Press Release Details

DSP Group, Inc. Reports Financial Results for Second Quarter 1999

Jul 20, 1999


For more information, contact:

Michael Cohen
Investor Relations
DSP Group, Inc.

DSP Group, Inc. Reports Financial Results for Second Quarter 1999

SANTA CLARA, Calif., July 20 /PRNewswire/ -- DSP Group, Inc. (Nasdaq: DSPG - news) today announced its financial results for the second quarter ended June 30, 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 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 Group, Inc.

                               DSP GROUP, INC.
                   (In thousands, except per share amounts)

                                        Three Months Ended   Six Months Ended
                                             June 30,            June 30,
                                         1999       1998     1999       1998
      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
      Basic                              11,561     9,884    11,167     9,981
      Diluted                            12,166    10,142    11,502    10,264

                               DSP GROUP, INC.
                                (In thousands)
                                                        June 30,  December 31,
                                                          1999        1998
    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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