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DSP Group, Inc. Reports Financial Results for Third Quarter 1999
  • All-Time Record High Revenues - $23,296,000.
  • All-Time Record High EPS (excluding one-time gains) - $0.44
  • Successful Follow-on Offering of Affiliate's Shares

SANTA CLARA, CALIFORNIA -- October 18, 1999 -- DSP Group, Inc. (NASDAQ: DSPG) today announced its financial results for the third quarter ended September 30, 1999.

Third quarter revenues were $23,296,000, an increase of 35%, compared to $17,308,000 in the same quarter of 1998. Revenues for the first three quarters of 1999 were $50,460,000, an increase of 1.5% compared to $49,733,000 in the same period in 1998.

Net income for the third quarter of 1999 was $5,770,000, an increase of 66%, compared to $3,475,000 for the comparable quarter of 1998. Earnings per share were $0.44, an increase of 26% compared to $0.35 in the third quarter of 1998. Net income for the first three quarters of 1999 was $20,661,000, an increase of 89% over the net income of $10,947,000 in the first three quarters of 1998. Earnings per share for the first nine months of 1999 were $1.70, an increase of 57% above earnings per share of $1.08 during the same period of 1998. Net income for the first three quarters of 1999, excluding one-time capital gains, was $10,081,000.

During the first nine months of 1999, the company significantly increased its research and development and sales and marketing expenses to support its new product introductions. These expense increases, which were undertaken to build future revenues, resulted in a decreased operating income, during this period, compared to the same period of 1998.

Eli Ayalon, President and CEO of DSP Group stated, "During the third quarter of 1999, the company continued to expand its family of DSP Core licensees, by signing two additional licensing agreements with major companies in the United States and in Japan. One licensing agreement was for DSP Group's TeakDSPCore® and TeakliteÔ DSPCore, while the other agreement included it's TeakDSPCore and PalmDSPCore®."

Ayalon continued, "The third quarter's very positive results and the good visibility we have in our two business lines, Product Sales and DSP Licensing, strengthen our confidence in DSP Group's ability to meet its goals for the coming quarter and for the year 2000." After the end of the third quarter, the Company's affiliate, AudioCodes Ltd. (NASDAQ: AUDC) successfully concluded a follow-on public offering of 3 Million shares at a price of $41.00 per share. An amount of 1.5 Million shares was issued by AudioCodes and an additional 1.5 million shares were sold by previous shareholders, of which approximately 818,000 shares were sold by DSP Group. After the follow-on offering, AudioCodes has approximately 19 Million shares outstanding of which DSP Group owns approximately 3.2 Million shares, which represent approximately 17% of the outstanding shares of AudioCodes.

In the fourth quarter of 1999, DSP Group will record a one-time profit of approximately $38 million, resulting from AudioCodes' follow-on offering. Of this amount, a one-time capital gain of approximately $26.9 Million will be recorded following the sale of the AudioCodes shares by DSP Group. A $11.1 million one-time capital gain will also be recorded as a result of the increase of Audiocodes equity by net proceeds from the offering amounting to approximately $57 million.

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 Companies ability to meet its goals for next quarter and for the year 2000 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, DSP Group at Santa Clara, CA. (408) 986-4300.

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OakDSPCore, TeakDSPCore, PalmDSPCore and SmartCores are registered trademarks of DSP Group, Inc. TeakLite is a trademark of DSP Group, Inc.

Information Contact:
Michael Cohen
Director for Investor Relations,
DSP Group, Inc.
+1 408 986 4424