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DSP Group, Inc. Reports First Quarter 2011 Earnings

SAN JOSE, Calif., Apr 28, 2011 (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 first quarter ended March 31, 2011.

First Quarter Results:

Revenues for the first quarter of 2011 were $48,776,000, a decrease of 13% from revenues of $56,109,000 for the first quarter of 2010. Net loss for the first quarter of 2011 was $4,564,000, as compared to a net loss of $184,000 for the first quarter of 2010. Loss per share for the first quarter of 2011 was $0.19, as compared to a loss per share of $0.01 for the first quarter of 2010.

Non-GAAP Results:

Non-GAAP net loss and diluted loss per share for the first quarter of 2011 were $1,119,000 and $0.05, respectively, as compared to non-GAAP net income of $2,657,000 and non-GAAP diluted earnings per share of $0.11 for the first quarter of 2010. Non-GAAP net loss and diluted loss per share for the first quarter of 2011 excluded the impact of amortization of acquired intangible assets in the amount of $2,196,000, associated with the acquisition of the Cordless and VoIP Terminals business of NXP B.V., equity-based compensation expenses of $1,839,000 and restructuring income of $590,000 associated with the reorganization of our European operations.

Non-GAAP net income and diluted EPS for the first quarter of 2010 excluded the impact of amortization of acquired intangible assets in the amount of $2,498,000, associated with the acquisition of the Cordless and VoIP Terminals business of NXP B.V., equity-based compensation expenses of $2,843,000 and income from the reversal of a reserve that was determined to be no longer needed due to the expiration of applicable statute of limitations in the amount of $2,500,000, recorded in the cost of goods sold.

Ofer Elyakim, CEO of DSP Group, stated, "Our business results for the first quarter were consistent with our financial projections. Furthermore, we believe that the inventory correction that impacted our results in both the fourth quarter of 2010 and first quarter of 2011 is finally behind us. We anticipate solid demand going forward and expect our second quarter revenues to grow by approximately 20% compared to the first quarter of 2011." Mr. Elyakim also stated, "We are happy to announce that two leading telecommunication operators in Western Europe chose to integrate our DECT CAT-iq products in their new line of residential gateways with commercial shipments of such products having taken place already in the first quarter."

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 quarter ended March 31, 2011 to the same period in 2010 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 conclusion of the inventory correction, as well as the Company's expectation that second quarter revenues will grow by approximately 20% as compared to the first quarter of 2011. 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; the impact of reductions in lead times and inventory levels by DSP Group customers and their 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; 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 2010 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 growing 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. EDT today to discuss the financial results for the first quarter of 2011 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.media-server.com/m/em/mu5zva28/r/1

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:

--US Dial-In # 1-888-286-8010 (passcode: 86982344)

--International Dial-In # 1-617-801-6888 (passcode: 86982344)



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


                             Three Months Ended
                                  March 31,

                               2011        2010
                            ----------  ---------
                             Unaudited  Unaudited

  Revenues                    $ 48,776   $ 56,109
  Cost of revenues              31,548     32,521


                            ----------  ---------
  Gross profit                  17,228     23,588
  Operating expenses:
   Research and
    development                 14,190     13,491
   Sales and marketing           4,019      4,444
   General and
    administrative               3,070      3,762
   Amortization of
    intangible assets            2,196      2,498
   Restructuring expenses
    (income)                     (590)         --


                            ----------  ---------
  Total operating expenses      22,885     24,195


                            ----------  ---------
  Operating loss               (5,657)      (607)
  Other income :
   Financial income, net           469        425


                            ----------  ---------
  Loss before taxes on
   income                      (5,188)      (182)
  Taxes on income (income
   tax benefit)                  (624)          2


                            ----------  ---------

  Net loss                   $ (4,564)    $ (184)
                            ==========  =========

  Net loss per share:
   Basic                      $ (0.19)   $ (0.01)
   Diluted                    $ (0.19)   $ (0.01)

  Weighted average number
   of shares of
  common stock used in the
   computation of:
   Basic                        23,439     23,107
   Diluted                      23,439     23,107


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


                                Three Months Ended
                                     March 31,

                                  2011        2010
                               ----------  ---------
                                Unaudited  Unaudited

  Revenues                       $ 48,776   $ 56,109
  Cost of revenues                 31,416     34,819


                               ----------  ---------
  Gross profit                     17,360     21,290
  Operating expenses:
   Research and development        13,308     12,108
   Sales and marketing              3,713      4,002
   General and administrative       2,551      2,946


                               ----------  ---------
  Total operating expenses         19,572     19,056


                               ----------  ---------
  Operating income (loss)         (2,212)      2,234
  Other income :
   Financial income, net              469        425


                               ----------  ---------
  Income (loss) before taxes
   on income                      (1,743)      2,659
  Taxes on income (income tax
   benefit)                         (624)          2


                               ----------  ---------

  Net income (loss)             $ (1,119)    $ 2,657
                               ==========  =========

  Net earnings (loss) per
   share:
   Basic                         $ (0.05)     $ 0.11
   Diluted                       $ (0.05)     $ 0.11

  Weighted average number of
   shares of
  common stock used in the
   computation of:
   Basic                           23,439     23,107
   Diluted                         23,439     23,698


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


                                               Three Months Ended
                                                   March 31,

                                               2011         2010
                                            -----------  -----------
                                            (Unaudited)  (Unaudited)

  GAAP net loss                               $ (4,564)      $ (184)
                                            -----------  -----------
  Equity-based compensation expense
   Included in cost of product revenues             132          202
  Equity-based compensation expense
   Included in R&D                                  882        1,383
  Equity-based compensation expense
   Included in SG&A                                 825        1,258
  Amortization of intangible assets
   related
  to NXP transaction                              2,196        2,498
  Restructuring expenses (income)                 (590)           --
  Reversal of a reserve that was
   determined to
  be no longer needed due to the
  expiration of applicable statute of
  limitations included in costs of goods
   sold                                              --      (2,500)

  Non-GAAP net income (loss)                  $ (1,119)      $ 2,657
                                            -----------  -----------
  Non-GAAP basic earnings (loss) per share     $ (0.05)       $ 0.11
  Non-GAAP diluted earnings (loss) per
   share                                       $ (0.05)       $ 0.11


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


                                  March 31,        December 31,

                                     2011              2010
                               ----------------  ----------------
                                  (Unaudited)       (Audited)
  Assets
   Current assets:
   Cash and cash equivalents            $36,835           $33,912
   Restricted deposits                      121               121
   Marketable securities and
    short term deposits                  25,034            29,903
   Trade receivables, net                29,877            25,170
   Inventories                           15,887            18,803
   Other accounts receivable
    and prepaid expenses                  6,450             6,302

   Deferred income taxes                    143               121
                               ----------------  ----------------
  Total current assets
                                        114,347           114,332
  Property and equipment, net             7,391             7,786

  Long term marketable
   securities and deposits               75,236            75,825
  Severance pay fund                     11,862            11,336
  Intangible assets, net                  8,261            10,434
  Investment in other
   companies                              2,200             2,200
  Long term prepaid expenses
   and lease deposits                       630               642
                               ----------------  ----------------

                                         98,189           100,437
                               ----------------  ----------------
  Total assets
                                      $ 219,927         $ 222,555
                               ================  ================
  Liabilities and
   Stockholders' Equity
  Current liabilities:
  Trade payables                       $ 19,683          $ 19,206

  Other current liabilities              21,967            23,053
                               ----------------  ----------------
  Total current liabilities              41,650            42,259
  Accrued severance pay                  12,998            12,419

  Accrued pensions                          837               774
                               ----------------  ----------------
  Total long term liabilities            13,835            13,193

  Stockholders' equity:
  Common stock                               23                23
  Additional paid-in capital            336,971           335,132
  Accumulated other
   comprehensive income                     257               355
  Less -- Cost of treasury
   stock                              (117,493)         (119,280)

  Accumulated deficit                  (55,316)          (49,127)
                               ----------------  ----------------

  Total stockholders' equity            164,442           167,103
                               ----------------  ----------------
  Total liabilities and
   stockholders' equity               $ 219,927         $ 222,555
                               ================  ================

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

SOURCE: DSP Group, Inc.

CONTACT: Victor Halpert, Investor Relations Consultant
Tel: 1 917 602 2965
Email: victor.halpert@dspg.com