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DSP Group, Inc. Reports Fourth Quarter and Year End 2009 Results
SAN JOSE, Calif., Jan 27, 2010 (GlobeNewswire via COMTEX) -- DSP Group, Inc. (Nasdaq:DSPG), a leading global provider of wireless chipset solutions for converged communications at home announced today its results for the fourth quarter and year ended December 31, 2009.

Fourth Quarter Results:

Revenues for the fourth quarter of 2009 were $54,720,000, a decrease of 24% from revenues of $71,551,000 for the fourth quarter of 2008. Net loss for the fourth quarter of 2009 was $2,871,000, as compared to net loss of $194,405,000 for the fourth quarter of 2008. Loss per share for the fourth quarter of 2009 was $0.13, as compared to a loss per share of $7.23 for the fourth quarter of 2008.

Year End Results:

Revenues for the year ended December 31, 2009 were $212,186,000, a decrease of 31% over 2008 revenues of $305,800,000. Net loss for 2009 was $8,436,000, compared to a net loss of $212,394,000 for 2008. Loss per share for 2009 was $0.36, compared to a loss per share of $7.48 for 2008.

Non-GAAP Results:

Non-GAAP net income and diluted EPS for the fourth quarter of 2009 were $2,827,000 and $0.12, respectively; a decrease of 29% from the non-GAAP net income of $3,987,000 and a decrease of 20% from the non-GAAP diluted earnings per share (EPS) of $0.15 for the fourth quarter of 2008. Non-GAAP net income and diluted EPS for the fourth quarter of 2009 excluded the impact of amortization of acquired intangible assets of $3,081,000 associated with the acquisition of the Cordless and VoIP Terminals business of NXP B.V. and equity-based compensation expenses of $2,617,000. Non-GAAP net income and diluted EPS for the fourth quarter of 2008 excluded the impact of amortization of acquired intangible assets of $5,654,000, associated with the acquisition; equity-based compensation expenses of $3,188,000; impairment of goodwill and other intangible assets of $181,534,000; unrealized losses related to certain available-for-sale marketable securities of $2,290,000 and the net tax effect of all items cited above along with valuation allowance of deferred tax assets of $5,726,000.

Non-GAAP net income and diluted EPS for the year ended December 31, 2009 were $3,258,000 and $0.14, respectively, representing a decrease of 76% from the non-GAAP net income of $13,816,000 and a decrease of 71% from the non-GAAP diluted EPS of $0.49 for the year ended December 31, 2008. Non-GAAP net income and diluted EPS for the year ended December 31, 2009 excluded the impact of amortization of acquired intangible assets of $12,258,000 associated with the acquisition; equity-based compensation expenses of $11,100,000; gains from realization of previously impaired available-for-sale securities of $531,000; a tax benefit of $3,488,000 resulting from a settlement agreement with the tax authorities and a tax benefit of $7,645,000 resulting from the reversal of certain income tax contingency reserves that were determined to be no longer needed due to the expiration of applicable limitation statutes.

Non-GAAP net income and diluted EPS for the year ended December 31, 2008 excluded the impact of amortization of acquired intangible assets of $22,853,000 associated with the acquisition; equity-based compensation expenses of $13,938,000; impairment of goodwill and other intangible assets of $181,534,000; unrealized losses related to certain available-for-sale marketable securities of $2,961,000; restructuring expenses of $1,870,000 associated with our cost cutting measures at various operating sites and the net tax effect of all items cited above along with valuation allowance of deferred tax assets of $3,054,000.

Ofer Elyakim, CEO of DSP Group, stated: "Our fourth quarter financial results were solid, and our cash flow from operations reached approximately $13 million during the quarter. We ended the year with $123 million in cash and equivalents, taking into consideration $20 million expended in the repurchase of our common stock from NXP and a tough market environment, our ability to generate $26 million in cash from operations in 2009 is a major achievement.

"Moreover, the Consumer Electronics Show in January was a successful event for DSP Group. For the first time, several industry participants showed fully functional devices based on our XpandR product that supports DECT and Wi-Fi connectivity.

"As we look to 2010, we expect conditions in our major end markets, including Europe and the U.S., to improve. We project revenue growth of 10% for 2010 over 2009, reflecting a sharp recovery during the first quarter, as compared to the first quarter of 2009, and revenue generation from our new product categories throughout the year."

The Company believes that the non-GAAP presentation of net income and diluted EPS presented in this press release is useful to investors in comparing results for the fourth quarter and year ended December 31, 2009 to the same period in 2008 because the exclusion of the above noted expenses may provide a more meaningful analysis of the Company's core operating results. Further, the Company believes it is useful to investors to understand how the expenses associated with equity-based compensations expenses are reflected on its statements of income.

Forward Looking Statements

This press release contains statements that qualify as "forward-looking statements" under the Private Securities Litigation Reform Act of 1995, including Mr. Elyakim's statements about the company's objective to resume revenue growth in 2010, a sharp recovery during the first quarter and revenue generation from new product categories. 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 as a result of various factors, including the timing and ability of the market to recover and the corresponding recovery of DSP Group's customers; unexpected delays in the introduction of new products; especially the new generation of multimedia products; fluctuations in gross margins associated with the sale of existing products; the impact of reductions in lead times and inventory levels by DSP Group customers and their customers; slower than expected change in the nature of residential communications domain; DSP Group's inability to develop and produce new products at competitive costs and in a timely manner or failure of such products to achieve broad market acceptance; 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 2008 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.

About DSP Group

DSP Group, Inc. (Nasdaq:DSPG) is a leading global provider of wireless chipset solutions for converged communications at home. Delivering system solutions that combine semiconductors and software with reference designs, DSP Group enables consumer electronics (CE) manufacturers to cost-effectively develop new revenue-generating applications with fast time to market. At the forefront of semiconductor innovation and operational excellence for over two decades, and with a dominant share of the wireless home telephony market, DSP Group provides a broad portfolio of wireless chipsets integrating DECT, Wi-Fi, PSTN and VoIP technologies with state-of-the-art application processors. Enabling converged voice, audio, video and data connectivity across diverse consumer products -- from cordless and VoIP phones to home gateways and connected multimedia screens -- DSP Group proactively partners with CE manufacturers to shape the future of converged communications at home. For more information, visit www.dspg.com.

The DSP Group, Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=6171

Earnings conference call

DSP Group has scheduled a conference call for 8:30 a.m. EST today to discuss the financial results for the fourth quarter of 2009 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 one week after the call on DSP Group's Web site or by calling the following numbers:

--U.S. Dial-In # 1-888-286-8010 (passcode: 89096148)

--International Dial-In # 1-617-801-6888 (passcode: 89096148)

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


                                        Three Months Ended              Twelve Months Ended
                                           December 31,                    December 31,

                                       2009           2008             2009            2008
                                  -------------  ---------------  --------------  ---------------
                                   (Unaudited)     (Unaudited)     (Unaudited)       (Audited)

  Product revenues and other           $ 54,720         $ 71,551       $ 212,186        $ 305,800
  Cost of product revenues
   and other                             33,339           43,350         133,590          191,811
                                  -------------  ---------------  --------------  ---------------

  Gross profit                           21,381           28,201          78,596          113,989
  Operating expenses:
   Research and development              13,557           17,032          56,148           73,856
   Sales and marketing                    4,423            5,587          17,889           22,712
   General and administrative             3,833            4,535          15,228           17,871
   Amortization of intangible
    assets                                3,081            5,654          12,258           22,853
   Impairment of goodwill and
    other intangible assets                  --          181,534              --          181,534

   Restructuring costs                       --               --              --            1,870
                                  -------------  ---------------  --------------  ---------------


  Total operating expenses               24,894          214,342         101,523          320,696
                                  -------------  ---------------  --------------  ---------------

  Operating loss                        (3,513)        (186,141)        (22,927)        (206,707)
  Other income:
   Interest and other income
    (loss), net                             559          (1,787)           2,857              160
                                  -------------  ---------------  --------------  ---------------

  Loss before provision for
  income taxes                          (2,954)        (187,928)        (20,070)        (206,547)
  Provision for income taxes
   (income tax benefit)                    (83)            6,477        (11,634)            5,847
                                  -------------  ---------------  --------------  ---------------


  Net loss                            $ (2,871)      $ (194,405)       $ (8,436)      $ (212,394)
                                  =============  ===============  ==============  ===============

  Net loss per share:
   Basic                               $ (0.13)         $ (7.23)        $ (0.36)         $ (7.48)
   Diluted                             $ (0.13)         $ (7.23)        $ (0.36)         $ (7.48)

  Weighted average number of
   shares of common stock
   used
  in the computation of:
   Basic                                 22,901           26,892          23,655           28,387
   Diluted                               22,901           26,892          23,655           28,387

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

                                    Three Months Ended        Twelve Months Ended
                                       December 31,              December 31,

                                    2009         2008         2009         2008
                                 -----------  -----------  -----------  -----------
                                 (Unaudited)  (Unaudited)  (Unaudited)  (Unaudited)

  Product revenues and other         $54,720      $71,551     $212,186     $305,800
  Cost of product revenues and
   other                              33,175       43,143      132,812      190,892
                                 -----------  -----------  -----------  -----------

  Gross profit                        21,545       28,408       79,374      114,908
  Operating expenses:
   Research and development           12,410       15,409       50,895       66,608
   Sales and marketing                 4,029        5,183       16,116       21,017

   General and administrative          2,921        3,581       11,932       13,795
                                 -----------  -----------  -----------  -----------


   Total operating expenses           19,360       24,173       78,943      101,420
                                 -----------  -----------  -----------  -----------

  Operating income                     2,185        4,235          431       13,488
  Other income:
   Interest and other income,
    net                                  559          503        2,326        3,121
                                 -----------  -----------  -----------  -----------

  Income before provision for          2,744        4,738        2,757       16,609
  income taxes
  Provision for income taxes
   (income tax benefit)                 (83)          751        (501)        2,793
                                 -----------  -----------  -----------  -----------


  Net income                          $2,827       $3,987       $3,258      $13,816
                                 ===========  ===========  ===========  ===========

  Net earnings per share:
   Basic                               $0.12        $0.15        $0.14        $0.49
   Diluted                             $0.12        $0.15        $0.14        $0.49

  Weighted average number of
   shares of common stock
  used in the computation of:
   Basic                              22,901       26,892       23,655       28,387
   Diluted                            23,058       26,897       23,926       28,442


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

                                                                 Three Months Ended        Twelve Months Ended
                                                                    December 31,              December 31,

                                                                 2009         2008         2009         2008
                                                              -----------  -----------  -----------  -----------
                                                              (Unaudited)  (Unaudited)  (Unaudited)  (Unaudited)

  GAAP net loss                                                 $ (2,871)  $ (194,405)    $ (8,436)  $ (212,394)
                                                              ===========  ===========  ===========  ===========
  Equity-based compensation expense included in cost of
   product revenues                                                   164          207          778          919
  Equity-based compensation expense included in R&D                 1,147        1,623        5,253        7,248
  Equity-based compensation expense included in SG&A                1,306        1,358        5,069        5,771
  Amortization of intangible assets related to NXP
   transaction                                                      3,081        5,654       12,258       22,853
  Impairment of goodwill and other intangible assets                   --      181,534           --      181,534
  Restructuring costs                                                  --           --           --        1,870
  Unrealized loss (realized gain) related to certain
   available-for-sale marketable securities                            --        2,290        (531)        2,961
  Reversal of income tax contingency reserve                           --           --      (7,645)           --
  Tax benefit resulting from settlement agreement with
   tax authorities                                                     --           --      (3,488)           --
  Tax benefit resulting from the above mentioned items                 --        5,726           --        3,054

  Non-GAAP net income                                             $ 2,827      $ 3,987      $ 3,258     $ 13,816
                                                              ===========  ===========  ===========  ===========
  Non-GAAP diluted earnings per share                              $ 0.12       $ 0.15      $ 0. 14       $ 0.49

  DSP GROUP, INC.
  CONSOLIDATED BALANCE SHEETS
  (In thousands)
                                  December     December
                                     31,         31,

                                    2009         2008
                                 -----------  ---------

                                 (Unaudited)  (Audited)
                                 -----------  ---------
  Assets
  Current assets:
   Cash and cash equivalents         $37,986    $68,886
   Restricted deposits                   120        115
   Marketable securities and
    cash deposits                     19,567     12,449
   Trade receivables, net             28,352     39,603
   Inventories                        12,427     14,098
   Other accounts receivable          12,162     17,367

   Deferred income taxes                 178        306
                                 -----------  ---------
  Total current assets               110,792    152,824

  Property and equipment, net         10,090     14,822
                                      65,392     40,051
  Long term marketable
   securities and cash deposits
  Severance pay fund                   9,521      7,286
  Deferred income taxes                   15        212
  Intangible assets, net              20,473     32,728

  Investment in affiliated
   companies                           2,200         --
  Long term prepaid expenses
   and lease deposits                  1,286      1,331
                                 -----------  ---------

                                      98,887     81,608
                                 ===========  =========

  Total assets                      $219,769   $249,254
                                 ===========  =========

  Liabilities and Stockholders'
   Equity
  Current liabilities:
   Trade payables                    $18,309    $20,136

   Other current liabilities          24,470     40,329
                                 -----------  ---------
  Total current liabilities           42,779     60,465
   Accrued severance pay              10,572      8,008
   Accrued pensions                      929      1,675
   Deferred tax liabilities               --         24

   Other long term liabilities            --        455
                                 -----------  ---------
  Total long term liabilities         11,501     10,162
  Stockholders' equity:
   Common stock                           23         27
   Additional paid-in capital        325,588    314,484
   Accumulated other
    comprehensive income               2,174         51
   Less -- Cost of treasury
    stock                          (123,359)  (107,749)

   Accumulated deficit              (38,937)   (28,186)
                                 -----------  ---------

   Total stockholders' equity        165,489    178,627
                                 -----------  ---------
   Total liabilities and
    stockholders' equity            $219,769   $249,254
                                 ===========  =========

This news release was distributed by GlobeNewswire, www.globenewswire.com

SOURCE: DSP Group, Inc.

CONTACT: DSP Group, Inc.
Irit Jakoby
1-408 240 6839
irit.jakoby@dspg.com