DSP Group, Inc. Reports First Quarter 2009 Earnings

SAN JOSE, California, May 4 /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, 2009.

(Logo: http://www.newscom.com/cgi-bin/prnh/20081229/DSPLOGO )

First Quarter Results:

Revenues for the first quarter of 2009 were $39,914,000, a decline of 45% from revenues of $72,729,000 for the first quarter of 2008. Net loss for the first quarter was $10,691,000, as compared to a net loss of $7,608,000 for the first quarter of 2008. Earnings per share (EPS) for the first quarter of 2009 were a loss of $0.41 per share vs. a loss of $0.25 per share for the first quarter of 2008.

Non-GAAP Results:

Non-GAAP net loss and EPS for the first quarter of 2009 were $4,623,000 and a loss of $0.18 per share, respectively, as compared to the non-GAAP net income of $1,441,000 and the non-GAAP diluted EPS of $0.05 per share for the first quarter of 2008. Non-GAAP net loss and EPS for the first quarter of 2009 excluded the impact of amortization of acquired intangible assets of $3,047,000, associated with the acquisition of the Cordless and VoIP Terminals business of NXP B.V. and equity-based compensation expenses of $3,021,000. Non-GAAP net income and diluted EPS for the first quarter of 2008 excluded the impact of the amortization of acquired intangibles and other acquisition-related assets of $5,782,000, associated with the acquisition; equity-based compensation expenses of $3,961,000 and the aggregate tax benefits associated with such expenses of $694,000.

Share Repurchase

On March 12, 2009, the Company repurchased 4,186,603 shares of its common stock from NXP at a per share price of $4.78 for an aggregate consideration of $20,028,000 which was paid to NXP during the first quarter. This transaction was in accordance with the Stock Repurchase Agreement executed with NXP pursuant to which the Company agreed to repurchase all of its shares issued to NXP in connection with the acquisition of the Cordless and VoIP Terminals business.

Eli Ayalon, Chairman and CEO of DSP Group, stated: "Although we were not completely satisfied with the company's financial results stemming from the severe economic downturn, our first quarter results came in at the higher end of our guidance. We believe that the depressed demand for our products may have reached a bottom during the first quarter of the year, which may indicate that the worst is behind us."

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, 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.

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 world-leading consumer electronics (CE) manufacturers to cost-effectively develop innovative revenue-generating applications with fast time to market. At the forefront of wireless semiconductor development and operational excellence for over two decades, DSP Group provides a broad portfolio of chipsets integrating DECT, Wi-Fi, PSTN and VoIP/CoIP 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 infotainment centers - DSP Group proactively partners with CE manufacturers to shape the future of residential converged communications. For more information, visit http://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 Mr. Ayalon's statement that the depressed demand for the Company's products may have reached a bottom during the first quarter of 2009, which may indicate that the worst is behind it. 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 the timing and ability of the market to recover, especially the semiconductor and consumer electronics markets, and the corresponding recovery of DSP Group's customers; gross margin fluctuations; the success of implemented restructuring efforts; slower than expected change in the nature of residential communications domain; unexpected delays in the introduction of new products or failure of such products to achieve broad market acceptance; DSP Group's inability develop and produce new products at competitive costs; 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 (http://www.dspg.com) under Investor Relations.

Earnings conference call

DSP Group has scheduled a conference call for 8:30 a.m. EST today to discuss the financial results for the first 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 http://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: 94529166)
    International Dial-In # 1-617-801-6888 (passcode: 94529166)

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

                                       Three Months Ended
                                       March 31,
                                          2009      2008
                                       Unaudited  Unaudited

    Product revenues and other           $ 39,914  $ 72,729
    Cost of product revenues and other     26,504    45,776
                                              ___       ___

    Gross profit                           13,410    26,953
    Operating expenses:
    Research and development               13,738    20,028
    Sales and marketing                     4,516     6,021
    General and administrative              3,814     4,250
    Amortization of intangible assets       3,047     5,782
                                              ___       ___

    Total operating expenses               25,115    36,081
                                              ___       ___

    Operating loss                        (11,705)   (9,128)
    Other income :
    Interest and other income, net            603     1,234
                                              ___       ___
    loss before provision for

    income taxes                          (11,102)   (7,894)
    Income tax benefit                       (411)     (286)
                                              ___       ___

    Net loss                            $ (10,691) $ (7,608)

    Net loss per share:
    Basic                                 $ (0.41)  $ (0.25)
    Diluted                               $ (0.41)  $ (0.25)

    Weighted average number of shares
    of common stock used in the
    computation of:
    Basic                                  26,083    30,574
    Diluted                                26,083    30,574


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

                                       Three Months Ended
                                       March 31,
                                         2009      2008
                                       Unaudited Unaudited

    Product revenues and other          $ 39,914  $ 72,729
    Cost of product revenues and other    26,296    45,519

                                             ___       ___

    Gross profit                          13,618    27,210
    Operating expenses:
    Research and development              12,163    17,937
    Sales and marketing                    4,058     5,514
    General and administrative             3,034     3,144
                                             ___       ___

    Total operating expenses              19,255    26,595
                                             ___       ___

    Operating income (loss)               (5,637)      615
    Other income :
    Interest and other income, net           603     1,234
                                             ___       ___
    Income (loss) before provision
    for
    income taxes                          (5,034)    1,849

    Provision for income taxes
    (income tax benefit)                    (411)      408
                                             ___       ___

    Net income (loss)                   $ (4,623)  $ 1,441

    Net earnings (loss) per share:
    Basic                                $ (0.18)   $ 0.05
    Diluted                              $ (0.18)   $ 0.05

    Weighted average number of shares
    of common stock used in the
    computation of:
    Basic                                 26,083    30,574
    Diluted                               26,083    30,757


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


                                            Three Months Ended
                                              March 31,
                                          2009        2008
                                       (Unaudited) (Unaudited)
    GAAP net (loss) income               $ (10,691)   $ (7,608)
    Equity-based compensation expense          208         257

    Included in cost of product
    revenues
    Equity-based compensation expense        1,575       2,091

    Included in R&D
    Equity-based compensation expense        1,238       1,613

    Included in SG&A
    Amortization of intangible assets        3,047       5,782
    related to NXP transaction
    Tax benefit resulting from                   0        (694)
    equity-based

    compensation and amortization of
    acquired intangible assets
    Non-GAAP net income                   $ (4,623)    $ 1,441
    Non-GAAP basic earnings per share      $ (0.18)     $ 0.05
    Non-GAAP diluted earnings per          $ (0.18)     $ 0.05
    share


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

                                      March 31,     December 31,
                                      2009          2008
                                       (Unaudited)   (Audited)
    Assets
    Current assets:
    Cash and cash equivalents              $ 45,284   $ 68,886

    Restricted deposits                         115        115
    Marketable securities and cash           24,979     12,449
    deposits
    Trade receivables, net                   23,826     39,603
    Inventories                              12,301     14,098
    Other accounts receivable                17,187     17,367
    Deferred income taxes                       259        306
    Total current assets                    123,951    152,824

    Property and equipment, net              13,208     14,822

    Long term marketable securities          33,736     40,051
    Severance pay fund                        6,822      7,286
    Deferred income taxes                       200        212
    Goodwill and other intangible assets     29,547     32,728
    Other assets                              1,183      1,331

    Total assets                          $ 208,647   $249,254

    Liabilities and Stockholders'
    Equity
    Current liabilities:
    Accounts payable                       $ 13,923   $ 20,136
    Other current liabilities                34,810     40,329
    Total current liabilities                48,733     60,465

    Accrued severance pay                     8,028      8,008
    Accrued pensions                          1,526      1,675
    Deferred tax liability                       19         24
    Other long term liabilities                   -        455

    Total long term liabilities               9,573     10,162

    Stockholders' equity:
    Common stock                                 23         27
    Additional paid-in capital              317,509    314,484
    Accumulated other comprehensive
    income (loss)                            (1,680)        51
    Retained loss                           (40,369)   (28,186)
    Less - Cost of treasury stock          (125,142)  (107,749)
    Total stockholders' equity              150,341    178,627

    Total liabilities and                 $ 208,647  $ 249,254
    stockholders' equity

For more information, please contact Ofer Elyakim, +1-852-9017-5426, or e-mail: ofer.elyakim@dspg.com.

SOURCE DSP Group Ltd.