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DSP Group Reports Financial Results for Second Quarter 2000
DSP Group, Inc.


DSP GROUP, INC. REPORTS

Reports Financial Results for Second Quarter 2000

SANTA CLARA, CALIFORNIA – JULY 19, 2000 – DSP Group, Inc. (NASDAQ: DSPG) today announced its financial results for the second quarter ended June 30, 2000.

Revenues for the second quarter of 2000 were $25,713,000, an increase of 54%, compared to $16,702,000 in the second quarter of 1999. Net income for the second quarter was $17,255,000, an increase of 26%, compared to $13,709,000 for the same quarter of 1999. Earnings per share were $0.59 (diluted), an increase of 5% compared to $0.56 (diluted), in the second quarter of 1999.

Results for the second quarter of 2000 include a capital gain of $17,584,000 resulting from the sale of shares of AudioCodes Ltd. during this quarter. This capital gain is included under "Other Income (expense)" in the Company's statements of income. DSP Group still holds approximately 2.08 million of AudioCodes' shares which represent approximately 11% of the outstanding shares.

Excluding the effects of the capital gains and the unusual items, pro-forma net income for the second quarter of 2000 and for the first half of 2000 were $6,771,000 or $0.23 (diluted) per share and $12,625,000 or $0.44 (diluted) per share respectively, compared to pro-forma net income excluding the effects of the capital gains for the second quarter of 1999 and for the first half of 1999 which were $3,129,000 or $0.13 (diluted) per share and $4,311,000 or $0.19 (diluted) per share respectively.

Eli Ayalon, Chairman and CEO of DSP Group stated, "We are very pleased with the second quarter 2000 results which demonstrated a persistent growth of the company in both our Products and IP Licensing businesses. We are specially encouraged by the growth of our backlog which continued to improve our visibility for the future."

Mr. Ayalon added "This quarter we were honored by the addition of three companies to the increasing list of Licensees of our DSP Cores, the Atmel Corporation, the Marvell Technology Group Ltd. and Orckit Communication Ltd."

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 visibility and future growth of the Company business 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, potential customers and the company's ability continue to add licensees and to develop and produce its new products at competitive costs.

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

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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,
  2000 1999 2000 1999
Revenues:        
Product sales $ 20,181 $ 12,673 $ 38,543 $ 19,195
Licensing, royalties and other 5,532 4,029 10,556 7,969
  _ _ _ _ _ _ _ _ _ _ _ _
Total revenues 25,713 16,702 49,099 27,164
         
Cost of revenues:        
Product sales 11,727 7,148 22,202 10,899
Licensing, royalties and other 210 11 533 86
  _ _ _ _ _ _ _ _ _ _ _ _
Total cost of revenues 11,937 7,159 22,735 10,985
  _ _ _ _ _ _ _ _ _ _ _ _
Gross profit 13,776 9,543 26,364 16,179
         
Operating expenses:        
Research and development 4,806 3,741 9,482 7,102
Sales and marketing 3,056 2,201 5,909 4,117
General and administrative 1,594 1,304 2,886 2,556
Unusual items _ _ _ _ _ _ 14,154 _ _ _
  _ _ _ _ _ _ _ _ _ _ _ _
Total operating expenses 9,456 7,246 32,431 13,775
  _ _ _ _ _ _ _ _ _ _ _ _
Operating income (loss) 4,320 2,297 (6,067) 2,404
Other income (expense):        
Interest and other income 3,207 1,222 6,001 2,352
Interest expense and other (39) (78) (80) (182)
Equity in gain of unconsolidated subsidiaries 703 575 1,140 1,017
Minority interest in loss of subsidiary 48 _ _ _ 48 _ _ _
Capital gains from realization of
investments
17,584 11,780 57,593 11,780
  _ _ _ _ _ _ _ _ _ _ _ _
Income before provision for income taxes 25,823 15,796 58,635 17,371
Provision for income taxes 8,568 2,087 25,971 2,480
  _ _ _ _ _ _ _ _ _ _ _ _
Net income $ 17,255 $ 13,709 $ 32,664 $ 14,891
Net earnings per share:        
Basic $ 0.65 $ 0.59 $ 1.24 $ 0.67
Diluted $ 0.59 $ 0.56 $ 1.13 $ 0.65
Shares used in per share computations:        
Basic 26,684 23,122 26,412 22,334
Diluted 29,076 24,332 28,911 23,004

 

DSP GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)

  June 30, December 31,
  2000 1999
Assets    
Current Assets:    
Cash, cash equivalents, marketable securities and cash deposits $ 231,411 $ 161,371
Trade receivable, net 12,032 10,435
Inventories 2,346 3,283
Deferred income taxes 1,802 1,707
Other accounts receivable and
prepaid expenses
3,758 1,362
  _ _ _ _ _ _
Total current assets 251,349 178,158
     
Property and equipment, net 5,281 6,948
Other investments, net of accumulated amortization 14,143 18,433
Other assets, net of accumulated
amortization
4,133 1,250
Severance pay fund 1,573 1,390
  _ _ _ _ _ _
Total Assets $ 276,479 $ 206,179
 
Liabilities and Stockholders' Equity
 
Current liabilities:    
Trade payable $ 4,404 $ 6,079
Other current liabilities 20,324 8,332
  _ _ _ _ _ _
Total current liabilities 24,728 14,411
     
Long term liabilities:    
Accrued severance pay 1,664 1,431
Deferred income taxes 6,380 6,380
Minority interest 1,389 _ _ _
     
Stockholders' equity:    
Common stock 27 12
Additional paid-in capital 144,845 119,163
Retained earnings 97,446 64,782
  _ _ _ _ _ _
Total stockholders' equity 242,318 183,957
  _ _ _ _ _ _
Total liabilities and
stockholders' equity
$ 276,479 $ 206,179