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DSP Group, Inc. Reports Financial Results for Second Quarter 1997
DSP Group, Inc.


DSP Group, Inc. Reports Financial Results for Second Quarter 1997

Santa Clara, Calif., July 22, 1997 -- DSP Group, Inc. (NASDAQ: DSPG) today announced its financial results for the second quarter ended June 30, 1997.

Second quarter revenues increased by 12% to $14,642,000 compared to $13,021,000 in the second quarter of 1996. In the first half of 1997, revenues increased by 19% to $28,820,000 compared to $24,218,000 in the first half of 1996.

Net income for the second quarter increased by 730% to $2,225,000, or $0.23 per share, compared to net income of $268,000 or $0.03 per share, for the second quarter of 1996. Net income for the first half of 1997 increased by 404% to $4,241,000 compared to net income of $842,000 in the first half of 1996.

Eli Ayalon, President and CEO of DSP Group stated, "We are very pleased to release our fourth consecutive quarter of significant improvement in business results. It is also encouraging to note that the quarterly level of recurring royalties from DSP Cores licensing surpassed $500,000 to reach a record level this quarter. At the same time, record levels were also reached in backlog of product orders as well as core licensing activity. This enables us to achieve an even better level of visibility for future business."

Ayalon added, "This quarter we are proud to add the LSI division of the Japanese conglomerate Kawasaki Steel Corporation to our prestigious list of DSP Core licensees. The Kawasaki Steel Corporation, LSI division is a world leader in supplying CBA ASICs."

Statements contained in this release concerning the Company's visibility for its future business, the level of revenues and margins, and the positioning of the Company constitute forward-looking statements with respect to plans, projections or future performance of the Company. These statements involve certain risks and uncertainties such as the volume and timing of product orders, recognition of license fees and royalties, the impact of declining average selling prices for TAD speech processors on gross margins, the Company's reliance on independent foundries and dependence on a limited number of OEM customers. These and other risks are detailed in the Company's Form 10K report for 1996.

DSP Group, Inc., is a leader in the development and marketing of high-performance, cost-effective digital signal processing cores and solutions for the consumer telephone, computer telephony and personal computer industries. By combining three key technologies -- speech processing algorithms, telephony algorithms and digital signal processors (DSPs) -- the company has delivered a wide range of enabling application-specific DSPs to these markets. DSP Group is headquartered in Santa Clara, California. For more information, contact Yizhar Ganor of DSP Group at (408) 986-4300 or visit DSP Group's web site at http://www.dspg.com.

# # #

PineDSPCore, OakDSPCore and TrueSpeech are registered trademarks of DSP Group, Inc.

DSP GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(In thousands, except per share amounts)

  Three Months Ended Six Months Ended
  June 30 June 30
  1997 1996 1997 1996
Revenues:        
Product sales $ 12,181 $ 10,078 $ 24,079 $ 17,733
Royalties, licensing and other 2,461 2,943 4,741 6,485
  - - - - - - - - - - - - - - - - - - - - - - - -
Total revenues 14,642 13,021 28,820 24,218
         
Cost of revenues:        
Cost of product sales 7,544 7,933 15,074 13,133
Cost of royalties, licensing and other 503 148 846 378
  - - - - - - - - - - - - - - - - - - - - - - - -
Total cost of revenues 8,047 8,081 15,920 13,511
  - - - - - - - - - - - - - - - - - - - - - - - -
Gross profit 6,595 4,940 12,900 10,707
         
Operating expenses        
Research and development 2,018 2,238 3,959 4,782
Sales and marketing 1,075 1,007 2,331 2,375
General and administrative 1,125 1,682 2,204 3,245
  - - - - - - - - - - - - - - - - - - - - - - - -
Total operating expenses 4,218 4,927 8,494 10,402
  - - - - - - - - - - - - - - - - - - - - - - - -
Operating income 2,377 13 4,406 305
         
Other income (expense):        
Interest and other income 756 377 1,366 799
Interest expense and other (171) (28) (234) (71)
Equity in income (loss) of unconsolidated subsidiaries, net

(313)

(61)

(517)

(94)

  - - - - - - - - - - - - - - - - - - - - - - - -
Income before income taxes 2,649 301 5,021 939
Provision for income taxes 424 33 780 97
  - - - - - - - - - - - - - - - - - - - - - - - -
Net income $ 2,225 $ 268 $ 4,241 $ 842
         
Net income per share $ 0.23 $ 0.03 $ 0.44 $ 0.09
         
Number of shares used in per share computation 9,745 9,568 9,715 9,550

DSP GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

  June 30, December 31,
  1997 1996
ASSETS    
CURRENT ASSETS    
Cash, cash equivalents and marketable securities $ 49,259 $ 42,934
Accounts receivable 5,622 4,861
Inventories 2,562 2,957
Deferred income tax 500 500
Prepaid expenses and others 1,849 1,357
  - - - - - - - - - - - - - -
Total current assets 59,792 52,609
     
Property and equipment 7,952 7,324
Accumulated depreciation and amortization (4,482) (4,033)
  - - - - - - - - - - - - - -
  3,470 3,291
     
Investment in unconsolidated subsidiaries, net 1,898 2,415
Other assets, net 150 388
Deferred taxes 504 504
  - - - - - - - - - - - - - -
TOTAL ASSETS $ 65,814 $ 59,207
     
LIABILITIES AND STOCKHOLDERS' EQUITY    
CURRENT LIABILITIES    
Accounts payable $ 2,056 $ 1,428
Other current liabilities 4,236 3,330
  - - - - - - - - - - - - - -
Total current liabilities 6292 4758
     
STOCKHOLDERS' EQUITY    
Preferred stock -- --
Common stock 10 10
Additional paid-in capital 67,613 66,781
Accumulated deficit (8,101) (12,342)
  - - - - - - - - - - - - - -
  59,522 54,449
  - - - - - - - - - - - - - -
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 65,814 $ 59,207