FOR IMMEDIATE RELEASE
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DSP Group, Inc.
DSP Group, Inc. Reports Financial Results for Second Quarter 1999
Second quarter revenues were $16,702,000, compared to revenues of $16,749,000 in the same quarter last year. In the first half of 1999, revenues were $27,164,000, compared to revenues of $32,425,000 in the first half of 1998.
Net income for the second quarter reached $13,709,000 or $1.13 per share (diluted), compared to net income of $4,261,000 or $0.42 per share (diluted) in the second quarter of 1998. During the first six months of 1999, net income was $14,891,000 or $1.29 (diluted) per share, compared to net income of $7,472,000 or $0.73 (diluted) per share, during the first six months of 1998.
Results for the second quarter and first half of 1999 include one-time capital gains in the amount of $11,780,000. This amount is comprised of $9,335,000, which resulted from the Initial Public Offering of DSP Group's subsidiary, AudioCodes Ltd., in May, 1999, and $2,445,000 from the sale of AudioCodes' shares to underwriters, made in order to cover the over-allotment option. These one-time gains are included under ``Other income (expense)'' in the Company's statements of income. DSP Group still holds approximately 4,000,000 shares (approximately 23%) of AudioCodes' shares.
Excluding the effect of the one-time capital gains, pro-forma net income for the second quarter of 1999 and for the first half of 1999 were $3,129,000 or $0.26 (diluted) per share and $4,311,000 or $0.37 (diluted) per share, respectively.
During the first six months of 1999, the Company significantly increased its research and development and sales and marketing expenses to support its new product introduction. These planned expense increases were undertaken to build future revenues, resulting in operating income during the quarter and first six months trailing operating income during the comparable periods of 1998.
During the second quarter of 1999, the Company signed two additional licensing contracts with major companies in the U.S. and Japan, one for its TeakLite(TM) DSP Core and the second for the TeakDSPCore(TM).
Eli Ayalon, President & CEO of DSP Group said, ``Significant order bookings for DSP Group's products, were received during the second quarter of 1999. This resulted in a 94% increase of our product sales compared to the first quarter of 1999. This increase was in line with our plans. Market acceptance of our new product line of Integrated Digital Telephony (IDT) chips, the D16xxx, is now a fact.''
Mr. Ayalon continued, ``Toward the end of the second quarter, we began shipments of our new line of products -- the 900MHz Spread Spectrum Baseband and RF chips -- and managed to build a significant backlog for these products.''
DSP Group, Inc. is a leader in the development and marketing of high-performance, cost-effective Digital Signal Processing Cores used in a wide range of applications for industries such as wireless communications, telephony and personal computing. By combining its DSP Core technology with its advanced speech processing algorithms, DSP Group also delivers a wide range of enabling application-specific ICs, such as ICs for fully featured Integrated Digital Telephony, for 900 MHz Spread Spectrum wireless telephony products and for IP telephony applications.
Statements contained in this release concerning the anticipated new product introductions and future revenues may constitute forward-looking statements. These statements involve certain risks and uncertainties such as acceptance of the company's new products by existing OEM customers and potential customers, the ability of the company to produce its new products at competitive costs, the volume and timing of product orders and the number and timing of new licensing agreements.
Additional information is available on the World Wide Web at www.dspg.com. This press release is also available through the company's News on Call fax service, which can be reached at 800-758-5804, company code 112025.
For more information, please contact Michael Cohen at 408-986-4424.
NOTE: TeakLite and TeakDSPCore are trademarks of DSP
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, 1999 1998 1999 1998 Revenues: Product sales $12,673 $13,045 $19,195 $26,446 Licensing, royalties and other 4,029 3,704 7,969 5,979 Total revenues 16,702 16,749 27,164 32,425 Cost of revenues: Cost of product sales 7,148 7,861 10,899 15,588 Cost of licensing, royalties and other 11 132 86 198 Total cost of revenues 7,159 7,993 10,985 15,786 Gross profit 9,543 8,756 16,179 16,639 Operating expenses: Research and development 3,741 2,500 7,102 4,528 Sales and marketing 2,201 1,278 4,117 2,591 General and administrative 1,304 1,189 2,556 2,281 Total operating expenses 7,246 4,967 13,775 9,400 Operating income 2,297 3,789 2,404 7,239 Other income (expense): Interest and other income 1,222 920 2,352 1,860 Interest and other expense (78) (66) (182) (108) Gain on sale of marketable equity security -- 1,086 -- 1,086 Equity in income (loss) of equity method investees, net 575 (49) 1,017 (115) Capital gain 11,780 -- 11,780 -- Income before provision for income taxes 15,796 5,680 17,371 9,962 Provision for income taxes 2,087 1,419 2,480 2,490 Net income $13,709 $4,261 $14,891 $7,472 Net income per share: Basic $1.19 $0.43 $1.33 $0.75 Diluted $1.13 $0.42 $1.29 $0.73 Shares used in per share computations: Basic 11,561 9,884 11,167 9,981 Diluted 12,166 10,142 11,502 10,264 DSP GROUP, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) June 30, December 31, 1999 1998 Assets Current Assets: Cash, cash equivalents and marketable securities $100,957 $66,989 Accounts receivable, net 9,926 5,721 Inventories 1,654 2,182 Deferred income taxes 1,374 1,374 Prepaid expenses and others 2,555 1,608 Total current assets 116,466 77,874 Property and equipment, net 7,159 4,236 Other investments, net of accumulated amortization 12,550 1,834 Other assets, net 1,590 135 Severance pay fund 1,057 864 Deferred income taxes 848 848 Total Assets $139,670 $85,791 Liabilities and Stockholders' Equity Current liabilities: Accounts payable $5,976 $2,360 Other current liabilities 8,388 6,841 Total current liabilities 14,364 9,201 Accrued severance pay 1,095 895 Stockholders' equity: Common stock 12 9 Additional paid-in capital 110,249 75,610 Retained earnings 26,517 12,129 Treasury stock at cost (12,567) (12,053) Total stockholders' equity 124,211 75,695 Total liabilities and stockholders' equity $139,670 $85,791
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