EX-99.1 2 dex991.htm PRESS RELEASE OF DSP GROUP, INC., DATED JULY 23, 2007. Press Release of DSP Group, Inc., dated July 23, 2007.

Exhibit 99.1

LOGO

DSP Group, Inc. Reports Second Quarter 2007 Earnings

SANTA CLARA, Calif., July 23, 2007—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 second quarter ended June 30, 2007.

Second Quarter Results:

Revenues for the second quarter of 2007 were $52,436,000, a decrease of 14% from revenues of $60,737,000 for the second quarter of 2006. Net income for the second quarter was $2,964,000, a decrease of 58% from net income of $7,088,000 for the second quarter of 2006. Diluted earnings per share (EPS) for the second quarter of 2007 were $0.10, a decrease of 57% from $0.23 for the second quarter of 2006. Pro forma net income for the second quarter of 2007, which excludes equity-based compensation expenses of $3,707,000 and an anticipated loss of $996,000 related to certain marketable securities, as well as the tax benefit associated with such expenses and anticipated loss, was $7,170,000 or $0.25 per share on a diluted basis.

Eli Ayalon, Chairman and CEO of DSP Group, stated: “As a result of increased price sensitivity in the US market, we are seeing an increase of sales of analog systems on account of digital systems. This trend may continue until the introduction of our next wave of multimedia products in 2008 and as a result of these market conditions, we expect the US market to remain challenging. On the other hand, despite this challenging environment, sales of DECT (including DECT 6.0) are expected to ramp up according to plan, and our R&D efforts to improve the cost effectiveness of our products enabled us to return to a gross margin level of 41%.”

Mr. Ayalon added: “During the quarter, we announced the acquisition of NXP’s Cordless and VoIP Terminal Business, and currently expect to close the transaction in the third quarter. We are enthusiastic about the fit of the NXP business with our line of business and believe it will put DSP Group firmly in a leadership position in terms of scale and technology in the growing VoIP and DECT markets.”

 

1


Dror Levy, CFO of DSP Group, stated: “Our operating cash flow during the quarter generated $7.5 million, demonstrating the continued strength of our business. During the quarter we repurchased 421,000 shares of our common stock for a total consideration of $7.7 million as part of our repurchase program. Our cash and marketable securities at the end of the quarter were $353.7 million.”

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 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 statements made by Mr. Ayalon about the ramp up of sales of DECT products and the timetable for and optimism about the acquisition of NXP’s Cordless and VoIP Terminal Business. 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 slower than expected change in the nature of the residential communications domain, unexpected delays in the introduction of new products, especially DECT products; failure to achieve broad market acceptance of existing and new products by existing and potential OEM customers; DSP Group’s inability to add new customers and develop and produce new products at competitive costs and in a timely manner; 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 2006 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.

 

2


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 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: 81662116)

 

 

International Dial-In # 1-617-801-6888 (passcode: 81662116)

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

 

3


DSP GROUP, INC.

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share amounts)

 

     Three Months Ended
June 30,
   Six Months Ended
June 30,
     2007    2006    2007    2006
     (Unaudited)    (Unaudited)    (Unaudited)    (Unaudited)

Product revenues and other

   $ 52,436    $ 60,737    $ 101,723    $ 112,689

Cost of product revenues and other

     31,233      35,632      61,233      65,987
                           

Gross profit

     21,203      25,105      40,490      46,702

Operating expenses:

           

Research and development

     12,465      12,409      25,221      23,310

Sales and marketing

     4,110      4,070      8,307      7,876

General and administrative

     3,328      2,895      6,925      5,695
                           

Total operating expenses

     19,903      19,374      40,453      36,881
                           

Operating income

     1,300      5,731      37      9,821

Other income :

           

Interest and other income, net

     2,927      3,351      6,579      6,460
                           

Income before provision for income taxes

     4,227      9,082      6,616      16,281

Provision for income taxes

     1,263      1,994      2,288      3,555
                           

Net income

   $ 2,964    $ 7,088    $ 4,328    $ 12,726
                           

Net earnings per share:

           

Basic

   $ 0.10    $ 0.24    $ 0.15    $ 0.43

Diluted

   $ 0.10    $ 0.23    $ 0.15    $ 0.41

Weighted average number of shares of Common stock used in the computation of:

           

Basic

     28,257      29,871      28,356      29,674

Diluted

     28,469      30,632      28,580      30,708

 

4


Unaudited Reconciliation of GAAP to Pro Forma Non-GAAP Financial Measures

(In thousands, except per share amounts)

 

     Three Months Ended
June 30,
    Six Months Ended
June 30,
 
     2007     2006     2007     2006  
     Unaudited     Unaudited     Unaudited     Unaudited  

GAAP net income

   $ 2,964     $ 7,088     $ 4,328     $ 12,726  

Equity-based compensation expense included in cost of product revenues and other

     166       130       332       208  

Equity-based compensation expense included in R&D

     1,929       1,703       4,017       2,925  

Equity-based compensation expense included in SG&A

     1,612       1,525       3,512       2,718  

Loss related to certain marketable securities

     996       —         996       —    

Tax benefit resulting from equity-based compensation and from loss related to certain marketable securities

     (497 )     (121 )     (682 )     (208 )

Pro Forma net income

   $ 7,170     $ 10,325     $ 12,503     $ 18,369  
                                

Pro Forma diluted earnings per share

   $ 0.25     $ 0.34     $ 0.44     $ 0.60  

 

5


DSP GROUP, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands)

 

    

June 30,

2007

    December 31,
2006
 
     (Unaudited)     (Audited)  

Assets

    

Current assets:

    

Cash and cash equivalents

   $ 60,365     $ 37,344  

Marketable securities and cash deposits

     212,662       132,170  

Trade receivables, net

     30,560       21,489  

Inventories

     10,908       14,366  

Other accounts receivable

     5,127       4,049  

Deferred income taxes

     2,520       1,516  
                

Total current assets

     322,142       210,934  

Property and equipment, net

     12,831       12,644  

Long term marketable securities

     80,634       179,368  

Severance pay fund

     5,894       5,689  

Deferred income taxes

     2,977       1,987  

Other assets

     2,897       3,366  
                

Total assets

   $ 427,375     $ 413,988  
                

Liabilities and Stockholders’ Equity

    

Current liabilities:

    

Accounts payable

   $ 18,828     $ 12,205  

Other current liabilities

     30,859       28,969  
                

Total current liabilities

     49,687       41,174  

Accrued severance pay

     6,198       6,065  

Stockholders’ equity:

    

Common stock

     28       28  

Additional paid-in capital

     223,902       216,041  

Accumulated other comprehensive income (loss)

     (1,533 )     28  

Retained earnings

     196,637       195,198  

Less – Cost of treasury stock

     (47,544 )     (44,546 )
                

Total stockholders’ equity

     371,490       366,749  
                

Total liabilities and stockholders’ equity

   $ 427,375     $ 413,988  
                

 

6