Investor Overview

Press Release

View printer-friendly version << Back
DSP Group, Inc. Reports Fourth Quarter and 2003 Earnings

Net Income for the Quarter and Year Increased 65% YoY and 67% YoY, Respectively

SANTA CLARA, Calif., Jan. 27 /PRNewswire-FirstCall/ -- DSP Group, Inc. (Nasdaq: DSPG) today announced its results for the quarter and year ended December 31, 2003.

Fourth Quarter Results:

Revenues for the fourth quarter of 2003 were $38,136,000, an increase of 36% from revenues of $28,128,000 for the fourth quarter of 2002. Net income for the fourth quarter was $5,961,000, an increase of 65% from net income of $3,604,000 for the fourth quarter of 2002 (which included net loss of $22,000 related to the discontinued operations of the DSP cores licensing business). Diluted earnings per share (EPS) for the fourth quarter of 2003 was $0.20, an increase of 54% from $0.13 for the fourth quarter of 2002.

Year End Results:

Revenues for the year ended December 31, 2003, were $152,875,000, an increase of 22% over 2002 revenues of $125,158,000. Net income for 2003 was $25,355,000, an increase of 67% from $15,142,000 for 2002 (which included net income of $2,470,000 related to the discontinued operations of the DSP cores licensing business). Diluted EPS for 2003 was $0.86, an increase of 59% from $0.54 for 2002. Diluted EPS for 2002 included an amount of $0.09 related to the discontinued operations.

Pro Forma Results:

Results for 2003 included a one-time write-off in the second quarter of 2003 in the amount of $2,727,000 for in-process research and development related to the Teleman Multimedia Inc. acquisition announced by the company on May 19, 2003 and a capital gain of $241,000 from the sale of Tower Semiconductor Ltd. shares. Results for the fourth quarter and year ended December 31, 2002, included an unusual loss item for impairment of available-for-sale marketable securities of $414,000 and $10,229,000, respectively, mainly associated with a decline in value of the company's holdings in AudioCodes Ltd. shares (Nasdaq: AUDC) in the second quarter of 2002. In addition, the company recorded in the first quarter of 2002, an amount of $865,000 as an unusual expense related to the abandoned IPO expenses of the DSP Cores licensing business.

Pro forma net income and diluted EPS for the company for the year ended December 31, 2003, excluding the unusual loss and expense items described above, would have been $27,569,000 and $0.93, respectively. The company achieved an increase of 38% and 31% for pro forma net income and diluted EPS, excluding the discontinued operations and the unusual loss and expense items, as compared to $19,930,000 and $0.71, respectively, for the same period in 2002.

The company believes that this pro forma presentation of net income and diluted EPS is useful to investors in comparing results for the quarter and year ended December 31, 2003 to the same periods during 2002, because it excludes items that management does not consider meaningful for purposes of analyzing the company's operating results and budget-planning decisions.

Eli Ayalon, Chairman and CEO of DSP Group, stated: "We are very satisfied with our achievements in 2003. We reached record revenue and operating profitability levels, and increased diluted EPS, as compared to 2002. We are also pleased with our solid fourth quarter 2003 performance, and the continuing strong demand for our wireless residential products, resulting in strong bookings and good visibility into the first quarter of 2004."

Mr. Ayalon further stated: "During 2003 we also completed a strategic move into the multimedia communication market through the acquisition of Teleman Multimedia, finalized the development of a new chip set for the European markets and added new advanced features to our products. We are now well positioned to face the exciting challenges of the future, and take advantage of new market opportunities."

Moshe Zelnik, CFO of DSP Group, stated, "Our gross margins for the fourth quarter of 2003 reached a record level of 49% of revenues, a significant improvement over previous quarters. Approximately $900,000 or 2% was due to our ability to use previously scrapped inventory. In addition, it should be noted that an amount of approximately $700,000 related to the accelerated depreciation of equipment was included in research and development expenses recorded in the fourth quarter of 2003."

Mr. Zelnik further stated, "During the fourth quarter of 2003 we repurchased 100,000 shares of our common stock for a total amount of $2,310,000 at an average price of $23.1 per share. During the year ended December 31, 2003, we repurchased 746,000 shares for a total amount of $16,157,000 at an average price of $21.66 per share. As of December 31, 2003, our cash position, consisting of cash, cash equivalents and marketable securities, reached a level of approximately $276.4 million, reflecting approximately $34.3 million of positive cash flow from operations during the year 2003."

About DSP Group

DSP Group, Inc. is a fabless semiconductor company that is a worldwide leader in the short-range wireless market. By combining its DSP core technology with advanced RF CMOS, communication technology, video technology and speech-processing algorithms, DSP Group develops and provides a wide portfolio of short-range communication solutions, which are utilized for residential, SOHO, SME, enterprise and automotive applications. DSP Group solutions include digital 900MHz, 2.4GHz, DECT (1.9GHz), 5.8GHz and Bluetooth for voice, data and video communication as well as solutions for DVRs (Digital Voice Recorders) and MP3 applications. DSP Group also develops and markets embedded, integrated silicon/software solutions for Voice-over-Digital-Subscriber Line (VoDSL) and Voice-over-Internet-Protocol (VoIP) applications, as well as other Voice-over-Packet applications for Integrated Access Devices (IAD) and IP phones. More information about DSP Group is available at www.dspg.com.

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 statements made by Mr. Ayalon relating to continuing strong demand for DSP Group's wireless residential products, strong booking for and good visibility into the first quarter of 2004, and DSP Group being well positioned to face the exciting challenges of the future and take advantage of new market opportunities. 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. DSP Group's actual results could differ materially from those described in this press release as a result of various factors, including unexpected delays in the introduction of new products; failure to achieve broad market acceptance of existing and new products by existing and potential OEM customers; DSP Group's inability to add new customers and develop and produce new products at competitive costs and in a timely manner; decline or fluctuations in gross margins and the effect on revenues and profitability; 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 the year ended December 31, 2002, as well as other reports, including Form 10-Qs, 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. EST today to discuss fourth quarter and annual 2003 results 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://phx.corporate-ir.net/phoenix.zhtml?c=101665&p=irol-necalendar .

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:

-- US Dial-In # 1-888-286-8010 (passcode: 19616340)

-- International Dial-In # 617-801-6888 (passcode: 19616340)

For more information, please contact Yaniv Arieli, President of US Operations, Investor Relations, DSP Group at 408-986-4423; or e-mail: yarieli@dspg.com



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


                                   Three Months Ended         Year Ended
                                      December 31,        December 31,
                                     2003      2002        2003       2002

    Product revenues and
     other                       $ 38,136  $ 28,128   $ 152,875  $ 125,158
    Cost of product revenues
     and other                     19,451    16,213      83,077     74,412

    Gross profit                   18,685    11,915      69,798     50,746
    Operating expenses:
      Research and development      8,197     4,621      25,599     19,745
      Sales and marketing           3,361     2,767      11,977     10,745
      General and administrative    1,947     1,523       6,953      5,048
      In-process research &
       development write-off           --        --       2,727         --
      Aborted spin off expenses
       and other                       --        --          --        865

      Total operating expenses     13,505     8,911      47,256     36,403

    Operating income                5,180     3,004      22,542     14,343
    Other income :
      Interest and other income,
       net                          2,002     1,886       7,947      9,452
      Capital gains                    --        --         241         --

    Income after financial and
     other income                   7,182     4,890      30,730     23,795
    Impairment of
     available-for-sale
     marketable securities             --      (414)         -- (*)(10,229)

    Income before provision for
     income taxes                   7,182     4,476      30,730     13,566
    Provision for income
     Taxes                          1,221       850       5,375    (**)894

    Net income from continuing
     operations                     5,961     3,626      25,355     12,672
    Net income (loss) from
     discontinued operations           --       (22)         --      2,470
    (***)
    Net income                     $5,961    $3,604     $25,355    $15,142

    Net earnings per share for
     continuing operations:
      Basic                        $ 0.21    $ 0.13      $ 0.91     $ 0.47
    Diluted                        $ 0.20    $ 0.13      $ 0.86     $ 0.45
    Net earnings (loss) per share
     for discontinued operations:
      Basic                        $ 0.00    $ (0.00)    $ 0.00     $ 0.09
      Diluted                      $ 0.00    $ (0.00)    $ 0.00     $ 0.09
    Net earnings per share
     (combined):
      Basic                        $ 0.21    $ 0.13      $ 0.91     $ 0.56
      Diluted                      $ 0.20    $ 0.13      $ 0.86     $ 0.54
    Weighted average number of
     shares of Common Stock used
     in computing of:
      Basic                        28,615    27,188      27,912     27,070
      Diluted                      30,344    28,028      29,593     28,041

     (*)   Related to impairment of marketable securities
     (**)  Included a tax credit related to impairment of marketable
           securities
     (***) Related to the DSP cores licensing business (Ceva) which was
           discontinued in November 2002 following the combination of Ceva
           with Parthus Technologies plc to form ParthusCeva, Inc.


                               DSP GROUP, INC.
                CONSOLIDATED STATEMENTS OF INCOME -- PRO FORMA
                   (In thousands, except per share amounts)



                                   Three Months Ended           Year Ended
                                      December 31,             December 31,
                                     2003      2002        2003        2002

    Product revenues and other
                                 $ 38,136   $ 28,128  $ 152,875  $ 125,158
    Cost of product revenues and
     other                         19,451     16,213     83,077     74,412

    Gross profit                   18,685     11,915     69,798     50,746
    Operating expenses:
      Research and development      8,197      4,621     25,599     19,745
      Sales and marketing           3,361      2,767     11,977     10,745
      General and administrative    1,947      1,523      6,953      5,048
      Total operating expenses     13,505      8,911     44,529     35,538

    Operating income                5,180      3,004     25,269     15,208
    Other income:
      Interest and other income,
       net                          2,002      1,886      7,947      9,452

    Income after financial and
     other income                   7,182      4,890     33,216     24,660

    Provision for income taxes      1,221        929      5,647      4,730

    Net income from continuing
     operations                     5,961      3,961     27,569     19,930
    Net income (loss) from
     discontinued operations           --        (22)        --      2,470
    (***)
    Net income                     $5,961     $3,939   $ 27,569    $22,400

    Net earnings per share for
     continuing operations:
      Basic                        $ 0.21     $ 0.15     $ 0.99     $ 0.74
      Diluted                      $ 0.20     $ 0.14     $ 0.93     $ 0.71
    Net earnings (loss) per share
     for discontinued operations:
      Basic                        $ 0.00   $ (0.00)     $ 0.00     $ 0.09
      Diluted                      $ 0.00   $ (0.00)     $ 0.00     $ 0.09
    Net earnings per share
     (combined):
      Basic                        $ 0.21     $ 0.15     $ 0.99     $ 0.83
      Diluted                      $ 0.20     $ 0.14     $ 0.93     $ 0.80
    Weighted average number of
     shares of Common Stock used
     in computing of:
      Basic                        28,615     27,188     27,912     27,070
      Diluted                      30,344     28,028     29,593     28,041

The above pro forma consolidated statements of income have been adjusted to exclude the following items to US GAAP reported net income:


    Reported net income per
     US GAAP                      $ 5,961    $ 3,604   $ 25,355   $ 15,142
    Adjustments:
      Aborted spin off expenses
       and other                       --         --         --        865
      Impairment of
       available-for-sale
       marketable securities           --        414         --     10,229
      In-process research &
       development write-off           --         --      2,727         --
      Capital gains                    --         --       (241)        --
      Tax benefit                      --        (79)      (272)    (3,836)

    Pro forma net income          $ 5,961    $ 3,939   $ 27,569   $ 22,400


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

                                                   December 31,   December 31,
                                                      2003            2002
    Assets                                          (Audited)       (Audited)
    Current assets:
      Cash and cash equivalents                     $ 36,812       $ 39,919
      Marketable securities                           42,490         45,371
      Trade receivables, net                          15,844          4,873
      Inventories                                      8,466          6,916
      Other accounts receivable                        1,462          1,352
      Deferred income taxes                            1,326          1,685
      Assets of discontinued operation, net               --          4,737
    Total current assets                             106,400        104,853

    Property and equipment, net                        7,108          4,690
    Long term marketable securities                  197,071        150,692
    Investment in equity security of traded
     companies                                        47,138         12,031
    Severance pay fund                                 2,360          1,616
    Long term pre-paid expenses and lease deposits       513            386
    Goodwill                                           5,804          5,804
    Other intangible assets                              911             --

    Total Assets                                   $ 367,305      $ 280,072

    Liabilities and Stockholders' Equity
    Current liabilities:
      Trade payable                                  $11,221         $6,745
      Other current liabilities                       34,556         21,552

    Total current liabilities                         45,777         28,297
    Long term liabilities:
    Accrued severance pay                              2,555          1,686
    Deferred income taxes                             14,592          2,371
    Total long term liabilities                       17,147          4,057

    Stockholders' equity:
      Common Stock                                        29             27
      Additional paid-in capital                     174,700        156,443
      Accumulated other comprehensive income          23,045            476
      Retained earnings                              107,799         90,772
    Loss -- Cost of Treasury stock                    (1,192)            --

    Total stockholders' equity                       304,381        247,718
    Total liabilities and stockholders' equity     $ 367,305      $ 280,072

SOURCE DSP Group, Inc.

/CONTACT: Yaniv Arieli, President of US Operations, Investor Relations of DSP Group, +1-408-986-4423, or yarieli@dspg.com/

/Photo: http://www.newscom.com/cgi-bin/prnh/20020715/SFM118LOGO

AP Archive: http://photoarchive.ap.org

PRN Photo Desk, +1-888-776-6555 or +1-212-782-2840/

/Web site: http://www.dspg.com /

http://www.prnewswire.com