that includes a heart pendant, an additional assisted voice enabled devices and at length.
Chose R Dickson, you're really solution for its wireless hi Fi audio streaming system.
The momentum behind decked and you really technology strong and we expect a robust engagement pipeline with security and telecom service providers to fuel for.
Foster expansion of the deck, Julie ecosystem with additional products by leading brands that brought adoption by industry Bellwethers will serve as an important pillar.
All of our growth strategy.
This year and beyond and.
And now to an update on the cordless phone market.
During the fourth quarter, we experience stronger than expected demand for quotas product social distancing work from home remote learning and other outgrowth of the pandemic stimulated a resurgent invoice traffic and propelled demand for this product.
Such unexpected surge in demand completely depleted retail and channel inventory.
This for standard to invest heavily in expediting shipments and increasing demand driving revenues $213.8 million up 42% year over year and 10% on a sequential basis for the full year, our coldest business generated revenues or 46 three.
$8, representing an increase of 5% year over year.
With the ongoing social distancing restrictions and the future dependency on hybrid forms of living a greater emphasis is placed on our protective of native environment or home.
And the role of voice as the lowest common denominator for human interaction is irreplaceable.
DSP group as the undisputed market leader in voice is benefiting from the increased demand for voice centric products, such a scoreless products and looking ahead to the first quarter. We expect the strong demand for cordless phones and other voice centric products to continue.
As users upgrade and refine their home office environment and.
And now to an update on our outlook for the first quarter.
Taking into account the strong business momentum across are different product lines day lean inventory situation at most of our customers while taking into consideration the severe supply constraints. We expect our first quarter revenues to be in the range of $31 million to $33 million the <unk>.
Point of these guidance range implies year over year revenue growth of 13% we expect.
That's R. I O T businesses will account for 62, 63% of our first quarter revenues.
To summarize.
The shift towards a voice centric future is driving demand for DSP groups products and technologies, we're thrilled about our business momentum and we're confident that our leadership in voice AI and Iot technologies and solutions will determine our future success.
Coming on the heels of a strong pipeline of design wins with a record number of new customers that are expected to contribute to a solid performance and revenue growth this year.
Now I'd like to turn the call over to draw our Chief financial officer throw the flow yours.
Thank you also.
Now review the income statement for the fourth quarter of 2020 from both top to bottom.
For each line item I will provide that uses up results as well as the equity based compensation expenses included in line items and expenses related to previous acquisitions.
All revenues for the fourth quarter of 2024 $31.9 million.
Gross margin for the quarter was 51, 3%.
Gross margin for the quarter included equity based compensation expenses in the amount of 1 million dollar andamortization of intangible assets related to some trip acquisition in the amount of $1 million.
R&D expenses were $8.6 million, including equity based compensation expensive in the amount of point $9 million.
Operating expenses for the quarter, whereas $17.3 million, including equity based compensation expenses in the amount of 3 million dollar and amortization of intangible assets related to acquisitions in the amount of $6 million.
Operating expenses on the non non-GAAP basis, excluding the items mentioned where $13.7 million.
Financial expenses for the quarter point $3 million.
And that's an expensive for the quarter included point $7 million of exchange of differences related to accounting standards related to long term leases. These exchange for a differences were excluded from our non-GAAP results for the quarter the.
The financial income on the non the basis was $4 million.
Thanks expenses for the quarter, where for $1 million.
<unk> expenses for the quarter included benefit from the fair tax chart changes related to intangible assets and equity based compensation expensive the amount of $2.3 million.
Net loss was one for millions, including equity based compensation expenses of $3 2 million dollar amortization expenses related to previous acquisitions of point 7 million dollar exchange a different set for the amount of 7 million dollar in tax benefit related to different taxes.
The amount of point $3 million.
Non-GAAP net income excluding items I've. Just described described was $2.1 million.
GAAP loss for sure for the quarter was <unk>.
The negative impact of equity based compensation expenses on Vps was 13 cents.
The negative impact of amortization of required intangible assets on Vps was three cents.
The negative impact of exchange of differences ones EPS was <unk>.
And the positive impact of it changes in the for taxes was one cent.
Non-GAAP diluted income per share. Excluding these items I've. Just described was 12 cents for the quarter.
Let's see the current report on for me, it's K that we filed with US to see this morning for reconciliation of the non-GAAP presentation to the Gulf presentation.
Now turning to the balance sheet.
Conscious liveable at the end of the fourth quarter of 2020 degrees to 11 million dollar compared to 11 six from the dollar.
The end of the third quarter, where.
Representing level of 31 days.
Centaury increased from 8.2 million dollar is the end of the third quarter to 9 million representing level of 53 days.
Our cash and marketable securities increased by $8.4 million during the fourth quarter and worry and the level of $128.6 million as of December 31st 2020.
Orchestral multiple security position during the quarter was affected by the for me with.
Regenerated eight $6 million cash from operations.
0.3, Mcgoff cash was used for purchase of property and equipment.
Point $2 million cash was provided by exercising stock options.
And for $1 million of cash was the change in the value Andamortization of honorable Securities.
Now I would like to provide you with our full projections for the first quarter of 2021.
Our first quarter projections include the impact of equity based compensation expenses and acquisition related amortization expenses are as follows.
Revenues are expected to be in the range of 31 million dollar $233 million.
We expect our gross margin to be in the range of 51% and 53%.
R&D expenses are expected to be in the range of $10 million to 11 million dollar.
Operating expenses are expected to be in the range of a 10 million dollar to $19.5 million.
Financial income is expected to be in the range of $300000 to $400000.
And taxes on income expected to be approximately 2.3 million dollar on a non-GAAP basis.
Our share it outstanding are expected to be approximately 25.5 million shows.
Our first quarter projections include approximately for under a thousand dollars or for more possession of intangible assets.
And our first quarter projections also includes the following amounts that are forecast for equity based compensation expenses and intangible assets related to previous acquisitions.
Cost of goods includes approximately 2 million dollar.
R&D expenses include $1 million to 1.2 million dollar.
Sales and marketing include point $7 million 2.9 million dollar.
And G&A includes point 6 million dollar $2.8 million.
Now I would like to open up the line for a question and losses operator for Ya.
Thank you, ladies and gentlemen will now begin to question and answer session for a reminder, if you wish to ask a question. Please price is far one on your telephone keypad.
Your first question.
Coming from the line now Jason Smith from Lake Street <unk> question.
Hey, guys. Thanks for taking my questions.
Up on your comments on Jean continued supply constraints, just curious if you could quantify what sort of revenue impact that had on queue for and if there's a wages.
Quantify how much you think it will impact the queue.
As well.
Hi, Jason so on the on the supply chain comments so.
I think we're in the midst of the.
Fairly significant supply chain, a constrained where.
Demand outweighs the the available supply and there's a lot of the capacity restrictions.
We are managing through that situation with the support of our supply chain partners.
A but indeed it is there are certain a material that we cannot fulfill and supply to our customers.
With respect of the magnitude of that you know I I would say that it is probably you know.
Around twin.
25, 20% to 25% of let's say the fourth quarter revenues and.
Think to a certain extent the same on queue one revenues.
Okay. That's really helpful. And then you mentioned things are record design wins within that I O H T. As we look at 2021.
Rank order for three segments on.
Seeing the most design activity.
Sure I think we do see a great deal of design activity a with bleeding for you. One is <unk> a smartphone and I think that we're also away very encouraged and <unk> <unk> I have a very strong hope say for it is.
Very strong translation of the design went activities to revenue growth also on the smart voice front, where we do see a a our products reaching <unk> is very interesting in a way leading very interesting <unk> categories.
So I think that day, we will also share some excitement there and day on the unified communication front, a we we have secured as I've indicated in in the prepared comments, both the design wins on the video and new video endpoints day.
As well as in.
<unk>.
Voice related to work from home so newly developed type of a and points to facilitate the online collaboration with the external hardwood accessories.
But.
On the unified Communications segment, I think what is most interesting to see.
Is despite a thoroughly turbulent here, where you know there were a lot of leaps in terms of the usage and adoption of new technologies.
All of our customers the incumbent customers, all investing and all refreshing and are looking for to launch you a a hardwood endpoints.
And I think that the DSP G is going to play a fairly significant trolling that and I believe that this is also very encouraging.
As we look into the future of that segment and the role that day, how the endpoints will continue to play in the scanner more elastic or hybrid model in which we're going to you know work and where where some part of all time will be spent in a home office and other part.
In the traditional office.
So this is also a very much exciting and I think that for unified communication, we do expect to see every cover it this year as a vindicated we've.
Perhaps a shift.
In the way enterprises are going to utilize their I I T budget this year.
So I hope that the covers your question Jason.
No. That's really helpful. And then just the last one for me and I'll jump back into Q, just following up on those comments on the U C segment.
Understand the customers are still investing have you seen timetables as far as launches go continue get pushed out or give me a relatively on track.
And so from what we can tell him I think that everyone is pushing forward and and trying to expedite the launches.
As I think we we spoke drink a last year a lot of these designs.
<unk> bye.
These organizations will for plans, but just because of the reflection of reality, it's very hard to design hardware, where people are not sitting in the same space on it's very hard to debug and do these bring up a when people are sharing the screen.
And so the.
The design cycles.
Did take longer but from everything that we see a we believe that day a most of these programs.
You know orange should should be launched on time and hopefully a completed before and so we don't see there a change I think it's just gonna reflection of reality.
Do see delays because of the different way of a of conducting such designs.
Okay I appreciate that color. Thanks, a lot guys.
Your next question from the lineup, Matt Ramsey from Calvin HSR question.
Thank you very much.
Hope everybody as well.
Oh Friday.
There's a lot of companies that are.
In around the ecosystem going through this.
Supply chain tightness at the same time.
Sort of a surge of bookings.
And customers are clamoring for that limited supply. So you talked in your script about.
Fairly clean channel for most of your customers, particularly in the cordless business.
At the same time, you guys being limited on supply so could you maybe help.
The the guidance that you provided for March is that.
Indicative of how much you can ship and is that greater than or less than what you think sell out is from your customers I guess certain other way are you.
Is that revenue level that you're starting to rebuild a little bit of inventory are are are we flat on a channel inventory basis are things still depleting I'm just trying to figure out how we're gonna trend through the rest of the year if that makes sense. Thanks.
Yeah sure sure meant and thanks for the question so.
It'd be kind of with a little bit of background, so as as Julie call and you follow us now for.
A number of years now and you do know that usually when we look at our backlog in our visibility is typically you know.
Two months.
Or on average eight weeks.
Right now and I think that.
It's not that these P. G phenomena, probably a wider phenomenon that there is no problem with visibility because everyone wants material.
Now in order to better understand.
The needs and the.
Urgent C.
Where product needs to go.
We are doing it is certain it channel checks to better understand what is the situation of that inventory again, you know I'll I'll check so.
Are not necessarily covering an industry wide type of a check but.
Go and measure certain certain sandals, and query with with customers and value added research et cetera, and for what we can for me.
What we can tell.
We see that day at least in the fourth quarter.
For this product were flown by you know by air rather than by C. Meaning that day, you know the cost of these products day.
Went through the roof because of it is fairly expensive it and transportation and cause. We also see that is some of the unified communications side, where in lead times I'll I'll very long much longer than the traditional early times.
And so I think that day.
For the most about a an <unk>.
We do see when we kind of are looking at the trend line of queue for and now into Q1, let's see January.
Sofa, we believe that day inventories inventory levels Arlene.
Now when I look at the guidance and I tried to EM and compare it versus demand as I as I as I said earlier.
A our ability to supply.
Is basically included in the revenue guidance that we provided.
Needs coming from customers are much my child.
Now if you ask me you know around the end of March where would inventories b.
I cannot tell you, but what I can tell you that since we are missing a lot of material and we're not able to fully supply.
I would say that you know the inventory levels should should stay you know at.
At the same leathers also and you know when we will continue to do these checks and have a better understanding of where it will is supplies really needed and then and the and measure tried to measure or assist the levels of inventory, but for now.
From what we can tell a demand is significantly higher than what we can we can supply and we are trying to do our best to work very closely with our customers as well as with our supply chain partners in order to accommodate to the best we can.
All the needs a given that very dynamic situation that we're in.
No I appreciate quantifying some of those effects.
Transient environment is top so I appreciate the color.
My next question is.
On the.
Communications market and I thought it was interesting the comments about how.
The customer base.
Is it.
Investing to to take on this sort of hybrid.
Work from office work from home model, that's likely to persist for a number of years.
I Wonder Ofer, if you could just offer some comments about.
Unit N E S. P N margin potential of those new products that you're designing in in totality versus.
No some of the recent wins with Cisco and others might've been quite high ISBN margins, but maybe lower unit numbers versus this new paradigm I'm just trying to understand what the area onto the current might look like relative to if we'd add this conversation nine months ago.
Yes, so you know.
I would say first of all split my answer into two parts. One is it new design wins that we're winning in the traditional.
You see endpoints market and the second part is is from let's see then you are a hybrid type of influence and that are a in a way is supposed to M. As in full so oh upgrade the zone experienced when using a soft cloth.
<unk> such as the web <unk> themed zone et cetera.
So on the traditional you see market as we discussed it in the past.
For the most part are a content the content that we ship is it the type of performance that we provide.
He's usually going upwards of not downloads.
A and a we are at a two day expanding our market share in that business by penetrating into new Oems and also strengthening.
A I'll show a wallet at existing Oems.
In the new type of a a collaboration devices those adult kinda.
In a way more posted the they can be used at home in the office.
There, we also see a a rising dollar content, but with respect to the revenues in the unit volumes et cetera, I would say, it's relatively early and you know only once these products, we launch and will kind of get some history will understand better I think we'd be able to comment right now the expectations are high but.
We need to see the proof once it these products all go into the launch an adopted it et cetera, but I think the common denominator here is that our content is going up.
Got it that that's helpful. I'm just last one for me or any comments on opex trends it sounds like the.
Good day to churn and the opportunity funnel for you guys Uhm given these trends so any thoughts about how to model expenses would be helpful. Thanks, guys.
Yeah sure. So overall when you look at our first quarter are for.
Lance all books are running like a higher slightly higher than where it wasn't.
For the fourth quarter for for 220, and we believe that going into 2021 for the for you we should spill opex small less in this levels, though with sales around the 15 million a quarter I on a non-GAAP basis. I think this is a 15 215.5.
Is.
More or less aligned with where we are expected to be in the first quarter. So.
Alright, perfect. Thank you very much.
Your next question comes from the line now said you Desilva from rock capital R. D. H for each ask your question.
Can you maybe take the first quarter guidance and tell us what you expect for each other segments.
Hi, Tsuji Uhm, so what we did in the guidance we did.
<unk> between a call this a non call this.
<unk>.
You know when you tried to kind of appeal.
The total I OAP revenues by the different ingredients.
I would still say, it's rather early for us to say exactly how given you know the very dynamic situation that we're in but I would say that day, we do right now expect to see growth in each of those.
Those a segments a I want to say both sequentially and year over year.
Okay Ah.
That's helpful. And then yeah, maybe just kind of a higher level question. It seems like there's an interesting trend going on with the devices that we used for work whether it's in the office or at home is there any any logic, perhaps to combining the cord listen unified communications segments into one and I just coralloid for that I mean, these form factors you could argue that was zoom and all that they would be.
Soft clients and a P C or a phone, but you you guys are seeing new form factors devices I, just Wanna know the customer sort of thoughts on kind of there being a physical device versus it being kind of a soft function zoom ish kind of I mean, any any thoughts that would be helpful.
Yeah, Yeah. So absolutely is so I am you know.
The soft clients it where you know widely embraced it because of the situation and you know a lot of the calls did go into into that is a common denominator for having a a.
<unk>, you know rich media type of collaboration session.
Uhm, but we do see a this rising need then we sit everywhere whether it's in P. C devices tablets in.
For the development of new accessories for <unk>, a significant enhancements are both from the camera side as well as from the it all your front.
And I do believe that day, we will see a lot of these.
Accessories that will significantly improve the imaging.
The way you know the camera interact for the fact that you don't need to sit.
Really in front of the screen in order to be able to come across the both from an old your front as well as from a video perspective.
So all of that is going to be enhance and the and I think that day and most likely it will be enhanced by hardware does not mean that this will come on the expense of the soft clients that day.
I think that hardwood can significantly increase the productivity and also allowing a less fatigue for him from such shape.
Ongoing game type of a of sessions that that the one would have it during the day and will enable a lot more.
Home for them and the ability to really work as you would in the office, where you don't you don't need to be in front of it your P C or or tablet.
In addition to that and I and I and I think that we see that everywhere not all of these sessions can actually be done.
In the right in the right performance and actually the common denominator for all of the session is the quality of the voice and one's voice is corrupt and once voice is really clear our choppy.
Those soft sessions, a are not really productive and hence it there is a need also to complement that with the ability to actually access those sessions via.
A regular line by you know calling from a cell phone from a from a a.
Home phone or or a desk phone.
To the to the M C U a to the cloud and the accessing these calls so I think that what we're seeing is really and Maria type of the uses that will include both it.
The regular endpoints as well as species as well as new accessories as well as new collaboration units that will in a way enable you to have an additional screen or a much better AI based camera and you know a microphone system and and speaker system that we're really kind of follow you.
<unk> that will you know if you know the beam will follow.
Follow your direction and in a way amplify if you will to sit there are far from from from.
From the screen or from the camera.
So all of these are all products and debt innovations that day, all being worked on by Vandals, both incumbent as well as newcomers to that to that space.
Okay now look forward to those interesting for them factors and then the last question on the Smart voice the D. B M 10, which incorporates hai which of the and market segments are the most eager the first to adopt this trying to dump this design when wise.
How does the segments yeah. So I think there are a number of them. So the first one is the the hero both side.
So a true wireless and the over the air type of headset that they will require a more intelligence and you know the ability to provide much better comprehension, so way to enhance the listening experience. So that we can actually heal much better.
It is voices around us when the headset is in the ear versus when we take it off the air.
It could it it will be for a lot of algorithms that will run in order to provide you with all the noise cancellation mechanisms and a lot of information around how the headset is placed in the ear.
And all of compensation type of mechanisms uhm and it <unk>.
<unk>, many such algorithms and other a.
Area, where they will be deployed will be in the entertainment from so I'm on the television entertainment from.
They were a you need day more capabilities around the sound analysis.
Around it will trillo Powell.
And the the third would be also on the on in the camera market that would be kind of the third segment.
Okay. Thanks.
Your next question from from the line up.
Direct soderbergh from call your security speech at your question.
For taking my questions I wanted to start with cordless. So demand appears to be holding up it's gonna be nice nicely up year over year I'm curious as to what your update updated for you is on the short and medium term outlook for cordless beyond Q1, and maybe when we should start to see that written.
Turn to the historical year over year declines thanks.
Hi, Derek and welcome.
So what day with respect to the questions around call. This though a you're right. We are seeing some necessarily different it trends a I think this robust deal for your growth in the fourth quarter and our outlook also indicates that the call. This is supposed to grow nicely a year over year.
And this is very different from is the trends and the assumption that we talk about the you know the cellular decline of that category of about 15% to 20% a year.
I think that in the short term today.
Demand is strong and a inventory is lynn.
And there is need for for dogs and there are many a customers who are pushing very hard to an expedite and get it and get more product and material.
With respect to the medium term I Wanna say that as long as.
We are going to be in the situation that we're in now and this kind of more kind of flexible working environment, where you know.
People can work from home from from the office. So when whenever you need to use a you know the the home is the home office more I think the described where we will continue to see an expedited replacement cycle.
Such as the one that we see now perhaps.
Elizabeth kind of more muted with respect to the trend line.
And I think in the long in the long run once we do return.
You know to a full normality no social distancing, we are not necessary, we don't need to use the phone as much as we do today two way in a way replace face to face interaction then perhaps you know call. This may may move back to a secular decline maybe not the day levels of 15% to 20% per.
Probably less than that.
Uhm, a but you know this is still a a prediction will need to see exactly how.
It all environment. The the dynamics are going to change how fast will a we kind of resume a V. The the older habits and I think that as long as the habits, we stay as they are today.
There will be an expedited cycle of replacement I think we we see that everywhere from them.
What the service providers, all reporting with respect to the voice minutes use.
New connections of the game of Thrones, the landline I think today, we see a robust.
In adoption all day, you know more digital voice into a cpe's like we've never seen before so all of these indication do transfer to the fact that this.
This kind of rising tide in name.
In more voice calls and more voice communication is also you know it and raising.
The demand for for call this for that.
Great and then on my follow up question I'm wondering on deck U L. E. You know, you're making some progress in Europe and now a another customer in the United States I'm curious to as your thoughts on you all the adoption trends in the U S. Bradley.
From the short medium term and then if you could provide any details on the size of the.
The new U S deal this quarter that'd be great.
Sure so with respect to Yulia all you know.
<unk>.
As I look at two the last five years, we did start with a focus on Europe. This is where the technology is a major incumbent technology, a where am and you know all the sanitation by these are all based and I'm working very closely with a lot of these type of market.
Participants, whether they come from the telecom security or industrial Iot. This is this was the the first market.
In a way kind of the home base a of yearly and this is where we started if we were able to.
A bill sway day, two of the largest city's providers in the continent, both the Deutsche Telekom as well as orange to.
Two adopted this will open in today, we see it.
A significant wider adoption of the technology in countries like Germany and also in France.
Uhm, we see an expanding ecosystem, we see many more service providers adopting is connectivity.
And I think that the <unk>, we are very optimistic and bullish about eight a the trend line and the trajectory and European market now.
Two and a half years ago, a we basically started off for a a and it started promoting is the technology in the U S market, a and I think that day one of the major conclusions that we that we go to was that we need to focus on the U as security.
Market as one of the driving forces for Iot technologies <unk>.
And in a way kind of a pioneer in in name utilizing it needs such technologies, enhancing and enabling every true ecosystem.
We did announce office day a.
Two one I would say a breakthrough design with the blue by ATT.
A last year. These products are now in the market.
A where a launch day a late Internet a 2020.
And we believe.
That with our Air force and with a day the selection.
And the vote of confidence that we received from our both as an ADT that these technologies position very very well to thrive in the U S security market and in other I, let the market then I would say that day.
This is a one of the major pillows for awhile future growth and also on the investment.
Into the future. So this is definitely a market that were very very current with the results in day, we really like the momentum and the drivers are really.
Working on all cylinders. So with this is definitely a market to focus on a P C or and also a next year.
Great. Thanks.
Once again, if you have questions. Please practice for one on your telephone keypad.
Your next question from from the line now for <unk> from Human Please have your question.
For some questions on behalf of Roger Gil today.
If you guys could I speak a little bit more about smart voice up so what's driving demand here is predominantly COVID-19 or are there. Some maybe other kind of non a cold relate to transfer you can highlight can you guys provide a little bit more car about that and then what's what kind of a driving the other revenue is it.
Most of the units kind of moving around or if there's some it changed and kind of unit pricing.
Sure High day, and thanks for the question So smart voice.
So I you know I think that the pandemic in the event that we went through in 2020 will definitely a catalyst fully larger and wider adoption of voices user interface. Now if you asked me about the the design wins for the pipeline that we have the day.
<unk>. This is really a result of the pandemic, probably the pandemic definitely stimulated the adoption and the the fact that more people became aware of the values and these are views and the fact that the technology is really ready for prime time.
Now when I look at the designs that we achieve this year that are expected to ramp up into product say in mass production during the year.
I do notice that.
Many a is such vendors that are selecting our technology, whether it is for the Z. The standard for you I, whether it's to enhance.
A collaboration capabilities and whether it's to Ron H AI algorithms, whether it's for voice human interaction or even just for environmental sense, Inc.
Are doing so because.
Products were designed with these capabilities in mind. The May we mentioned the New addition to the family that we announce day.
Early in the in the year Dbm's N L.
And <unk>.
This these products are really designed with that in mind for way the best in class performance, the maximum flexibility and very very fast time to market, whether you're you'll be using the DSP G algorithm sweet weather is the vendor is bringing their own algorithm and in a way of putting it on our end.
DSP G.
A a machine learning cool.
So I think that from from a content perspective, we see the content.
Increasing we're providing move value more capabilities.
I mean, I think that also from the performance criteria, we're providing a more advanced an enhanced capabilities to to our customers.
So when when I look at the market today I just feel that day.
Voice and a whether it's with.
Other it's voice that is used for commands whether it's voice that this is for a for a communication or it is audible signals that they'll useful AI analysis. These are all it becoming more essential as it I think that day.
The audience and the target market is just expanded by the events of last year like the pandemic that really proliferated. The the day use for the whole day.
<unk>, a smart assistance and others and then I think that for US It definitely serves as a good catalyst and we're very happy.
With the design pipeline that we have in with the use cases that our customers are using.
And we do believe that day it will be one of the a strong sectors for growth say for us this year.
Hi, Thank you for that and then for my follow up question I just wanted to ask a little about margins. So yeah with a supply chain tightness.
Or do you guys believe that there might be some pressure to the to the basically the record margins. You guys. You guys are are at now I'm looking at 1.9% here.
You expect a little bit of pressure kind of going into a Q1 in the queue too.
M E. So it with respect to the kind of the ghost module profile I think that what we've seen that during the last day I Wanna say six or seven years that day almost margins the debt improve and expand from you know the high facilities into the low fifties and this.
Was done based on name a you know the mix it the.
More traditional products that were sitting at relatively low margins versus cannot cope with average and is the new for dogs. All the internet of all do things products that work that work is selling at a bit of that with a bit the margin profile I think that we believe that this is still.
The case. However, you are right that we are in in these kind of very.
Dynamic supply chain situations that could in in impacted emergencies, they'll but I think that day, what we need to look at is really you know that that trend line, where I think.
I am looking forward to it is seeing the you know.
The increase the mix in terms of the the portion of the I O T. A product say, we do believe that day, we should as the company and we can based on the value and the content that the the content share that we're seeing if we can expand and enhance the margin profile.
And yes. It during the this interim period, where they're all from constraints. It could is C sharp some pleasure, but but the.
I think that some of it is already taken into a guidance for the first quarter and the you know he still be of course any changes that we believe would probably provide the thing on a quarterly call and provide an update but I I don't think that this is something that should be it.
A of a of concern and I think that you know you need to look at the trend line that we were able to achieve and also a.
With the improved mix I think this is a trend line that we need to follow.
Great how does all for me. Thank you.
Sure no for your questions. Please continue.
Thank you everyone for joining us and we look forward to report for you in the next quarter.
Yeah definitely the recall for today. Thank you for participating you me I'll disconnect.
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