DTS Reports First Quarter 2013 Financial Results

DTS Reports First Quarter 2013 Financial Results

TV, PC and Mobile Drive 246% Growth in Network-Connected Revenue

CALABASAS, Calif., May 8, 2013 (GLOBE NEWSWIRE) -- DTS, Inc. (Nasdaq:DTSI)
today announced financial results for the first quarter ended March 31, 2013.

Revenue for the first quarter was $32.7 million. This compares to $26.9
million in the first quarter of 2012, which included $2.3 million in royalty
recoveries. Excluding royalty recoveries, revenue grew 33%, primarily due to
continued significant growth in the Company's network-connected business,
which grew 246% year-over-year, with particular strength in the strategically
important network-connected TV, PC and mobile markets. These results were
partially offset by expected declines in sales of DVD-based products,
standalone Blu-ray players and PC Blu-ray products.

Non-GAAP net income in the first quarter of 2013 was $4.0 million, or $0.22
per diluted share net of tax, compared to non-GAAP net income of $6.2 million,
or $0.37 per diluted share net of tax, in the first quarter of
2012.Consistent with our expectations, non-GAAP operating margin in the first
quarter of 2013 was 21%, compared to 38% in the first quarter of 2012.

GAAP net loss in the first quarter of 2013 was $1.5 million, or a loss of
$0.08 per share, compared to net income $4.0 million, or $0.24 per diluted
share, in the first quarter of 2012.The Company's GAAP results reflect a tax
rate of 293% due to a valuation allowance against future tax benefits of
approximately $0.10 per share.Due in part to its recent acquisitions, the
Company has generated a three-year cumulative pre-tax loss in the U.S.,
requiring it to provide the valuation allowance and currently preventing the
Company from utilizing these losses to offset other income taxes, which will
temporarily create substantial volatility in its tax provisions.As a result,
the Company's non-GAAP presentation reflects a more normalized 40% tax rate as
management works to resolve the situation.

GAAP operating margin in the first quarter of 2013 was 3%, compared to 26% in
the first quarter of 2012.GAAP results for the first quarter of 2013 include
$3.0 million, or $0.10 per diluted share net of tax, in stock-based
compensation expense; $2.5 million, or $0.08 per diluted share net of tax, in
amortization of intangibles; and $388,000, or $0.01 per diluted share net of
tax, in acquisition and integration-related costs.

The GAAP and non-GAAP reconciling items for the first quarters of 2013 and
2012 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 closed the quarter with cash and investments totaling $76.6

"DTS delivered strong revenue growth in the first quarter, consistent with our
expectations, driven again by accelerating momentum in the network-connected
markets," said Jon Kirchner, chairman and CEO of DTS, Inc."The strategic
investments we have made in technology, products and content partnerships to
expand our network-connected footprint are continuing to translate into
meaningful design wins and customer momentum, particularly in mobile.The
recent launches of our Headphone:X and DTS Layered Audio technologies continue
to generate significant industry excitement. These launches, combined with
new product and customer announcements during the quarter from a number of
manufacturers, including Toshiba, Asustek, Samsung and Yulong, position us
well to continue to drive our network-connected business in 2013 and beyond."

Business Outlook

The Company continues to expect 2013 revenue in the range of $140 to $146
million, including a normal level of royalty recoveries, non-GAAP operating
margin in the low- to mid-20s and non-GAAP EPS in the range of $1.05 to $1.20
per diluted share based on a normalized 40% effective tax rate. 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 in 2013.On a GAAP basis, the Company expects an
operating margin of approximately 3% to 6% and now expects EPS in the range of
$(0.05) to $0.00 per diluted share as a result of the unusual tax situation
described above.

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.In addition, the Company's GAAP tax rate is
currently subject to substantial volatility caused by three-year cumulative
pre-tax losses in the U.S., which now require the Company to record a
valuation allowance against all U.S. Federal deferred tax benefits.Management
believes that the Company's inability to utilize its U.S. deferred tax
benefits is temporary, and as a result, the appropriate measure for its
effective tax rate, until such time as the valuation allowance issue is
resolved, is to impute a normalized 40% effective tax rate on the pretax
earnings of the Company.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 Wednesday, May 8, 2013

DTS will host a conference call and live webcast at 1:30 p.m. Pacific Time to
discuss the first quarter results.To access the conference call, dial
1-877-941-9205 or 1-480-629-9818 (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, May 8, 2013
through 11:59 p.m. Pacific Time, May 15, 2013, by dialing 1-800-406-7325 or
1-303-590-3030 (outside the U.S. and Canada) and entering pass code 4615478#.

About DTS, Inc.

DTS, Inc. (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 billions 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 automotive audio
systems, digital media players, DVD players, game consoles, home theaters,
PCs, set-top boxes, smartphones, surround music content and every device
capable of playing Blu-ray discs. Founded in 1993, DTS' corporate headquarters
is 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.

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 the Company's future use of
deferred tax benefits; 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-based product sales, 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,
unanticipated changes in our tax provisions 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


(Amounts in thousands, except per share amounts)
                                                       As of      As of
                                                      March 31,  December 31,
                                                       2013       2012
Current assets:                                                  
Cash and cash equivalents                              $60,104  $57,831
Short-term investments                                 9,022     14,214
Accounts receivable, net of allowance for doubtful
accounts of $667 and $679 at March 31, 2013 and        7,666     6,910
December 31, 2012 and 2011, respectively
Deferred income taxes                                  1,365     1,998
Prepaid expenses and other current assets              3,359     4,572
Income taxes receivable                                4,533     5,107
Total current assets                                   86,049    90,632
Property and equipment, net                           32,736    33,325
Intangible assets, net                                 59,332    61,400
Goodwill                                               51,234    51,314
Deferred income taxes                                  827       630
Long-term investments                                  7,502     5,000
Other assets                                           5,029     4,826
Total assets                                           $242,709 $247,127
Current liabilities:                                             
Accounts payable                                      $2,764   $2,771
Accrued expenses                                       10,826    15,954
Deferred revenue                                       7,038     7,659
Total current liabilities                              20,628    26,384
Long-term debt                                         30,000    30,000
Other long-term liabilities                            10,636    9,817
Stockholders' equity:                                            
Preferred stock -- $0.0001 par value, 5,000 shares
authorized at March 31, 2013 and December 31, 2012; no —        —
shares issued and outstanding
Common stock -- $0.0001 par value, 70,000 shares
authorized at March 31, 2013 and December 31, 2012;
20,763 and 20,710 shares issued at March 31, 2013 and  3         3
December 31, 2012, respectively; 18,261 and 18,208
outstanding at March 31, 2013 and December 31, 2012,
Additional paid-in capital                             215,811   213,787
Treasury stock, at cost - 2,502 shares at March 31,    (59,848)  (59,848)
2013 and December 31, 2012
Accumulated other comprehensive income                 686       659
Retained earnings                                      24,793    26,325
Total stockholders' equity                            181,445   180,926
Total liabilities and stockholders' equity             $242,709 $217,127

(Amounts in thousands, except per share amounts)
                                        For the Three Months Ended
                                         March 31,
                                        2013          2012
Revenue                                  $32,728     $26,885
Cost of revenue                          2,322        194
Gross profit                             30,406       26,691
Operating expenses:                                   
Selling, general and administrative      21,690       15,283
Research and development                 7,679        4,510
Total operating expenses                 29,369       19,793
Operating income                         1,037        6,898
Interest and other income (expense), net (245)        (88)
Income before provision for income taxes 792          6,810
Provision for income taxes               2,324        2,765
Net income (loss)                        $(1,532)    $4,045
Net income (loss) per common share:                   
Basic                                    $(0.08)     $0.25
Diluted                                  $(0.08)     $0.24
Weighted average shares outstanding:                  
Basic                                    18,218       16,465
Diluted                                  18,218       16,933

(Amounts in thousands)
                                                 For the Three Months Ended
                                                  March 31,
                                                 2013          2012
Cash flows from operating activities:                          
Net income (loss)                                 $(1,532)    $4,045
Adjustments to reconcile net income (loss) to net              
cash provided by operating activities:
Depreciation and amortization                    3,837        1,333
Stock-based compensation charges                 3,013        2,598
Deferred income taxes                            362          (652)
Tax benefits (shortfalls) from stock-based        (319)        1,010
Excess (tax benefits) shortfalls from stock-based 3            (1,136)
Other                                            31           56
Changes in operating assets and liabilities, net               
of business acquisitions:
Accounts receivable                              (731)        (2,022)
Prepaid expenses and other assets                929          (82)
Accounts payable, accrued expenses and other      (4,257)      2,032
Deferred revenue                                  (621)        (636)
Income taxes receivable                          574          271
Net cash provided by operating activities        1,289        6,817
Cash flows from investing activities:                          
Purchases of held-to-maturity investments         --           (3,335)
Purchases of available-for-sale investments       (5,059)      (31,105)
Maturities of held-to-maturity investments        --           12,720
Maturities of available-for-sale investments      7,749        7,300
Purchases of property and equipment              (773)        (311)
Purchases of intangible assets                    (260)        (102)
Net cash provided by (used in) investing          1,657        (14,833)
Cash flows from financing activities:                          
Proceeds from the issuance of common stock under  97           456
stock-based compensation plans
Repurchases and retirement of common stock for    (767)        (921)
restricted stock tax withholdings
Excess tax benefits (shortfalls) from stock-based (3)          1,136
Purchases of treasury stock                      --           (2,035)
Net cash used in financing activities            (673)        (1,364)
Net change in cash and cash equivalents          2,273        (9,380)
Cash and cash equivalents, beginning of period   57,831       46,944
Cash and cash equivalents, end of period         $60,104     $37,564

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
                                           March 31,
                                          2013               2012
Cost of revenue:                                             
GAAP cost of revenue                       $2,322           $194
Amortization of intangible assets          2,203             182
Non-GAAP cost of revenue                   $119             $12
Selling, general and administrative:                         
GAAP selling, general and administrative   $21,690          $15,283
Amortization of intangible assets          250               39
Stock-based compensation                   2,301             2,089
Acquisition and integration related costs* 350               459
Non-GAAP selling, general and              $18,789          $12,696
Research and development:                                    
GAAP research and development              $7,679           $4,510
Amortization of intangible assets          --                45
Stock-based compensation                   712               509
Acquisition and integration related costs* 38                --
Non-GAAP research and development          $6,929           $3,956
Operating income:                                            
GAAP operating income                      $1,037           $6,898
Amortization of intangible assets          2,453             266
Stock-based compensation                   3,013             2,598
Acquisition and integration related costs* 388               459
Non-GAAP operating income                  $6,891           $10,221
Non-GAAP operating income as a % of        21%                38%
Net income (loss):                                           
GAAP net income (loss)                     $(1,532)         $4,045
Amortization of intangible assets          2,453             266
Stock-based compensation                   3,013             2,598
Acquisition and integration related costs* 388               459
Tax adjustment                             (334)             (1,146)
Non-GAAP net income                        $3,988           $6,222
Non-GAAP diluted income per common share   $0.22            $0.37
Weighted average diluted shares            18,449            16,933
* 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 loss per diluted share                              $(0.05) $--
Amortization of intangible assets                            0.65     0.70
Stock-based compensation                                     0.73     0.78
Tax adjustment                                               (0.28)   (0.28)
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
         (415) 618-8750

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