News Column

DSP Group, Inc. Reports Second Quarter 2014 Earnings

July 31, 2014

LOS ALTOS, Calif., July 31, 2014 (GLOBE NEWSWIRE) -- DSP Group®, Inc. (Nasdaq:DSPG), a leading global provider of wireless chipset solutions for converged communications, announced today its results for the second quarter ended June 30, 2014.

Financial Results Highlights:

• Non-GAAP diluted EPS of $0.12 and GAAP diluted EPS of $0.05, both exceeding guidance• Second quarter revenues of approximately $36.3 million, above mid-point of guidance• Gross margins of 40.7%, exceeding the high end of guidance• Maintained positive non-GAAP operating income for the seventh consecutive quarter• Non-GAAP net income of $2.8 million, representing the ninth consecutive quarter of non-GAAP net income• GAAP net income of $1.1 million, exceeding GAAP net income for the same period last year• Generated $5.5 million in cash flows from operating activities• Repurchased 313,000 shares for a total consideration of $2.6 million• Net cash and cash equivalents of $120 million

Management Comments:

Commenting on the results, Ofer Elyakim, CEO of DSP Group, stated, "We are delighted that our investment in new products is paying off and contributing to our strong financial results. In particular, our Office/VoIP products achieved record revenues and the major design wins we secured this year give us high confidence that the growth in this and other segments will continue."

Mr. Elyakim added, "We remain well positioned to meet the key milestones we have set forth for this fiscal year and subsequently reach an inflection point in our business in 2015."

Products and Market Highlights:

• Record high Office/VoIP segment quarterly revenues at $3.8 million, exceeding guidance• A leading OEM in China chose DVF99 SoC for its new IP Phone products• Two Tier 1 OEMs launched IP phones based on DSP Group's VoIP SoCs• Record quarterly shipments of DECT/CAT-iq products for DECT-enabled HGWs• DHX91 ULE SoC in mass production; powers a Tier 1 OEM smart home ULE based system• Cablevision launched HD Voice services and products powered by DSP Group SoCs

2014 Second Quarter Results:

GAAP Results:

Net income for the second quarter of 2014 was $1,088,000 on revenues of $36,276,000, compared to a net income of $750,000 on revenues of $40,692,000 for the same period last year. EPS for the second quarter of 2014 were $0.05 per share, as compared to EPS of $0.03 per share for the second quarter of 2013.

Non-GAAP Results:

Non-GAAP net income and diluted EPS for the second quarter of 2014 were $2,849,000 and $0.12 per share, respectively, as compared to non-GAAP net income of $3,520,000 and non-GAAP diluted EPS of $0.15 per share for the second quarter of 2013. Non-GAAP net income and diluted EPS for the second quarter of 2014 excluded the impact of amortization of acquired intangible assets of $397,000 associated with the acquisitions of NXP's CIPT business and BoneTone, equity-based compensation expenses of $1,461,000 and amortization of deferred tax liability related to intangible assets acquired in the BoneTone acquisition in the amount of $97,000.

Non-GAAP net income and diluted EPS for the second quarter of 2013 excluded the impact of amortization of acquired intangible assets of $418,000 associated with the acquisitions of NXP's CIPT business and BoneTone, equity-based compensation expenses of $1,045,000, amortization of deferred tax liability related to intangible assets acquired in the BoneTone acquisition in the amount of $96,000 and proxy contest related expenses of $1,403,000.

Earnings Conference Call:

DSP Group will discuss its second quarter financial results, along with its outlook and guidance for the third quarter of 2014, on its conference call at 8:30 a.m. ET today, and invites you to listen via our conference call or a live broadcast over the Internet.

Investors may access the conference call by dialing +1 877 280 1254 (domestic US) or +1 646 254 3363 (international) approximately 10 minutes prior to the starting time. The password is DSP Group. The broadcast via the Internet can be accessed by all interested parties through the Investor Relations section of DSP Group's website at www.dspg.com or link to: http://www.media-server.com/m/p/mag3nvd5

A replay of the conference call will be available for a week following the call. To listen to the session, please dial +1 347 366 9565 (domestic US) or +44 203 427 0598 (international) and enter the company access code: 8312192#

For more information, please contact Dror Levy, CFO, at: Office: +972-9-952-9699 Email: dror.levy@dspg.com

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, 2014 to the same period in 2013 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 compensation 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 that the company's investment in new products are paying off and contributing to its strong financial results and confidence that growth of the Office and other segments will continue, as well as his statement that DSP Group remains well positioned to meet the key milestones it has set for this fiscal year and subsequently reaching an inflection point in its business in 2015. 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; slower than expected change in the nature of residential communications domain; DSP Group's ability to manage costs, DSP Group's ability to develop and produce new products at competitive costs and in a timely manner or the ability 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 2013, as well as other reports DSP Group has filed with the Securities and Exchange Commission and which are available on DSP Group's website (www.dspg.com) under Investor Relations. DSP Group assumes no obligation to update any forward-looking statements or information, which speak as of their respective dates.

About DSP Group

DSP Group®, Inc. (Nasdaq:DSPG) is a leading global provider of wireless chipset solutions for converged communications. Delivering semiconductor system solutions with software and hardware reference designs, DSP Group enables OEMs/ODMs, consumer electronics (CE) manufacturers and service providers to cost-effectively develop new revenue-generating products with fast time to market.

At the forefront of semiconductor innovation and operational excellence for over two decades, DSP Group provides a broad portfolio of wireless chipsets integrating DECT/CAT-iq, ULE, Wi-Fi, PSTN, HDClear™, video and VoIP technologies.

DSP Group enables converged voice, audio, video and data connectivity across diverse mobile, consumer and enterprise products – from mobile devices, connected multimedia screens, and home automation & security to cordless phones, VoIP systems, and home gateways. Leveraging industry-leading experience and expertise, DSP Group partners with CE manufacturers and service providers to shape the future of converged communications at home, office and on the go.

For more information, visit www.dspg.com.

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

June 30,
Six Months Ended

June 30,
  2014 2013 2014 2013
  (Unaudited) (Unaudited) (Unaudited) (Unaudited)
         
Revenues $ 36,276$ 40,692$ 69,162$ 80,342
Cost of revenues 21,495 24,530 41,367 48,474
         
Gross profit 14,781 16,162 27,795 31,868
Operating expenses:        
Research and development, net 8,025 9,183 16,230 18,334
Sales and marketing 2,947 2,674 6,033 5,725
General and administrative 2,644 3,848 5,361 6,470
Amortization of intangible assets 397 418 794 836
         
Total operating expenses 14,013 16,123 28,418 31,365
         
Operating income (loss)  768 39 (623) 503
         
Financial income, net 297 755 709 1,325
         
Income before taxes on income  1,065 794 86 1,828
         
Taxes on income (income tax benefit)  (23) 44 (14) (94)
         
Net income $1,088$750$100$1,922
Net earnings per share:        
Basic$ 0.05$ 0.03$ 0.00$ 0.09
Diluted$ 0.05$ 0.03$ 0.00$ 0.09
         
Weighted average number of shares used in per share computations of net income per share:      
Basic 21,983 22,059 22,180 21,978
Diluted 23,035 22,875 22,706 22,561
 
Unaudited Reconciliation of GAAP to Non-GAAP Financial Measures
 (In thousands, except per share amounts)
         
  Three Months Ended

June 30,
Six Months Ended

June 30,
  2014 2013 2014 2013
  Unaudited Unaudited Unaudited Unaudited
GAAP net income$1,088$750$100$1,922
Equity-based compensation expense included in cost of revenues  84 63 166 126
Equity-based compensation expense included in research and development, net 657 470 1,301 938
Equity-based compensation expense included in sales and marketing  169 133 331 268
Equity-based compensation expense included in general and administrative  551 379 1,106 756
Amortization of intangible assets 397 418 794 836
Proxy contest related expenses  -- 1,403 -- 1,403
Amortization of deferred tax liability related to intangible assets  (97) (96) (194) (193)
Non-GAAP net income$ 2,849$ 3,520$ 3,604$ 6,056
         
Weighted-average number of common stock used in computation of GAAP diluted net income per share (in thousands) 23,035 22,875 22,706 22,561
         
Weighted-average number of shares related to outstanding options, stock appreciation rights and restricted share units (in thousands) 455 426 1,044 399
         
Weighted-average number of common stock used in computation of non-GAAP diluted net income per share (in thousands) 23,490 23,301 23,750 22,960
         
GAAP diluted net income per share $ 0.05$ 0.03$ 0.00$ 0.09
Equity-based compensation expense 0.06 0.05 0.12 0.09
Amortization of intangible assets 0.02 0.02 0.04 0.03
Proxy contest related expenses -- 0.06 -- 0.06
Amortization of deferred tax liability related to intangible assets acquired in BoneTone acquisition (0.01) (0.01) (0.01) (0.01)
Non-GAAP diluted net income per share$ 0.12$ 0.15$ 0.15$ 0.26
 
DSP GROUP, INC.
CONSOLIDATED BALANCE SHEETS 
(In thousands)
     
 June 30,

2014
December 31,

2013
   (Unaudited) (Audited)
Assets     
Current assets:    
Cash and cash equivalents$ 17,813$ 23,578
Restricted deposits 67 77
Marketable securities and short term deposits 10,377 13,895
Trade receivables, net 23,761 21,195
Inventories 11,986 12,334
Other accounts receivable and prepaid expenses 1,470 2,641
Deferred income taxes 89 92
Total current assets 65,563 73,812
     
Property and equipment, net 2,902 2,837
     
Long term marketable securities and deposits 91,727 90,162
Severance pay fund 11,860 11,168
Intangible assets, net 11,191 11,986
Investment in other companies 2,200 2,200
Long term prepaid expenses and lease deposits 93 100
  117,071 115,616
Total assets$ 185,536$ 192,265
     
Liabilities and Stockholders' Equity    
Current liabilities:    
Trade payables$ 12,814$ 14,149
Other current liabilities  14,853 17,362
Total current liabilities 27,667 31,511
     
Accrued severance pay 11,885 11,179
Accrued pensions 988 981
Deferred income taxes 990 1,183
Total long term liabilities 13,863 13,343
Stockholders' equity:    
Common stock 22 22
Additional paid-in capital 353,398 350,494
Accumulated other comprehensive income loss (609) (821)
Less – Cost of treasury stock (122,713) (118,749)
Accumulated deficit (86,092) (83,535)
Total stockholders' equity 144,006 147,411
Total liabilities and stockholders' equity$ 185,536$ 192,265


DSP Group

Source: DSP Group, Inc.


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