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DSP Group, Inc. Reports Second Quarter 2011 Earnings

SAN JOSE, Calif., Jul 26, 2011 (GlobeNewswire via COMTEX) --

DSP Group(R), Inc. (Nasdaq:DSPG), a leading global provider of wireless chipset solutions for converged communications at home, announced today its results for the second quarter ended June 30, 2011.

Second Quarter Results:

Revenues for the second quarter of 2011 were $58,517,000, a decrease of 4% from revenues of $60,846,000 for the second quarter of 2010. Net loss for the second quarter of 2011 was $2,041,000, as compared to net loss of $367,000 for the second quarter of 2010. Earnings per share (EPS) for the second quarter of 2011 were a loss of $0.09 per share, as compared to a loss of $0.02 per share for the second quarter of 2010.

Non-GAAP Results:

Non-GAAP net income and diluted EPS for the second quarter of 2011 were $2,030,000 and $0.08 per share, respectively, as compared to non-GAAP net income of $4,354,000 and non-GAAP diluted EPS of $0.18 per share for the second quarter of 2010. Non-GAAP net income and diluted EPS for the second quarter of 2011 excluded the impact of amortization of acquired intangible assets of $2,198,000 associated with the acquisition of NXP's CIPT business and equity-based compensation expenses of $1,873,000. Non-GAAP net income and diluted EPS for the second quarter of 2010 excluded the impact of amortization of acquired intangible assets of $2,488,000 associated with the acquisition of NXP's CIPT business and equity-based compensation expenses of $2,233,000.

Ofer Elyakim, CEO of DSP Group, stated: "We met our financial projections for the second quarter, including revenues of approximately $59 million, which represented a growth rate of 20% on a sequential basis; non-GAAP net income of $2 million which resulted in non-GAAP earnings per share of $0.08; and maintained a stable cash balance of $137 million. We are now focused on meeting the challenges we are facing in our markets in the second half of 2011. In the past few weeks we have experienced a slowdown in bookings, due to what appears to be a near-term softening of the consumer electronics market, resulting in weaker demand for cordless telephony products. As a result of these macro-economic conditions, we are experiencing a decrease in customer projections. Accordingly, we are updating our revenue guidance for the year to be in the range of $200 million to $207 million, down from $227 million to $245 million. In response to these short-term market trends, we have decided to take proactive measures and implement further cost synergies in the second half of 2011, to reduce operating expenses and maintain positive operating cash flows."

Mr. Elyakim also stated, "Despite our lower revenue guidance for the year as a result of this near-term, temporary market slowdown, we are seeing strong evidence that our past R&D investments in new product areas are gaining significant market traction and delivering revenue growth that we expect to accelerate over the long-term. For 2011, we expect new products revenue of approximately $25 million, representing a 56% increase over 2010."

Authorization of Stock Repurchases

The Company's Board has unanimously authorized a 1 million share increase in the number of shares of Common Stock the Corporation is authorized to repurchase pursuant to its stock repurchase plan, bringing the total authorization to 2.6 million shares.

Adoption of Rights Plan

The Company's Board has unanimously adopted a Rights Agreement. Under the Rights Agreement, each stockholder of record on August 5, 2011, will receive a right for each share owned to purchase one-thousandth of a share of Series B Junior Participating Preferred Stock for $45. The rights will become exercisable should a person or group obtain beneficial ownership of 10% or more of the Company's outstanding common stock, which acquiring person or group will not be able to exercise their rights. The Rights Agreement is scheduled to expire on July 25, 2012.

Presentation on non-GAAP Net Income Calculation

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 June 30, 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 softening consumer electronics market and weaker demand across most consumer segments, the Company's financial guidance for 2011 annual revenues and the Company's projected 2011 revenues for its new products. 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 consumer electronics market to recover and the corresponding recovery of DSP Group's customers; unexpected delays in the commercial launch of new 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 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 second 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 www.dspg.com or link to: http://www.media-server.com/m/p/ohsa37hf

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: 74099180)

--International Dial-In # 1-617-801-6888 (passcode: 74099180)

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

                                 Three Months Ended         Six Months Ended
                                      June 30,                  June 30,

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

  Revenues                       $ 58,517     $ 60,846    $ 107,293    $ 116,956

  Cost of revenues                 36,767       37,592       68,315       70,113
                              -----------  -----------  -----------  -----------

  Gross profit                     21,750       23,254       38,978       46,843
  Operating expenses:
   Research and development        14,210       13,541       28,400       27,032
   Sales and marketing              4,159        4,226        8,178        8,671
   General and
    administrative                  3,600        3,615        6,670        7,377
   Amortization of
    intangible assets               2,198        2,488        4,394        4,985
   Restructuring expenses
    (income)                           --           --        (590)           --
                              -----------  -----------  -----------  -----------


   Total operating expenses        24,167       23,870       47,052       48,065
                              -----------  -----------  -----------  -----------

  Operating loss                  (2,417)        (616)      (8,074)      (1,222)


  Financial income, net               411          263          880          688
                              -----------  -----------  -----------  -----------

  Loss before taxes on
   income                         (2,006)        (353)      (7,194)        (534)

  Taxes on income (income
   tax benefit)                        35           14        (589)           17
                              -----------  -----------  -----------  -----------


  Net Loss                       ($2,041)       ($367)     ($6,605)       ($551)
                              ===========  ===========  ===========  ===========

  Net loss per share:
    Basic and Diluted            ($ 0.09)     ($ 0.02)     ($ 0.28)     ($ 0.02)

  Weighted average number of
   shares of common stock
   used in the computation
   of:
    Basic and Diluted              23,381       23,149       23,410       23,128



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

                                                                          Three Months Ended     Six Months Ended
                                                                               June 30,              June 30,

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

  GAAP net loss                                                           ($2,041)     ($367)   ($6,605)     ($551)
  Equity-based compensation expense included in cost of product
   revenues and other                                                          102        167        234        369
  Equity-based compensation expense included in research and
   development                                                                 724      1,119      1,606      2,502
  Equity-based compensation expense included in sales and marketing            257        325        563        768
  Equity-based compensation expense included in general and
   administrative                                                              790        622      1,309      1,438
  Amortization of intangible assets related to NXP transaction               2,198      2,488      4,394      4,985
  Reversal of a reserve that was determined to be no longer needed
   included in costs of goods sold                                              --         --         --    (2,500)
  Restructuring expenses (income)                                               --         --      (590)         --

  Non-GAAP net income                                                      $ 2,030    $ 4,354      $ 911    $ 7,011
                                                                         =========  =========  =========  =========

  GAAP weighted-average number of common stock used in computation of
   basic and diluted loss per share (in thousands)                          23,381     23,149     23,410     23,128

  Weighted--average number of shares related to outstanding options and
   SARs                                                                        930        688        465        640

  Weighted-average number of common stock used in computation of
   non-GAAP diluted net income per share                                    24,311     23,837     23,875     23,768

  GAAP diluted net loss per share                                         ($ 0.09)   ($ 0.02)   ($ 0.28)   ($ 0.02)
  Equity-based compensation expense                                           0.08       0.09       0.16       0.21
  Amortization of intangible assets related to NXP transaction                0.09       0.11       0.18       0.21
  Reversal of a reserve that was determined to be no longer included in
   costs of goods sold                                                          --         --         --     (0.11)
  Restructuring expenses (income)                                               --         --     (0.02)         --
  Non-GAAP diluted net income per share                                     $ 0.08     $ 0.18     $ 0.04     $ 0.29



                     DSP GROUP, INC.
               CONSOLIDATED BALANCE SHEETS
                     (In thousands)
                                             December
                                June 30,       31,

                                  2011         2010
                               -----------  ----------

                               (Unaudited)   (Audited)
                               -----------  ----------
  Assets
  Current assets:
   Cash and cash equivalents       $31,135     $33,912
   Restricted deposits                 121         121
   Marketable securities and
    short term deposits             33,570      29,903
   Trade receivables, net           39,491      25,170
   Inventories                      17,764      18,803
   Other accounts receivable
    and prepaid expenses             4,184       6,302

   Deferred income taxes               146         121
                               -----------  ----------
  Total current assets             126,411     114,332

  Property and equipment, net        7,052       7,786

  Long term marketable
   securities and deposits          72,458      75,825
  Severance pay fund                11,502      11,336
  Intangible assets, net             6,079      10,434
  Investment in other
   companies                         2,200       2,200
  Long term prepaid expenses
   and lease deposits                  559         642
                               -----------  ----------

                                    92,798     100,437
                               -----------  ----------


  Total assets                   $ 226,261   $ 222,555
                               ===========  ==========

  Liabilities and
   Stockholders' Equity
  Current liabilities:
  Trade payables                  $ 28,624    $ 19,206

  Other current liabilities         20,930      23,053
                               -----------  ----------
  Total current liabilities         49,554      42,259

   Accrued severance pay            11,666      12,419

   Accrued pensions                    896         774
                               -----------  ----------
   Total long term
    liabilities                     12,562      13,193

  Stockholders' equity:
   Common stock                         23          23
   Additional paid-in capital      338,844     335,132
   Accumulated other
    comprehensive income             1,065         355
   Less -- Cost of treasury
    stock                        (117,942)   (119,280)

  Accumulated deficit             (57,845)    (49,127)
                               -----------  ----------

  Total stockholders' equity       164,145     167,103
                               -----------  ----------
  Total liabilities and
   stockholders' equity          $ 226,261   $ 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