Press Release

Printer Friendly Version View printer-friendly version
<< Back
DSP Group, Inc. Reports Third Quarter 2008 Earnings

SAN JOSE, Calif., Oct. 30 /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 third quarter ended September 30, 2008.

(Logo: http://www.newscom.com/cgi-bin/prnh/20020715/SFM118LOGO)

Third Quarter Results:

Revenues for the third quarter of 2008 were $87,368,000, an increase of 41% from revenues of $61,866,000 for the third quarter of 2007. Net loss for the third quarter of 2008 was $3,030,000, as compared to net loss of $7,496,000 for the third quarter of 2007. Earnings per share (EPS) for the third quarter of 2008 were a loss of $0.11 per share, as compared with a loss of $0.25 per share for the third quarter of 2007.

Non-GAAP Results:

Non-GAAP net income and diluted EPS for the third quarter of 2008 were $7,367,000 and $0.27 per share, respectively; a decrease of 3% from the non-GAAP net income of $7,615,000 and an increase of 4% from non-GAAP diluted EPS of $0.26 per share for the third quarter of 2007. Non-GAAP net income and diluted EPS for the third quarter of 2008 excluded the impact of amortization of acquired intangible assets of $5,702,000 associated with the acquisition of the Cordless and VoIP Terminals business of NXP B.V.; equity-based compensation expenses of $3,205,000; restructuring expenses of $1,870,000 associated with our cost cutting measures at various operating sites, unrealized loss related to certain available-for-sale marketable securities of $671,000 and the aggregate tax benefits associated with such expenses of $1,051,000. Non-GAAP net income and diluted EPS for the third quarter of 2007 excluded the impact of an in-process R&D expense of $10,120,000 and the amortization of acquired intangibles and other acquisition-related assets of $3,704,000, both associated with the acquisition of the Cordless and VoIP Terminals business of NXP B.V.; equity-based compensation expenses of $2,880,000; and the aggregate tax benefits associated with such expenses of $1,593,000.

Eli Ayalon, Chairman and CEO of DSP Group, stated: "Despite a solid third quarter and in view of the current economic crisis and the uncertainty of consumer spending in 2009, we decided to implement further synergies aimed at improving efficiencies across our various operating sites and reduce our operating expenses in 2009." Mr. Ayalon also added, "During the third quarter of 2008, we secured two design wins for XpandR, our new generation of wireless multimedia system-on-a-chip (SoC) solution. Both Giant Wireless Technology Ltd, a leading wireless technology creation company, and another leading European-based OEM customer chose XpandR for its broad application capabilities and high level of integration."

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 and 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, video and data communication and deployment in residential, SOHO, SME, enterprise and automotive applications. DSP Group's 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 http://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 Mr. Ayalon's statement about the company's implementation of further synergies to reduce its 2009 operating expenses. 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 fluctuations in sales of DSP Group's 5.8GHz and DECT 6.0 products; successful implementation of the restructuring plan to reduce 2009 operating expenses; slower than expected change in the nature of residential communications domain; unexpected delays in the introduction of new products or failure of such products to achieve broad market acceptance; DSP Group's inability develop and produce new products at competitive costs; 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 2007 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 (http://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 third quarter of 2008 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 http://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 # 1-888-286-8010 (passcode: 59861318)
-- International Dial-In # 1-617-801-6888 (passcode: 59861318)

For more information, please contact Ofer Elyakim, DSP Group Inc. at +852-9017-5426; or e-mail: ofere@dsp.co.il.



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

                            Three Months Ended          Nine Months Ended
                               September 30,              September 30,
                            2008         2007         2008         2007
                         (Unaudited)  (Unaudited)  (Unaudited)  (Unaudited)

    Product revenues
     and other             $87,368      $61,866     $234,250     $163,590
    Cost of product
     revenues and other     54,503       37,201      148,462       98,434

    Gross profit            32,865       24,665       85,788       65,156
    Operating expenses:
      Research and
       development          17,908       13,874       56,825       39,095
      Sales and
       marketing             5,483        4,680       17,124       12,987
      General and
       administrative        4,539        3,271       13,336       10,196
      Amortization of
       intangible assets     5,702        3,057       17,200        3,057
      In-process R&D             -       10,120            -       10,120
      Restructuring
       costs                 1,870            -        1,870            -

      Total operating
       expenses             35,502       35,002      106,355       75,455

    Operating loss          (2,637)     (10,337)     (20,567)     (10,299)
    Other income :
      Interest and other
       income/(loss), net     (185)       2,569        1,948        9,148

      Loss before
       provision for
       income taxes         (2,822)      (7,768)     (18,619)      (1,151)
    Provision for income
     taxes ( income tax
     benefit)                  208         (272)        (630)       2,016

    Net Loss               $(3,030)     $(7,496)    $(17,989)     $(3,167)

    Net loss per share:
      Basic                 $(0.11)      $(0.25)      $(0.62)      $(0.11)
      Diluted               $(0.11)      $(0.25)      $(0.62)      $(0.11)

    Weighted average
     number of shares
     of Common stock
     used in the
     computation of:
      Basic                 27,728       29,436       28,885       28,716
      Diluted               27,728       29,436       28,885       28,716



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

                             Three Months Ended         Nine Months Ended
                               September 30,              September 30,
                             2008         2007         2008         2007
                         (Unaudited)  (Unaudited)  (Unaudited)  (Unaudited)

    Product revenues
     and other             $87,368      $61,866     $234,250     $163,590
    Cost of product
     revenues and other     54,295       36,411      147,750       97,312

    Gross profit            33,073       25,455       86,500       66,278
    Operating expenses:
      Research and
       development          16,267       12,424       51,201       33,628
      Sales and marketing    5,127        4,351       15,832       11,771
      General and
       administrative        3,539        2,313       10,215        6,613

      Total operating
       expenses             24,933       19,088       77,248       52,012

    Operating income         8,140        6,367        9,252       14,266
    Other income:
      Interest and
       other income, net       486        2,569        2,619       10,144

    Income before
     provision for
     income taxes            8,626        8,936       11,871       24,410
    Provision for
     income taxes            1,259        1,321        2,042        4,291

    Net income              $7,367       $7,615       $9,829      $20,119

    Net earnings
     per share:
      Basic                  $0.27        $0.26        $0.34        $0.70
      Diluted                $0.27        $0.26        $0.34        $0.70

    Weighted average
     number of shares
     of Common stock
     used in the
     computation of:
      Basic                 27,728       29,436       28,885       28,716
      Diluted               27,740       29,549       28,957       28,903



         Unaudited Reconciliation of GAAP to Non-GAAP Financial Measures
                     (In thousands, except per share amounts)

                            Three Months Ended         Nine Months Ended
                               September 30,             September 30,
                             2008         2007        2008         2007
                          Unaudited    Unaudited   Unaudited    Unaudited

    GAAP net loss          $(3,030)     $(7,496)    $(17,989)     $(3,167)
    Equity-based
     compensation
     expense included
     in cost of
     product revenues          208          143          712          475
    Amortization of
     adjustment of
     Inventories to
     market values               -          647            -          647
    Equity-based
     compensation
     expense included
     in R&D                  1,641        1,450        5,624        5,467
    Equity-based
     compensation
     expense included
     in SG&A                 1,356        1,287        4,413        4,799
    Amortization of
     intangible assets
     related to NXP
     transaction             5,702        3,057       17,200        3,057
    In-process R&D               -       10,120            -       10,120
    Restructuring costs      1,870            -        1,870            -
    Unrealized loss
     related to certain
     available-for-sale
     marketable securities     671            -          671          996
    Tax benefit resulting
     from equity-based
     compensation,
     amortization of
     intangible assets,
     in-process R&D,
     restructuring costs
     and loss related to
     certain
     available-for-sale
     marketable securities  (1,051)      (1,593)      (2,672)      (2,275)
    Non-GAAP net income     $7,367       $7,615       $9,829      $20,119
    Non-GAAP diluted
     earnings per share      $0.27        $0.26        $0.34        $0.70



                               DSP GROUP, INC.
                         CONSOLIDATED BALANCE SHEETS
                                (In thousands)
                                                 September 30,  December 31,
                                                      2008           2007
                                                  (Unaudited)     (Audited)
    Assets
    Current assets:
      Cash and cash equivalents                      $64,089        $69,586
      Restricted deposits                                115              -
      Marketable securities and cash deposits          9,700         63,682
      Trade receivables, net                          44,233         51,636
      Inventories                                     21,847         16,361
      Other accounts receivable                       15,682          8,173
      Deferred income taxes                              547          4,011
    Total current assets                             156,213        213,449

    Property and equipment, net                       16,451         14,270

    Long term marketable securities                   46,647         34,469
    Severance pay fund                                 8,123          6,883
    Deferred income taxes                              8,842          5,109
    Goodwill and other intangible assets             220,286        237,969
    Other assets                                       1,704            694
    Total assets                                    $458,266       $512,843

    Liabilities and Stockholders' Equity
    Current liabilities:
      Accounts payable                               $31,794        $29,064
      Other current liabilities                       40,319         48,125
    Total current liabilities                         72,113         77,189

     Accrued severance pay                             8,491          7,303
     Accrued pensions                                  1,091          1,758
     Deferred tax liability                            1,613            372
     Other long term liabilities                         455          1,364

    Total long term liabilities                       11,650         10,797

    Stockholders' equity:
      Common stock                                        28             31
      Additional paid-in capital                     311,296        300,542
      Accumulated other comprehensive
       income (loss)                                    (378)         1,025
      Retained earnings                              166,219        187,063
    Less - Cost of treasury stock                   (102,662)       (63,804)

    Total stockholders' equity                       374,503        424,857
    Total liabilities and stockholders' equity      $458,266       $512,843

SOURCE DSP Group, Inc.
10/30/2008
CONTACT: Ofer Elyakim of DSP Group Inc., +852-9017-5426,
ofere@dsp.co.il