DSP Group, Inc. Reports Second Quarter 2005 Earnings
Record High Revenues and 11% Revenue Increase YoY
SANTA CLARA, Calif., July 20 /PRNewswire-FirstCall/ -- DSP Group, Inc. (Nasdaq: DSPG), a worldwide leader in developing and providing chip-set solutions for residential wireless connectivity announced today its results for the second quarter of 2005.
Revenues for the second quarter of 2005 were $49,047,000, an increase of 11% from revenues of $44,016,000 for the second quarter of 2004. Net income for the second quarter of 2005 decreased 12% to $8,248,000, as compared to $9,371,000 for the second quarter of 2004. Diluted earnings per share (EPS) for the second quarter of 2005 decreased 7% to $0.28, as compared to $0.30 for the second quarter of 2004.
Results for the second quarter of 2004 included a capital gain of $7,671,000 resulting from the sale of 801,000 shares of AudioCodes Ltd. and a one-time goodwill impairment charge of $4,304,000 arising from the GAAP-required re-evaluation of the remaining goodwill associated with the acquisition of VoicePump Inc. in March 2000.
Pro-forma net income and diluted EPS for the second quarter of 2004, excluding the effects of the capital gain and related taxes of $3,068,000 as well as the impairment of VoicePump goodwill, would have been $9,072,000 and $0.29, respectively.
The company believes that the above pro forma presentation of net income and diluted EPS is useful to investors in comparing results for the quarter ended June 30, 2005 to the same period during 2004, because it excludes items that management does not consider meaningful for purposes of analyzing the company's core operating results and making budget-planning decisions.
Eli Ayalon, Executive Chairman of DSP Group, stated: "In keeping with the company's policy of maintaining high levels of operating profitability even while increasing investment in research and development to strengthen our product offerings, we achieved a strong operating profit level of 15% of revenues, despite a significant increase in research and development expenses in the second quarter of 2005 as compared to the second quarter of 2004. This higher level of research and development expenses reflect an increase of resources dedicated to developing multimedia over Wi-Fi products from technologies acquired from Bermai, Inc. in October 2004. We believe that this combined approach will continue to benefit our stockholders and increase our competitive edge."
Inon Beracha, CEO of DSP Group, stated: "Record high revenues were achieved by the company in the second quarter of 2005, reflecting increased demand and market share in North America for our products. This together with a strong flow of orders during the quarter improves our revenue visibility for the third quarter and fiscal year 2005 and continues to validate our business strategy."
About DSP Group
DSP Group, Inc. is a fabless semiconductor company, offering advanced chip-set solutions for a variety of applications. DSP Group is a worldwide leader in the short-range wireless communication market, enabling home networking convergence for voice, video & data. By combining its in-house technologies of Digital Signal Processors (DSPs), portfolio of wireless communication protocols, including DECT, Bluetooth and Wi-Fi, most advanced Radio Frequency CMOS and SiGe, as well as VoIP ICs, DSP Group is a worldwide leader and a one-stop-shop for a wide range of applications. These applications include ISM band digital 900MHz, 2.4GHz and 5.8GHz telephony, European DECT (1.9GHz) telephony, Bluetooth systems for voice, data and video communication and deployment in residential, SOHO, SME, enterprise and automotive applications. DSP Group ICs provide solutions for MP3 players, VoIP Phones, Gateways, and Integrated Access Devices and are widely used in Digital Voice Recorders. More information about DSP Group is available at www.dspg.com.
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 about the benefits of increased investment in research and development and Mr. Beracha about revenue visibility for the third quarter and fiscal year 2005. 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 fiscal 2004 as well as other reports 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. EDT today to discuss the financial results for the second quarter of 2005 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://ir.dspg.com./phoenix.zhtml?c=101665&p=irol-calendar .
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 # 888-286-8010 (passcode: 97349393)
-- International Dial-In # 617-801-6888 (passcode: 97349393)
For more information, please contact Yaniv Arieli, President of US Operations, Investor Relations, DSP Group Inc. at +1-408-986-4423; or e-mail: email@example.com
DSP GROUP, INC. CONSOLIDATED STATEMENTS OF INCOME - US GAAP (In thousands, except per share amounts) Three Months Ended Six Months Ended June 30, June 30, 2005 2004 2005 2004 (Unaudited) (Unaudited) Product revenues and other $49,047 $44,016 $89,210 $82,724 Cost of product revenues and other 25,990 22,918 48,234 42,776 Gross profit 23,057 21,098 40,976 39,948 Operating expenses: Research and development 10,542 7,310 19,941 14,864 Sales and marketing 3,290 3,282 6,176 6,085 General and administrative 1,783 1,734 3,648 3,540 Impairment of goodwill -- 4,304 -- 4,304 Total operating expenses 15,615 16,630 29,765 28,793 Operating income 7,442 4,468 11,211 11,155 Other income: Interest and other income, net 2,499 2,159 4,771 4,284 Capital gains -- 7,671 -- 28,988 Income before provision for income taxes 9,941 14,298 15,982 44,427 Provision for income taxes 1,693 4,927 2,727 14,942 Net income $8,248 $9,371 $13,255 $29,485 Net earnings per share: Basic $0.29 $0.32 $0.47 $1.02 Diluted $0.28 $0.30 $0.45 $0.96 Weighted average number of shares of Common Stock used in the computation of: Basic 28,328 29,159 28,221 28,963 Diluted 29,718 30,957 29,662 30,827 DSP GROUP, INC. CONSOLIDATED PRO-FORMA STATEMENTS OF INCOME (In thousands, except per share amounts) Three Months Ended Six Months Ended June 30, June 30, 2005 2004 2005 2004 (Unaudited) (Unaudited) Product revenues and other $49,047 $44,016 $89,210 $82,724 Cost of product revenues and other 25,990 22,918 48,234 42,776 Gross profit 23,057 21,098 40,976 39,948 Operating expenses: Research and development 10,542 7,310 19,941 14,864 Sales and marketing 3,290 3,282 6,176 6,085 General and administrative 1,783 1,734 3,648 3,540 Total operating expenses 15,615 12,326 29,765 24,489 Operating income 7,442 8,772 11,211 15,459 Other income: Interest and other income, net 2,499 2,159 4,771 4,284 Income after financial and other income 9,941 10,931 15,982 19,743 Provision for income taxes 1,693 1,859 2,727 3,357 Net income $8,248 $9,072 $13,255 $16,386 Net earnings per: Basic $0.29 $0.31 $0.47 $0.57 Diluted $0.28 $0.29 $0.45 $0.53 Weighted average number of shares of Common Stock used in computing of: Basic 28,328 29,159 28,221 28,963 Diluted 29,718 30,957 29,662 30,827 The above pro forma consolidated statements of income have been adjusted to exclude following items to US GAAP reported net income: Reported net income per US GAAP $8,248 $9,371 $13,255 $29,485 Adjustments: Impairment of goodwill -- 4,304 -- 4,304 Capital gains -- (7,671) -- (28,988) Tax expenses -- 3,068 -- 11,585 Pro forma net income $8,248 $9,072 $13,255 $16,386 DSP GROUP, INC. CONSOLIDATED BALANCE SHEETS (In thousands) June 30, December 31, 2005 2004 (Unaudited) (Audited) Assets Current assets: Cash and cash equivalents $44,362 $60,827 Marketable securities and cash deposits 71,907 74,497 Trade receivables, net 18,837 5,976 Inventories 12,539 9,469 Other accounts receivable 1,267 2,213 Deferred income taxes 1,168 1,168 Total current assets 150,080 154,150 Property and equipment, net 11,484 6,683 Long term marketable securities 212,206 195,671 Severance pay fund 3,920 3,437 Long term pre-paid expenses and lease deposits 670 628 Goodwill 1,500 1,500 Deferred income taxes 1,410 1,410 Other intangible assets 2,911 3,482 Total assets $384,181 $366,961 Liabilities and Stockholders' Equity Current liabilities: Trade payable $15,486 $7,830 Other current liabilities 29,221 39,857 Total current liabilities 44,707 47,687 Accrued severance pay 4,110 3,784 Stockholders' equity: Common Stock 28 28 Additional paid-in capital 187,569 187,471 Accumulated other comprehensive income (67) 65 Retained earnings 169,029 157,723 Less -- Cost of treasury stock (21,195) (29,797) Total stockholders' equity 335,364 315,490 Total liabilities and stockholders' equity $384,181 $366,961
DSP Group, Inc.
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