DTS Reports Third Quarter 2012 Results

DTS Reports Third Quarter 2012 Results

    41% Increase in Network-Connected Revenue Drives Year-Over-Year Growth
                 in Slowing Consumer Electronics Environment

   Acquisition-Related Accounting and Taxes Materially Impact 2012 Earnings

CALABASAS, Calif., Nov. 8, 2012 (GLOBE NEWSWIRE) -- DTS, Inc. (Nasdaq:DTSI)
today announced financial results for the third quarter ended September 30,
2012.

Revenue for the third quarter was $22.2 million, including 41% year-over-year
growth from the network-connected markets. This compares to revenue of $20.5
million in the third quarter of 2011. There were no royalty recoveries in the
third quarter of 2012 or 2011. The 8% year-over-year growth in total revenue
resulted from continued growth in the network-connected markets, particularly
in connected TVs and mobile, as well as the automotive market. Blu-ray revenue
was essentially flat year-over-year and up 17% sequentially. These results
were partially offset by declining demand for DVD, stand-alone DMP and
broadcast products.

Non-GAAP operating income in the third quarter of 2012 was $440 thousand, or
2% of revenue.Non-GAAP net loss was $11.1 million, or a loss of $0.61 per
diluted share net of tax, compared to non-GAAP net income of $4.5 million, or
$0.26 per diluted share net of tax, in the third quarter of 2011.This net
loss was primarily the result of the accounting treatment of the SRS
acquisition, under which the Company recognized costs related to the
acquisition without being able to recognize most of the associated
revenue.This net loss was also the result of the tax impact of lower
profitability on our global licensing entity located in Ireland.Under current
Irish tax law, approximately $5 million of foreign withholding taxes paid over
the course of 2012 are now not eligible for credit or carry-forward, a
condition that is expected to persist until the end of 2012.

GAAP net loss was $19.1 million, or a loss of $1.04 per diluted share,
compared to net income of $2.9 million, or $0.17 per diluted share, in the
third quarter of 2011.GAAP net loss for the third quarter of 2012 includes
$8.2 million, or $0.27 per diluted share net of tax, of acquisition and
integration-related costs; $2.8 million, or $0.09 per diluted share net of
tax, of stock-based compensation expense; and $2.2 million, or $0.07 per
diluted share net of tax, of amortization of intangibles.

The GAAP and non-GAAP reconciling items for the third quarters of 2012 and
2011 can be found in the "Non-GAAP Financial Metrics" schedule attached to
this press release and on the investor relations section of the Company's
website at www.DTS.com.

The Company generated $6.7 million in cash flow from operations during the
third quarter of 2012, compared to $4.0 million during the third quarter of
2011, and closed the quarter with cash and investments of $80.7 million.

"Consistent with our strategy, DTS delivered attractive revenue growth in the
network-connected markets despite what has been a challenging macroeconomic
environment," said Jon Kirchner, chairman and CEO of DTS, Inc."We are pleased
with our progress in the network-connected markets this quarter, which
includes several recent smartphone and tablet product announcements. Looking
ahead, with the SRS integration expected to be complete by year-end, DTS is
well-positioned to capitalize on the significant market opportunities being
created by an increasingly connected world.While our results through 2012
will continue to be impacted by significant acquisition-related noise, we
believe the long-term prospects for our strategic markets are very much intact
and we remain focused on accelerating growth in a difficult environment."

Business Outlook

DTS management expects continued long-term growth in the network-connected
space, but in light of a softening near-term business environment, the Company
has reduced its fiscal 2012 revenue expectations to a range of $100 to $105
million.Additionally, the accounting treatment and the related tax impact of
the SRS acquisition are expected to cause 2012 non-GAAP operating margin to be
approximately 20% and non-GAAP EPS to be in the range of $0.05 to $0.20 per
diluted share net of tax, excluding the charges and the related income tax
effect for stock-based compensation, the amortization of intangible assets,
and certain acquisition-related charges. In 2012, stock-based compensation
expense is expected to be in the range of $0.38 to $0.39 per share net of tax,
amortization of intangibles is expected to be in the range of $0.19 to $0.20,
and acquisition- and integration-related expenses are expected to be between
$0.48 and $0.51. On a GAAP basis, management expects an operating loss of
approximately 10% and a per-share loss in the range of $0.90 to $1.00.

Additionally, DTS management expects to resolve certain issues involving the
Company's Irish structure with the IRS in the fourth quarter.If the matter is
resolved as and when expected, there will be a sizable charge in DTS' 2012 tax
provision, not reflected above, followed by meaningful improvements in the
Company's effective tax rates beginning in 2013.

For 2013, DTS now expects revenue of $140 to $150 million and operating
margins in the low- to mid-20s as a percent of revenue.Management will
provide additional background on its outlook during the investor conference
call scheduled today, November 8, 2012.

Use of Non-GAAP Financial Information

Included within this press release are non-GAAP financial measures that
supplement the Company's Consolidated Statements of Operations prepared under
generally accepted accounting principles (GAAP).These non-GAAP financial
measures adjust the Company's actual results prepared under GAAP to exclude
charges and the related income tax effect for stock-based compensation, the
amortization of intangible assets, and certain acquisition and
integration-related charges.Reconciliations of GAAP to non-GAAP amounts for
the periods presented herein are provided in schedules accompanying this
release and should be considered together with the Consolidated Statements of
Operations.These non-GAAP measures are not meant as a substitute for GAAP,
but are included solely for informational and comparative purposes.The
Company's management believes that this information can assist investors in
evaluating the Company's operational trends, financial performance, and cash
generating capacity.Management believes these non-GAAP measures allow
investors to evaluate DTS' financial performance using some of the same
measures as management.However, the non-GAAP financial measures should not be
regarding as a replacement for (or superior to) corresponding, similarly
captioned, GAAP measures.

Conference Call Information for Thursday, November 8, 2012

DTS will broadcast a conference call today, Thursday, November 8, 2012,
starting at 1:30 p.m. Pacific Time, to discuss the third quarter results.To
access the conference call, dial 1-877-941-1466 or 1-480-629-9724 (outside the
U.S. and Canada).A live webcast of the call will be available from the
Investor Relations section of the Company's corporate website at www.dts.com
and via replay beginning two hours after the completion of the call.An audio
replay of the call will also be available to investors beginning at 4:30 p.m.
Pacific Time, November 8, 2012 through 11:59 p.m. Pacific Time, November 15,
2012, by dialing 1-800-406-7325 or 1-303-590-3030 (outside the U.S. and
Canada) and entering pass code 4572564#.

About DTS, Inc.

DTS, Inc. (Nasdaq:DTSI) is dedicated to making digital entertainment exciting,
engaging and effortless by providing state-of-the-art audio technology to over
a billion consumer electronics products worldwide. From a renowned legacy as a
pioneer in high definition multi-channel audio, DTS became a mandatory audio
format in the Blu-ray Disc standard and is now increasingly deployed in
enabling digital delivery of compelling movies, music, games and other forms
of digital entertainment to a growing array of network-connected consumer
devices. With the acquisition of SRS Labs, Inc., DTS strengthens its position
as a leader in providing end-to-end audio solutions to the rapidly growing
network entertainment sector.DTS technology is in car audio systems, digital
media players, DVD players, game consoles, home theaters, PCs, set-top boxes,
smart phones, surround music content and every device capable of playing
Blu-ray discs. Founded in 1993, DTS' corporate headquarters are located in
Calabasas, California with its licensing operations headquartered in Limerick,
Ireland. DTS also has offices in Los Gatos and Santa Ana, California,
Washington, China, France, Hong Kong, Japan, Singapore, South Korea, Taiwan
and the United Kingdom.

The DTS, Inc. logo is available at
http://www.globenewswire.com/newsroom/prs/?pkgid=11752

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995 that involve risks,
uncertainties, assumptions and other factors which, if they do not materialize
or prove correct, could cause DTS' results to differ materially from
historical results or those expressed or implied by such forward-looking
statements. All statements, other than statements of historical fact, are
statements that could be deemed forward-looking statements, including
statements containing the words "planned," "expects," "believes," "intends,"
"strategy," "opportunity," "anticipates" and similar words. These statements
may include, among others, plans, strategies and objectives of management for
future operations; any statements regarding proposed new products, services or
developments; any statements regarding future economic conditions or financial
or operating performance; statements of belief and any statements of
assumptions underlying any of the foregoing. The potential risks and
uncertainties that could cause actual growth and results to differ materially
include, but are not limited to, the transition to the next generation optical
drives and consumer adoption of such technology, the rapidly changing and
competitive nature of the digital audio, consumer electronics and
entertainment markets, the Company's inclusion in or exclusion from
governmental and industry standards, continued customer acceptance of the
Company's technology, products, services and pricing, risks related to
ownership and enforcement of intellectual property, the continued release and
availability of entertainment content containing DTS audio soundtracks,
success of the Company's research and development efforts, risks associated
with the Company's ability to successfully integrate SRS Labs' operations and
employees, risks related to integrating acquisitions, greater than expected
costs, the departure of key employees, the current financial crisis and global
economic downturn, a loss of one or more of our key customers or licensees,
changes in domestic and international market and political conditions, and
other risks and uncertainties more fully described in DTS' public filings with
the Securities and Exchange Commission, available at www.sec.gov. DTS does not
intend to update any forward-looking statement contained in this press release
to reflect events or circumstances arising after the date hereof.

                                    DTS-I

                                                                
                                                                
DTS, INC.

CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except per share amounts)
                                                                
                                                    As of         As of
                                                   September 30, December 31,
                                                    2012          2011
                                                   (Unaudited)
ASSETS                                                           
Current assets:                                                  
Cash and cash equivalents                           $56,823     $46,944
Short-term investments                              23,840       38,697
Accounts receivable, net of allowance for doubtful
accounts of $541 and $251 at September 30, 2012 and 4,592        5,322
December 31, 2011, respectively
Deferred income taxes                               1,263        1,296
Prepaid expenses and other current assets           2,987        1,823
Income taxes receivable, net                        2,442        2,591
Total current assets                                91,947       96,673
Property and equipment, net                        33,193       32,800
Intangible assets, net                              79,277       6,549
Goodwill                                            52,431       1,257
Deferred income taxes                               14,830       13,574
Long-term investments                               --           6,922
Other assets                                        2,432        1,695
Total assets                                        $274,110    $159,470
                                                                
                                                                
LIABILITIES AND STOCKHOLDERS' EQUITY                            
Current liabilities:                                             
Accounts payable                                   $2,184      $1,056
Accrued expenses                                    13,759       3,605
Deferred revenue                                    4,017        1,121
Total current liabilities                           19,960       5,782
Long-term debt                                      30,000       —
Deferred income taxes                               24,760       —
Other long-term liabilities                         21,744       7,886
                                                                
Stockholders' equity:                                            
Preferred stock -- $0.0001 par value, 5,000 shares
authorized at September 30, 2012 and December 31,   —           —
2011; no shares issued and outstanding
Common stock -- $0.0001 par value, 70,000 shares
authorized at September 30, 2012 and December 31,
2011; 20,666 and 20,536 shares issued at September  3            3
30, 2012 and December 31, 2011, respectively;
18,729 and 16,536 outstanding at September 30, 2012
and December 31, 2011, respectively
Additional paid-in capital                          201,730      192,819
Treasury stock, at cost - 1,938 and 4,000 shares at
September 30, 2012 and December 31, 2011,           (51,194)     (107,222)
respectively
Accumulated other comprehensive income              680          644
Retained earnings                                   26,427       59,558
Total stockholders' equity                         177,646      145,802
                                                                
Total liabilities and stockholders' equity          $274,110    $159,470

                                                               
                                                               
DTS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except per share amounts)
                                                               
                                                               
                         For the Three Months Ended For the Nine Months Ended
                          September 30,              September 30,
                         2012           2011        2012          2011
                         (Unaudited)
                                                               
Revenue                   $22,235      $20,546   $70,874     $67,910
Cost of revenue           2,105         217        2,493        643
Gross profit              20,130        20,329     68,381       67,267
Operating expenses:                                             
Selling, general and      25,322        12,784     57,311       39,608
administrative
Research and development  7,625         3,364      16,915       9,759
Total operating expenses  32,947        16,148     74,226       49,367
Operating income (loss)   (12,817)      4,181      (5,845)      17,900
Interest and other income 19            348        (67)         322
(expense), net
Income (loss) before
provision for income      (12,798)      4,529      (5,912)      18,222
taxes
Provision for income      6,288         1,627      9,884        7,030
taxes
Net income (loss)         $(19,086)    $2,902    $(15,796)   $11,192
                                                               
Net income (loss) per                                           
common share:
Basic                     $(1.04)      $0.17     $(0.92)     $0.65
Diluted                   $(1.04)      $0.17     $(0.92)     $0.63
                                                               
Weighted average shares                                         
outstanding:
Basic                     18,329        16,910     17,104       17,131
Diluted                   18,329        17,434     17,104       17,768

                                                               

DTS, INC.
                                                               
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
                                                               
                                                               
                                                               
                         For the Three Months Ended For the Nine Months Ended
                          September 30,             September 30,
                         2012           2011        2012          2011
                         (Unaudited)
Cash flows from operating                                       
activities:
Net income (loss)         $(19,086)    $2,902    $(15,796)   $11,192
Adjustments to reconcile
net income (loss) to net                                        
cash provided by
operating activities:
Depreciation and          3,578         1,365      6,292        3,867
amortization
Stock-based compensation  2,842         2,369      8,358        6,756
charges
Deferred income taxes    7,158         620        3,185        470
Tax benefits (shortfalls) (2,967)       (139)      108          76
from stock-based awards
Excess tax shortfalls
(benefits) from           2,966         124        (312)        (30)
stock-based awards
Other                    241           166        381          362
Changes in operating assets and
liabilities, net of business                                     
acquisitions:
Accounts receivable      5,292         (453)      6,366        2,633
Prepaid expenses and      (204)         (332)      (325)        (809)
other assets
Accounts payable, accrued
expenses and other        4,863         (1,689)    6,301        (4,622)
liabilities
Deferred revenue          1,918         (1,064)    2,390        (4,643)
Income taxes receivable  57            147        349          (715)
Net cash provided by      6,658         4,016      17,297       14,537
operating activities
Cash flows from investing                                       
activities:
Purchases of
held-to-maturity          --            (2,672)    (3,450)      (36,583)
investments
Purchases of
available-for-sale        --            (771)      (42,074)     (12,888)
investments
Maturities of
held-to-maturity          2,585         13,026     20,120       55,686
investments
Maturities of
available-for-sale        3,147         --         22,092       --
investments
Sales of held-to-maturity 9,109         --         9,109        --
investments
Sales of
available-for-sale        24,760        --         24,760       --
investments
Cash paid for business    (59,616)      --         (59,616)     --
acquisitions, net
Purchases of property and (1,370)       (909)      (2,813)      (2,443)
equipment
Purchases of intangible   (242)         (140)      (422)        (413)
assets
Net cash provided by
(used in) investing       (21,627)      8,534      (32,294)     3,359
activities
Cash flows from financing                                       
activities:
Proceeds from the
issuance of common stock  36            595        1,411        3,596
under stock-based
compensation plans
Repurchases and
retirement of common      (11)          (31)       (966)        (1,511)
stock for restricted
stock tax withholdings
Excess tax benefits
(shortfalls) from         (2,966)       (124)      312          30
stock-based awards
Proceeds from long-term   30,000        --         30,000       --
borrowings
Purchases of treasury     (3,846)       (14,387)   (5,881)      (26,810)
stock
Net cash provided by
(used in) financing       23,213        (13,947)   24,876       (24,695)
activities
Net change in cash and    8,244         (1,397)    9,879        (6,799)
cash equivalents
Cash and cash
equivalents, beginning of 48,579        36,342     46,944       41,744
period
Cash and cash
equivalents, end of       $56,823      $34,945   $56,823     $34,945
period

                                                               
                                                               
Non-GAAP Financial Metrics
(Amounts in thousands, except per share amounts)
                                                               
The following tables show the Company's GAAP financial metrics reconciled to
non-GAAP financial metrics included in this release.
                                                               
                       For the Three Months Ended  For the Nine Months Ended
                        September 30,              September 30,
                       2012           2011         2012           2011
Cost of revenue:                                                
GAAP cost of revenue    $2,105       $217       $2,493       $643
Amortization of         2,037         184         2,400         549
intangible assets
Stock-based             --            3           --            8
compensation
Non-GAAP cost of        $68          $30        $93          $86
revenue
                                                               
Selling, general and                                            
administrative:
GAAP selling, general   $25,322      $12,784    $57,311      $39,608
and administrative
Amortization of         210           117         297           322
intangible assets
Stock-based             2,258         1,950       6,682         5,546
compensation
Acquisition and
integration related     7,286         --          10,057        --
costs*
Non-GAAP selling,
general and             $15,568      $10,717    $40,275      $33,740
administrative
                                                               
Research and                                                    
development:
GAAP research and       $7,625       $3,364     $16,915      $9,759
development
Amortization of         --            44          90            134
intangible assets
Stock-based             584           416         1,676         1,202
compensation
Acquisition and
integration related     882           --          894           --
costs*
Non-GAAP research and   $6,159       $2,904     $14,255      $8,423
development
                                                               
Operating income                                                
(loss):
GAAP operating income   $(12,817)    $4,181     $(5,845)     $17,900
(loss)
Amortization of         2,247         345         2,787         1,005
intangible assets
Stock-based             2,842         2,369       8,358         6,756
compensation
Acquisition and
integration related     8,168         --          10,951        --
costs*
Non-GAAP operating      $440         $6,895     $16,251      $25,661
income
Non-GAAP operating
income as a % of        2%             34%          23%            38%
revenue
                                                               
Net income (loss):                                              
GAAP net income (loss)  $(19,086)    $2,902     $(15,796)    $11,192
Amortization of         2,247         345         2,787         1,005
intangible assets
Stock-based             2,842         2,369       8,358         6,756
compensation
Acquisition and
integration related     8,168         --          10,951        --
costs*
Tax impact of the above (5,303)       (1,086)     (7,695)       (3,104)
items
Non-GAAP net income     $(11,132)    $4,530     $(1,395)     $15,849
(loss)
                                                               
Non-GAAP diluted income $(0.61)      $0.26      $(0.08)      $0.89
(loss) per common share
                                                               
Weighted average shares 18,329        17,434      17,104        17,768
outstanding:
                                                               
* On July 20, 2012, DTS completed its acquisition of SRS Labs, Inc. in a
cash-and-stock transaction.On July 5, 2012, DTS completed its acquisition of
assets from Phorus, Inc. and Phorus, LLC.

                                                            
                                                            
Non-GAAP Financial Targets                                   
                                                            
The following tables show the Company's fiscal year 2012 GAAP guidance
reconciled to non-GAAP financial targets.
                                                            
                                            Fiscal Year 2012
                                            Low              High
                                                            
Operating income (loss) as a % of revenue:                   
                                                            
GAAP operating loss as a % of revenue        (10)%            (8)%
Amortization of intangible assets            6                6
Stock-based compensation                     11               11
Acquisition and integration related costs*   12               12
Non-GAAP operating income as a % of revenue  19%              21%
                                                            
                                                            
Net income (loss) per diluted share:                         
                                                            
GAAP net loss per diluted share              $(1.00)        $(0.90)
Amortization of intangible assets            0.32            0.33
Stock-based compensation                     0.64            0.66
Acquisition and integration related costs*   0.66            0.71
Tax impact of the above items                (0.57)          (0.60)
Non-GAAP net income per diluted share        $0.05          $0.20
                                                            
Weighted average shares used to compute
Non-GAAP net income per diluted share        17.5            17.5
(millions)
                                                            
* On July 20, 2012, DTS completed its acquisition of SRS Labs, Inc. in a
cash-and-stock transaction.On July 5, 2012, DTS completed its acquisition of
assets from Phorus, Inc. and Phorus, LLC.
                                                            
                                                            
The following table shows the Company's fiscal year 2013 GAAP guidance
reconciled to Non-GAAP financial targets.
                                                            
                                            Fiscal Year 2013
                                            Low              High
                                                            
Operating income as a % of revenue:                          
                                                            
GAAP operating income as a % of revenue      4%               9%
Amortization of intangible assets            8                8
Stock-based compensation                     9                9
Non-GAAP operating income as a % of revenue  21%              26%

CONTACT:  Media & Investor Contacts
          Sard Verbinnen & Co
          John Christiansen/Jenny Gore
          jchristiansen@sardverb.com/jgore@sardverb.com
          (415) 618-8750

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