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DSP Group, Inc. Reports First Quarter 2007 Earnings

SANTA CLARA, Calif., Apr 26 /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 first quarter ended March 31, 2007.

First Quarter Results:

Revenues for the first quarter of 2007 were $49,288,000, a decrease of 5% from revenues of $51,952,000 for the first quarter of 2006. Net income for the first quarter was $1,364,000, a decrease of 76% from net income of $5,638,000 for the first quarter of 2006. Diluted earnings per share (EPS) for the first quarter of 2007 were $0.05, a decrease of 72% from $0.18 for the first quarter of 2006. Pro forma net income for the first quarter of 2007, which excludes equity-based compensation expenses, was $5.3 million or $0.19 per share on a diluted basis.

Eli Ayalon, Chairman and CEO of DSP Group, stated: "We continue to face pressure on ASPs, which caused our revenues to decline as compared to the first quarter of 2006. Nevertheless, sales of our CoIP (Cordless over IP) products, which we consider to be a future growth driver for the company, increased significantly in the quarter and exceeded our combined revenues for all three quarters of CoIP sales in 2006. Moreover, we also succeeded in achieving two design wins during the quarter, with two new customers for CoIP products. Our cash and marketable securities increased by $6.4 million during the quarter. The overall financial results of the Company for the first quarter of 2007 reflected solid execution in a challenging environment."

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 & 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, data and video communication and deployment in residential, SOHO, SME, enterprise and automotive applications. DSP Group 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 www.dspg.com.

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 2007 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 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: 74863061)

-- International Dial-In # 1-617-801-6888 (passcode: 74863061)


    For more information, please contact Ofer Elyakim, Director of Investor
Relations and Business Development, DSP Group Inc. at (408) 986-4421; or
e-mail:  ofere@dsp.co.il.


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

                                            Three Months Ended
                                                  March 31,
                                           2007            2006
                                         Unaudited      Unaudited

    Product revenues and other              $49,288     $51,952
    Cost of product revenues                 30,001      30,355
    and other

    Gross profit                             19,287      21,597
    Operating expenses:
     Research and development                12,757      10,901
     Sales and marketing                      4,197       3,806
     General and administrative               3,596       2,800

     Total operating expenses                20,550      17,507

    Operating income/(loss)                               4,090
                                             (1,263)
    Other income :
      Interest and other                      3,652       3,109
       income, net

    Income before provision for
      income taxes                            2,389       7,199
    Provision for income taxes                1,025       1,561

    Net income                               $1,364      $5,638

    Net earnings per share:
        Basic                                 $0.05       $0.19
        Diluted                               $0.05       $0.18

    Weighted average number of
     shares of Common stock used
     in the computation of:
        Basic                                28,455      29,477
        Diluted                              28,691      30,784


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

                                            Three Months Ended
                                                 March 31,
                                             2007        2006
                                          Unaudited    Unaudited
    GAAP net income                          $1,364      $5,638
    Equity-based compensation                   166          78
     expense included in cost of
     product revenues and other
    Equity-based compensation                 2,088       1,222
     expense included in R&D
    Equity-based compensation                 1,900       1,193
     expense included in SG&A

    Tax benefit resulting from                 (185)        (87)
     equity-based compensation
    Pro Forma net income                     $5,333      $8,044

    Pro Forma diluted earnings                $0.19       $0.26
     per share

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


                                                  March  31,    December 31,
                                                    2007             2006
                                                 (Unaudited)      (Audited)
    Assets
    Current assets:
     Cash and cash equivalents                      $35,168          $37,344
     Marketable securities and cash                 134,059          132,170
      deposits
     Trade receivables, net                          26,069           21,489
     Inventories                                     12,648           14,366
     Other accounts receivable                        5,199            4,049
     Deferred income taxes                            1,503            1,516

    Total current assets                            214,646          210,934

    Property and equipment, net                      13,779           12,644

    Long term marketable securities                 186,066          179,368
    Severance pay fund                                5,905            5,689
    Deferred income taxes                             2,562            1,987
    Other assets                                      3,097            3,366

    Total assets                                   $426,055         $413,988

    Liabilities and Stockholders' Equity
    Current liabilities:
     Accounts payable                               $20,177          $12,205
     Other current liabilities                       27,381           28,969

    Total current liabilities                        47,558           41,174

    Accrued severance pay                             6,246            6,065


    Stockholders' equity:
     Common stock                                        28               28
     Additional paid-in capital                     220,194          216,041
     Accumulated other                                   22               28
      comprehensive income
     Retained earnings                              194,379          195,198
    Less - Cost of treasury stock                   (42,372)         (44,546)
    Total stockholders' equity                      372,251          366,749

    Total liabilities and                          $426,055         $413,988
     stockholders' equity

SOURCE DSP Group, Inc.
04/26/2007
CONTACT: Ofer Elyakim, Director of Investor Relations and Business
Development of DSP Group Inc., +1-408-986-4421, or ofere@dsp.co.il
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