DTS Reports Fourth Quarter and Fiscal 2012 Financial Results

DTS Reports Fourth Quarter and Fiscal 2012 Financial Results

Network-Connected Business Drives Revenue Growth Into 2013

CALABASAS, Calif., March 11, 2013 (GLOBE NEWSWIRE) -- DTS, Inc. (Nasdaq:DTSI)
today announced financial results for the fourth quarter and fiscal year ended
December 31, 2012.

Revenue for the fourth quarter was $29.8 million, including 86% year-over-year
growth from the network-connected markets. This compares to revenue of $29.0
million in the fourth quarter of 2011, which included $1.6 million in royalty
recoveries. Excluding royalty recoveries, the 9% year-to-year increase in
total revenue resulted primarily from robust growth in the Company's
network-connected business, which was bolstered by the acquisition of SRS
Labs, Inc. last July. These results were partially offset by the continuing
decline in demand for DVD products and a decline in Blu-ray revenue
attributable in part to a comparably weaker holiday season in 2012.

Non-GAAP net income in the fourth quarter of 2012 was $6.1 million, or $0.33
per diluted share net of tax, compared to non-GAAP net income of $8.8 million,
or $0.52 per diluted share net of tax, in the fourth quarter of 2011. Non-GAAP
operating margin in the fourth quarter of 2012 was 26%, compared to 50% in the
fourth quarter of 2011, largely due to increased expenses resulting from
recent acquisitions as well as investments to support the Company's emerging
network-connected business.

GAAP net income in the fourth quarter of 2012 was $302,000, or $0.02 per
diluted share, compared to $7.1 million, or $0.42 per diluted share, in the
fourth quarter of 2011. GAAP net income for the fourth quarter of 2012
includes $3.0 million, or $0.09 per diluted share net of tax, in stock-based
compensation expense; $4.8 million, or $0.15 per diluted share net of tax, in
acquisition and integration-related costs; and $2.0 million, or $0.06 per
diluted share net of tax, in amortization of intangibles.

For the full year, revenue was $100.6 million, compared to revenue of $96.9
million in 2011. Revenue from royalty recoveries for 2012 was $2.4 million as
compared to $2.0 million in 2011.

Non-GAAP net income for the full year was $4.7 million, or $0.27 per diluted
share net of tax, compared to $24.7 million, or $1.40 per diluted share net of
tax, in 2011. Non-GAAP operating margin for the full year was 24%, compared to
42% in 2011.

GAAP net loss for the full year was $15.5 million, or $0.89 per diluted share,
compared to net income of $18.3 million, or $1.04 per diluted share, in 2011.
GAAP net income for 2012 includes $11.3 million, or $0.39 per diluted share
net of tax, in stock-based compensation expense; $15.7 million, or $0.44 per
diluted share net of tax, in acquisition and integration costs; and $4.8
million, or $0.17 per diluted share net of tax, in amortization of
intangibles.

The GAAP and non-GAAP reconciling items for the quarters and years ended
December 31, 2012 and 2011 can be found in the "Non-GAAP Financial Metrics"
schedule attached to this press release and on the investor relations portion
of the Company's website at www.DTS.com.

The Company generated $14.8 million in cash flow from operations in 2012,
compared to $24.2 million in 2011, and closed the year with cash and
investments totaling $77.0 million.

"The fourth quarter concluded a transformative year for DTS. Over the course
of 2012, we successfully completed the integration of two acquisitions,
realized all anticipated synergies, extended our capabilities as a complete
audio solutions provider, and significantly enhanced our network-connected
footprint," said Jon Kirchner, chairman and CEO of DTS, Inc.

Mr. Kirchner continued, "DTS is dramatically changing the way consumers
experience entertainment – whether on-the-go or at home – and we are very
excited about our strong product pipeline, including the products recently
announced at CES and Mobile World Congress. New technologies such as our
Play-Fi wireless audio delivery technology and Headphone:X™, a game-changing
technology designed to create an immersive, multi-dimensional sound experience
using only a pair of standard headphones, are generating significant industry
excitement. We are poised to accelerate our network-connected growth in 2013
and are intently focused on positioning the Company for improved financial
performance as we move through our strategic transition."

Business Outlook

For 2013, the Company expects revenue in the range of $140 to $146 million,
including a normal level of royalty recoveries. The midpoint of this range
reflects approximately 42% year-over-year growth, of which 16 percentage
points are expected to be from organic growth and 26 percentage points are
expected to come from acquired technologies, which have now been integrated
into the Company's ongoing business. The Company expects growth in 2013 to
come primarily from the network-connected markets and particularly from the
growing licensing of audio processing in TVs and mobile devices. The Company
expects the network-connected markets to grow to more than 40% of total
revenue in 2013, Blu-ray to be nearly 25% of revenue, the automotive market to
be between 10% and 15% of revenue, and home AV to be just under 15% of total
revenue in 2013.

The Company expects non-GAAP operating margins in the low- to mid-20s and
non-GAAP diluted EPS in the range of $1.05 to $1.20. In 2013, stock-based
compensation expense is expected to be in the range of $0.44 to $0.47 per
diluted share net of tax, and amortization of intangibles is expected to be in
the range of $0.39 to $0.42. On a GAAP basis, the Company expects operating
profit of approximately 3-6% and EPS in the range of $0.22 to $0.31.

DTS management will provide details of its full-year outlook and expectations
for the Company through 2013 on the conference call today, Monday, March 11,
2013, starting at 1:30 p.m. Pacific Time. The outlook is based on a number of
assumptions that the Company believes are reasonable at the time of this press
release. Information regarding potential risks that could cause the actual
results to differ from these forward-looking statements is set forth below and
in the Company's filings with the Securities and Exchange Commission.

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
regarded as a replacement for (or superior to) corresponding, similarly
captioned, GAAP measures.

Conference Call Information for Monday, March 11, 2013

DTS will also host a conference call and live webcast at 1:30 p.m. Pacific
Time to discuss the fourth quarter and fiscal year 2012 results. To access the
conference call, dial 1-877-941-8609 or 1-480-629-9692 (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, March 11, 2013 through 11:59 p.m. Pacific Time, March 18, 2013, by
dialing 1-800-406-7325 or 1-303-590-3030 (outside the U.S. and Canada) and
entering pass code 4602473#.

About DTS, Inc.

DTS (Nasdaq:DTSI) is a premier audio solutions provider for high-definition
entertainment experiences—anytime, anywhere, on any device. DTS' audio
solutions enable delivery and playback of clear, compelling high-definition
audio which is incorporated by hundreds of licensee customers around the
world, into an array of consumer electronic devices. 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. 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; any statements regarding anticipated growth in the
network-connected markets and in the Blu-ray, automotive and home AV markets;
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
continued decline in optical disc media consummation, our ability to penetrate
the on-line and mobile content delivery market and adapt our technologies for
that market, 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
related to integrating acquisitions, greater than expected costs, the
departure of key employees, negative trends in the general economy, continued
weakness in the global financial markets and decreases in consumer confidence,
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, including DTS' most recent forms 10-K and 10-Q,
available at www.sec.gov. Readers are urged not to place undue reliance on
these forward looking statements, which speak only as of the date of this
press release. 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
                                                    December 31, December 31,
                                                     2012         2011
                                                    (Unaudited)
ASSETS
Current assets:                                                  
Cash and cash equivalents                            $57,831    $46,944
Short-term investments                               14,214      38,697
Accounts receivable, net of allowance for doubtful
accounts of $679 and $251 at December 31, 2012 and   6,910       5,322
2011, respectively
Deferred income taxes                                1,782       1,296
Prepaid expenses and other current assets            4,572       1,823
Income taxes receivable, net                         5,196       2,591
Total current assets                                 90,505      96,673
Property and equipment, net                         33,325      32,800
Intangible assets, net                               61,400      4,549
Goodwill                                             51,314      1,257
Deferred income taxes                                26,312      13,574
Long-term investments                                5,000       6,922
Other assets                                         4,826       3,695
Total assets                                         $272,682   $159,470
                                                                
                                                                
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:                                             
Accounts payable                                    $2,771     $1,056
Accrued expenses                                     15,954      3,605
Deferred revenue                                     7,659       1,121
Total current liabilities                            26,384      5,782
Long-term debt                                       30,000      —
Deferred income taxes                                17,248      —
Other long-term liabilities                          17,720      7,886
                                                                
Stockholders' equity:                                            
Preferred stock -- $0.0001 par value, 5,000 shares
authorized at December 31, 2012 and 2011; no shares  —          —
issued and outstanding
Common stock -- $0.0001 par value, 70,000 shares
authorized at December 31, 2012 and 2011; 20,710 and
20,536 shares issued at December 31, 2012 and 2011,  3           3
respectively; 18,208 and 16,536 outstanding at
December 31, 2012 and 2011, respectively
Additional paid-in capital                           213,787     192,819
Treasury stock, at cost - 2,502 and 4,000 shares at  (59,848)    (107,222)
December 31, 2012 and 2011, respectively
Accumulated other comprehensive income               659         644
Retained earnings                                    26,729      59,558
Total stockholders' equity                          181,330     145,802
                                                                
Total liabilities and stockholders' equity           $272,682   $159,470

                                                              

DTS, INC.
                                                              
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except per share amounts)
                                                              
                                                              
                       For the Three Months Ended For the Twelve Months Ended
                        December 31,               December 31,
                       2012          2011         2012           2011
                       (Unaudited)
                                                              
Revenue                 $29,775     $29,012    $100,649     $96,922
Cost of revenue         1,854        217         4,347         860
Gross profit            27,921       28,795      96,302        96,062
Operating expenses:                                            
Selling, general and    21,098       13,296      78,409        52,904
administrative
Research and            8,859        3,780       25,774        13,539
development
Total operating         29,957       17,076      104,183       66,443
expenses
Operating income (loss) (2,036)      11,719      (7,881)       29,619
Interest and other      (285)        (11)        (352)         311
income (expense), net
Income (loss) before
provision for income    (2,321)      11,708      (8,233)       29,930
taxes
Provision (benefit) for (2,623)      4,631       7,261         11,661
income taxes
Net income (loss)       $302        $7,077     $(15,494)    $18,269
                                                              
Net income (loss) per common share:                             
Basic                   $0.02       $0.43      $(0.89)      $1.08
Diluted                 $0.02       $0.42      $(0.89)      $1.04
                                                              
Weighted average shares outstanding:                            
Basic                   18,467       16,541      17,446        16,982
Diluted                 18,697       17,004      17,446        17,575

                                                                 

DTS, INC.
                                                                 
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
                                                                 
                                                                 
                                   For the Three Months  For the Twelve Months
                                  Ended                 Ended
                                   December 31,          December 31,
                                  2012        2011      2012        2011
                                  (Unaudited)
Cash flows from operating                                         
activities:
Net income (loss)                  $302      $7,077  $(15,494) $18,269
Adjustments to reconcile net
income (loss) to net cash provided                                
by operating activities:
Depreciation and amortization     3,333      1,470    9,625      5,337
Stock-based compensation charges  2,958      2,527    11,316     9,283
Deferred income taxes             (6,011)    2,403    (2,826)    2,873
Tax benefits from stock-based      8,553      238      8,661      314
awards
Excess tax benefits from           (8,567)    (245)    (8,879)    (275)
stock-based awards
Other                             441        92       822        454
Changes in operating assets and liabilities, net of business         
acquisitions:
Accounts receivable               (1,050)    (1,984)  5,316      649
Prepaid expenses and other assets (2,056)    (235)    (2,381)    (1,044)
Accounts payable, accrued expenses (1,297)    (978)    5,004      (5,600)
and other liabilities
Deferred revenue                   3,642      (894)    6,032      (5,537)
Income taxes receivable           (2,754)    223      (2,405)    (492)
Net cash provided by (used in)     (2,506)    9,694    14,791     24,231
operating activities
Cash flows from investing                                         
activities:
Purchases of held-to-maturity      --         (4,077)  (3,450)    (40,660)
investments
Purchases of available-for-sale    (4,816)    (10,641) (46,890)   (23,529)
investments
Maturities of held-to-maturity     --         18,784   20,120     74,470
investments
Maturities of available-for-sale   9,442      3,800    31,534     3,800
investments
Sales of held-to-maturity          --         --       9,109      --
investments
Sales of available-for-sale        --         --       24,760     --
investments
Cash paid for business             --         --       (59,616)   --
acquisitions, net
Purchases of property and          (1,412)    (614)    (4,225)    (3,057)
equipment
Purchases of intangible assets     (162)      (132)    (584)      (545)
Net cash provided by (used in)     3,052      7,120    (29,242)   10,479
investing activities
Cash flows from financing                                         
activities:
Proceeds from the issuance of
common stock under stock-based     565        503      1,976      4,099
compensation plans
Repurchases and retirement of
common stock for restricted stock  (19)       (74)     (985)      (1,585)
tax withholdings
Excess tax benefits from           8,567      245      8,879      275
stock-based awards
Proceeds from long-term borrowings --         --       30,000     --
Purchases of treasury stock       (8,651)    (5,489)  (14,532)   (32,299)
Net cash provided by (used in)     462        (4,815)  25,338     (29,510)
financing activities
Net change in cash and cash        1,008      11,999   10,887     5,200
equivalents
Cash and cash equivalents,         56,823     34,945   46,944     41,744
beginning of period
Cash and cash equivalents, end of  $57,831   $46,944 $57,831   $46,944
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 Twelve Months Ended
                       December 31,                December 31,
                      2012           2011         2012           2011
Cost of revenue:                                               
GAAP cost of revenue   $1,854       $217       $4,347       $860
Amortization of        1,751         182         4,151         731
intangible assets
Stock-based            --            4           --            12
compensation
Non-GAAP cost of       $103         $31        $196         $117
revenue
                                                              
Selling, general and                                           
administrative:
GAAP selling, general  $21,098      $13,296    $78,409      $52,904
and administrative
Amortization of        253           140         551           462
intangible assets
Stock-based            2,258         2,076       8,940         7,622
compensation
Acquisition and
integration related    3,412         --          13,469        --
costs*
Non-GAAP selling,
general and            $15,175      $11,080    $55,449      $44,820
administrative
                                                              
Research and                                                   
development:
GAAP research and      $8,859       $3,780     $25,774      $13,539
development
Amortization of        --            45          90            179
intangible assets
Stock-based            700           447         2,376         1,649
compensation
Acquisition and
integration related    1,340         --          2,234         --
costs*
Non-GAAP research and  $6,819       $3,288     $21,074      $11,711
development
                                                              
Operating income                                               
(loss):
GAAP operating income  $(2,036)     $11,719    $(7,881)     $29,619
(loss)
Amortization of        2,004         367         4,792         1,372
intangible assets
Stock-based            2,958         2,527       11,316        9,283
compensation
Acquisition and
integration related    4,752         --          15,703        --
costs*
Non-GAAP operating     $7,678       $14,613    $23,930      $40,274
income
Non-GAAP operating
income as a % of       26%            50%          24%            42%
revenue
                                                              
Net income (loss):                                             
GAAP net income (loss) $302         $7,077     $(15,494)    $18,269
Amortization of        2,004         367         4,792         1,372
intangible assets
Stock-based            2,958         2,527       11,316        9,283
compensation
Acquisition and
integration related    4,752         --          15,703        --
costs*
Tax impact of the      (3,886)       (1,158)     (11,581)      (4,262)
above items
Non-GAAP net income    $6,130       $8,813     $4,736       $24,662
                                                              
Non-GAAP diluted
income (loss) per      $0.33        $0.52      $0.27        $1.40
common share
                                                              
Weighted average
diluted shares         18,697        17,004      17,790        17,575
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 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                       3%       6%
Amortization of intangible assets                             9        9
Stock-based compensation                                      9        10
Non-GAAP operating income as a % of revenue                   21%      25%
                                                                     
                                                                     
Net income per diluted share:                                         
                                                                     
GAAP net income per diluted share                             $0.22  $0.31
Amortization of intangible assets                             0.65    0.70
Stock-based compensation                                      0.73    0.78
Tax impact of the above items                                 (0.55)  (0.59)
Non-GAAP net income per diluted share                         $1.05  $1.20
                                                                     
Weighted average shares used to compute Non-GAAP net income   18.5    18.5
per diluted share (millions)

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

DTS, Inc. Logo
 
Press spacebar to pause and continue. Press esc to stop.