DSP Group, Inc. Reports Second Quarter 2009 Earnings


SAN JOSE, Calif., July 23, 2009 (GLOBE NEWSWIRE) -- DSP Group, Inc. (Nasdaq:DSPG), a worldwide leader in developing and providing chip-set solutions for residential wireless connectivity, announced today its results for the second quarter ended June 30, 2009.

Second Quarter Results:

Revenues for the second quarter of 2009 were $52,020,000, a decline of 30% from revenues of $74,152,000 for the second quarter of 2008. Net loss for the second quarter of 2009 was $1,677,000, as compared to net loss of $7,355,000 for the second quarter of 2008. Earnings per share (EPS) for the second quarter of 2009 were a loss of $0.07 per share, as compared to a loss of $0.26 per share for the second quarter of 2008.

Non-GAAP Results:

Non-GAAP net income and diluted EPS for the second quarter of 2009 were $718,000 and $0.03 per share, respectively, a decrease of 30% from the non-GAAP net income of $1,019,000 and a decrease of 25% from the non-GAAP diluted EPS of $0.04 per share for the second quarter of 2008. Non-GAAP net income and diluted EPS for the second quarter of 2009 excluded the impact of amortization of acquired intangible assets of $3,058,000 associated with the acquisition of NXP's CIPT business; equity-based compensation expenses of $2,825,000; and a tax benefit of $3,488,000 resulting from a partial reversal of tax reserves. Non-GAAP net income and diluted EPS for the second quarter of 2008 excluded the impact of amortization of acquired intangible assets of $5,716,000 associated with the acquisition of NXP's CIPT business; equity-based compensation expenses of $3,585,000; and the aggregate tax benefits associated with such expenses of $927,000.

Eli Ayalon, Chairman and CEO of DSP Group, stated: "We exceeded our financial objectives for the second quarter of 2009, resumed non-GAAP operating profit during the second quarter, a quarter earlier than previously projected, and continued to generate positive cash flow from operations. We also secured a new design win for our XpandR platform for a system combining advanced DECT telephony with content streaming over Wi-Fi. We are cautiously optimistic and anticipate further improvements in our business for the third quarter of 2009."

The Company believes that the non-GAAP presentation of net income and diluted EPS presented in this press release is useful to investors in comparing results for the quarter ended June 30, 2009 to the same period in 2008 because the exclusion of the above noted expenses may provide a more meaningful analysis of the Company's core operating results. Further, the Company believes it is useful to investors to understand how the expenses associated with equity-based compensations expenses are reflected on its statements of income.

About DSP Group

DSP Group, Inc. (Nasdaq:DSPG) is a leading global provider of wireless chipset solutions for converged communications at home. Delivering system solutions that combine semiconductors and software with reference designs, DSP Group enables consumer electronics (CE) manufacturers to cost-effectively develop new revenue-generating applications with fast time to market. At the forefront of semiconductor innovation and operational excellence for over two decades, and with a dominant share of the wireless home telephony market, DSP Group provides a broad portfolio of wireless chipsets integrating DECT, Wi-Fi, PSTN and VoIP technologies with state-of-the-art application processors. Enabling converged voice, audio, video and data connectivity across diverse consumer products -- from cordless and VoIP phones to home gateways and broadband multimedia screens -- DSP Group proactively partners with CE manufacturers to shape the future of converged communications at home. For more information, visit www.dspg.com.

The DSP Group, Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=6171

Forward-Looking Statements

This press release may contain statements that qualify as "forward-looking statements" under the Private Securities Litigation Reform Act of 1995, including Mr. Ayalon's statement of cautious optimism and anticipation of further improvements in DSP Group's business for the third quarter of 2009. These forward-looking statements are based on current expectations and DSP Group assumes no obligation to update this information. In addition, the events described in these forward-looking statements may not actually arise as a result of various factors, including the timing and ability of the market to recover and the corresponding recovery of DSP Group's customers; fluctuations in gross margins associated with the sale of existing products; the impact of reductions in lead times and inventory levels by DSP Group customers and their customers; the success of the implemented restructuring efforts; slower than expected change in the nature of residential communications domain; unexpected delays in the introduction of new products; especially the new generation of multimedia products; DSP Group's inability to develop and produce new products at competitive costs and in a timely manner or failure of such products to achieve broad market acceptance; and general market demand for products that incorporate DSP Group's technology in the market. These factors and other factors which may affect future operating results or DSP Group's stock price are discussed under "RISK FACTORS" in the Form 10-K for fiscal 2008 as well as other reports DSP Group has filed with the Securities and Exchange Commission and which are available on DSP Group's Web site (www.dspg.com) under Investor Relations.

Earnings conference call

DSP Group has scheduled a conference call for 8:30 a.m. EDT today to discuss the financial results for the second quarter of 2009 and invites you to listen to a live broadcast over the Internet. The broadcast can be accessed by all interested parties through the Investor Relations section (investor message board) of DSP Group's Web site at www.dspg.com or link to: http://ir.dspg.com./phoenix.zhtml?c=101665&p=irol-calendar.

If you cannot join the call, please listen to the replay, which will be available for approximately two weeks after the call on DSP Group's Web site or by calling the following numbers:

--U.S. Dial-In # 1-888-286-8010 (passcode: 47169011)

--International Dial-In # 1-617-801-6888 (passcode: 47169011)



                             DSP GROUP, INC.
                 CONSOLIDATED STATEMENTS OF OPERATIONS
               (In thousands, except per share amounts)


                             Three Months Ended     Six Months Ended
                                  June 30,              June 30,
                              2009        2008       2009       2008
                              ----        ----       ----       ----
                           (Unaudited)(Unaudited)(Unaudited)(Unaudited)

 Product revenues and other $  52,020  $  74,152  $  91,934  $ 146,881
 Cost of product revenues
  and other                    32,940     48,183     59,444     93,959
                            ---------  ---------  ---------  ---------
 Gross profit                  19,080     25,969     32,490     52,922
 Operating expenses:
  Research and development     13,632     18,890     27,368     38,916
  Sales and marketing           4,284      5,621      8,801     11,642
  General and
   administrative               3,926      4,547      7,740      8,798
  Amortization of
   intangible assets            3,058      5,716      6,105     11,498
                            ---------  ---------  ---------  ---------
  Total operating expenses     24,900     34,774     50,014     70,854
                            ---------  ---------  ---------  ---------
 Operating loss                (5,820)    (8,805)   (17,524)   (17,932)
 Other income :
  Interest and other
   income, net                    582        898      1,184      2,132
                            ---------  ---------  ---------  ---------

 Loss before provision for
  income taxes                 (5,238)    (7,907)   (16,340)   (15,800)


 Income tax benefit            (3,561)      (552)    (3,972)      (838)
                            ---------  ---------  ---------  ---------
 Net Loss                     ($1,677)   ($7,355)  ($12,368)  ($14,962)
                            =========  =========  =========  =========

 Net loss per share:
   Basic                      ($ 0.07)   ($ 0.26)   ($ 0.51)   ($ 0.51)
   Diluted                    ($ 0.07)   ($ 0.26)   ($ 0.51)   ($ 0.51)

 Weighted average number of
  shares of common stock
  used in the computation
  of:
   Basic                       22,734     28,352     24,408     29,463
   Diluted                     22,734     28,352     24,408     29,463


                             DSP GROUP, INC.
           CONSOLIDATED STATEMENTS OF OPERATIONS (NON-GAAP)
               (In thousands, except per share amounts)

                             Three Months Ended     Six Months Ended
                                  June 30,              June 30,
                              2009        2008      2009        2008
                              ----        ----      ----        ----
                           (Unaudited)(Unaudited)(Unaudited)(Unaudited)

 Product revenues and other $  52,020  $  74,152  $  91,934  $ 146,881
 Cost of product revenues
  and other                    32,745     47,936     59,041     93,455
                            ---------  ---------  ---------  ---------
 Gross profit                  19,275     26,216     32,893     53,426
 Operating expenses:
  Research and development     12,229     16,998     24,391     34,933
  Sales and marketing           3,816      5,192      7,875     10,706
  General and
   administrative               3,167      3,530      6,201      6,676
                            ---------  ---------  ---------  ---------
  Total operating expenses     19,212     25,720     38,467     52,315
                            ---------  ---------  ---------  ---------
 Operating income (loss)           63        496     (5,574)     1,111
 Other income :
  Interest and other
   income, net                    582        898      1,184      2,132
                            ---------  ---------  ---------  ---------

 Income (loss) before
  provision for
  income taxes                    645      1,394     (4,390)     3,243
 Provision for income taxes
  (income tax benefit)            (73)       375       (484)       784
                            ---------  ---------  ---------  ---------
 Net income (loss)          $     718  $   1,019  $  (3,906) $   2,459
                            =========  =========  =========  =========

 Net earnings (loss) per
  share:
   Basic                    $    0.03  $    0.04  $   (0.16) $    0.08
   Diluted                  $    0.03  $    0.04  $   (0.16) $    0.08

 Weighted average number of
  shares of common stock
  used in the computation
  of:
   Basic                       22,734     28,352     24,408     29,463
   Diluted                     22,901     28,373     24,408     29,565


     Unaudited Reconciliation of GAAP to Non-GAAP Financial Measures
               (In thousands, except per share amounts)

                              Three Months Ended     Six Months Ended
                                   June 30,              June 30,
                               2009       2008       2009       2008
                               ----       ----       ----       ----
                             Unaudited  Unaudited  Unaudited  Unaudited

 GAAP net loss                ($1,677)   ($7,355)  ($12,368)  ($14,962)
 Equity-based compensation
  expense included in cost
  of product revenues and
  other                           195        247        403        504
 Equity-based compensation
  expense included in R&D       1,403      1,892      2,978      3,983
 Equity-based compensation
  expense included in SG&A      1,227      1,446      2,465      3,058
 Amortization of intangible
  assets related to NXP
  transaction                   3,058      5,716      6,104     11,498
 Tax benefit resulting from
  equity-based compensation
  and amortization of
  intangible assets                --       (927)        --     (1,622)
 Tax benefit resulting from
  a partial reversal of tax
  reserves                     (3,488)        --     (3,488)        --
 Non-GAAP net income (loss)  $    718   $  1,019   $ (3,906)  $  2,459
                             ========   ========   ========   ========
 Non-GAAP diluted earnings
  (loss) per share           $   0.03   $   0.04   $  (0.16)  $   0.08


                             DSP GROUP, INC.
                      CONSOLIDATED BALANCE SHEETS
                            (In thousands)

                                                June 30,   December 31,
                                                 2009         2008
                                                 ----         ----
                                              (Unaudited)   (Audited)
                                              -----------  -----------
 Assets
 Current assets:
  Cash and cash equivalents                   $    46,230  $    68,886
  Restricted deposits                                 115          115
  Marketable securities and short term
   deposits                                        24,653       12,449
  Trade receivables, net                           31,597       39,603
  Inventories                                      12,571       14,098
  Other accounts receivable and prepaid
   expenses                                        13,394       17,367
  Deferred income taxes                               202          306
                                              -----------  -----------
 Total current assets                             128,762      152,824
 Property and equipment, net                       12,133       14,822

 Long term marketable securities                   39,858       40,051
 Severance pay fund                                 7,875        7,286
 Deferred income taxes                                 20          212
 Other intangible assets                           26,588       32,728
 Long-term prepaid expenses and lease
  deposits                                          1,688        1,331
                                              -----------  -----------
 Total assets                                 $   216,924  $   249,254
                                              ===========  ===========

 Liabilities and Stockholders' Equity
 Current liabilities:
  Accounts payable                            $    19,577  $    20,136
  Other current liabilities                        31,796       40,329
                                              -----------  -----------
 Total current liabilities                         51,373       60,465

  Accrued severance pay                             9,433        8,008

  Accrued pensions                                  1,624        1,675
  Deferred tax liability                               --           24
  Other long term liabilities                          --          455
                                              -----------  -----------
 Total long term liabilities                       11,057       10,162

 Stockholders' equity:

 Common stock                                          23           27
 Additional paid-in capital                       320,334      314,484
 Accumulated other comprehensive income             1,325           51
 Less - Cost of treasury stock                   (125,142)    (107,749)
 Accumulated deficit                              (42,046)     (28,186)
                                              -----------  -----------
 Total stockholders' equity                       154,494      178,627
                                              -----------  -----------
 Total liabilities and stockholders' equity   $   216,924  $   249,254
                                              ===========  ===========


            

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