DTS Reports Second Quarter 2013 Financial Results

DTS Reports Second Quarter 2013 Financial Results

Network-Connected Business Up 100%, Driving Solid Year-Over-Year Growth

CALABASAS, Calif., Aug. 15, 2013 (GLOBE NEWSWIRE) -- DTS, Inc. (Nasdaq:DTSI)
today announced financial results for the second quarter ended June 30, 2013.

"DTS delivered attractive revenue growth in the second quarter in line with
our expectations. The growth was driven by strong performance in our
network-connected business. Our strategy remains squarely focused on the large
network-connected opportunity, and as expected, this segment of our business
contributed nearly half of total revenue during the quarter," said Jon
Kirchner, chairman and CEO of DTS, Inc. "As we enter the important autumn and
holiday season, we are closely monitoring CE market headwinds and the timing
of certain customer network-connected product rollouts. Importantly, we are
very encouraged by the growing interest in our new Headphone:X and Play-Fi
technologies and expect those products to see increasing design wins as we get
into 2014.With growing content support and increasing device penetration, we
are pleased with our strategic progress and remain focused on execution in the
coming quarters."

Quarterly Financial Comparison
                                       Q2 2013        Q2 2012
Revenue                                 $27.2 million  $21.8 million
Year-over-year growth rate             25%            6%

GAAP Net income/(loss)                  $(2.0) million $(755,000)
GAAP Earnings/(loss) per share*         $(0.11)       $(0.05)

Non-GAAP Operating margin               13%            26%
Non-GAAP Net income                     $2.1 million   $3.5 million
Non-GAAP Earnings per share*            $0.11          $0.21
*Earnings/loss per diluted share net of               

Other GAAP Results
                                       Q2 2013        Amount per diluted
Stock-based compensation                $2.9 million   $0.10
Amortization of intangibles             $2.5 million   $0.08
Acquisition and integration-related     $47,000        $0.00
*Amount per diluted share net of tax                  

The Company generated $2.4 million in cash flow from operations during the
second quarter of 2013, compared to $3.8 million during the second quarter of
2012, and closed the quarter with cash and investments totaling $76.7

The Company has finalized the accounting related to a $2.9 million royalty
recovery received by DTS under an SRS license. This particular royalty
recovery, which resulted from a recent audit by DTS, was recorded as an
adjustment to goodwill and receivables as of the acquisition date.

The GAAP and non-GAAP reconciling items for the second 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.

Business Outlook

Management expects continued long-term growth to be driven primarily by
network-connected markets.However, a number of near-term factors have led the
Company to adjust its 2013 fiscal outlook. The revised expectations are
primarily due to:

  *Uncertainties around the timing of certain mobile and Play-Fi product
    shipments, which are now expected to push into 2014; 
  *A modestly weakening near-term CE business environment, which has impacted
    the Company's expectations for home theater in a box systems, Blu-ray
    players and automotive unit volumes; and
  *Lower expected royalty recoveries.

GAAP EPS expectations are unchanged, as the Company expects to offset any
revenue softness through active cost management. The Company has adjusted its
non-GAAP EPS outlook to reflect reduced expectations for non-cash charges
related to stock-based compensation and amortization expense.

The Company now expects 2013 revenue in the range of $130 to $136 million,
non-GAAP operating margin in the low- to mid-20s and non-GAAP EPS in the range
of $0.98 to $1.12 per diluted share based on a normalized 40% effective tax
rate.Stock-based compensation expense is now expected to be in the range of
$0.38 to $0.41 per diluted share net of tax and amortization of intangibles is
now expected to be in the range of $0.32 to $0.35 net of tax in 2013.On a
GAAP basis, the Company continues to expect an operating margin of
approximately 3% to 6% and expects EPS in the range of $(0.05) to $0.00 per
diluted share.

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 US, which now require the Company to record a valuation
allowance against all US Federal deferred tax benefits.Management believes
that the Company's inability to utilize its US 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

Conference Call Information for Thursday, August 15, 2013

DTS will host a conference call and live webcast at 2:00 p.m. Pacific Time to
discuss the second quarter results.To access the conference call, dial
1-877-941-0843 or 1-480-629-9819 (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 5:00 p.m. Pacific Time, August 15, 2013
through 11:59 p.m. Pacific Time, August 22, 2013, by dialing 1-800-406-7325 or
1-303-590-3030 (outside the U.S. and Canada) and entering pass code 4635803#.

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
                                                      June 30,   December 31,
                                                       2013       2012
Current assets:                                                  
Cash and cash equivalents                              $67,893  $57,831
Short-term investments                                 3,786     14,214
Accounts receivable, net of allowance for doubtful
accounts of $677 and $679 at June 30, 2013 and         11,507    9,460
December 31, 2012, respectively
Deferred income taxes                                  1,356     1,998
Prepaid expenses and other current assets              4,216     4,875
Income taxes receivable                                4,347     5,107
Total current assets                                   93,105    93,485
Property and equipment, net                           31,996    33,325
Intangible assets, net                                 57,185    61,400
Goodwill                                               48,418    48,418
Deferred income taxes                                  2,457     605
Long-term investments                                  4,993     5,000
Other assets                                           5,057     4,826
Total assets                                           $243,211 $247,059
Current liabilities:                                             
Accounts payable                                      $3,096   $2,796
Accrued expenses                                       8,641     15,861
Deferred revenue                                       8,357     7,659
Total current liabilities                              20,094    26,316
Long-term debt                                         30,000    30,000
Other long-term liabilities                            12,305    9,817
Stockholders' equity:                                            
Preferred stock -- $0.0001 par value, 5,000 shares
authorized at June 30, 2013 and December 31, 2012; no  —        —
shares issued and outstanding
Common stock -- $0.0001 par value, 70,000 shares
authorized at June 30, 2013 and December 31, 2012;
20,885 and 20,710 shares issued at June 30, 2013 and   3         3
December 31, 2012, respectively; 18,251 and 18,208
outstanding at June 30, 2013 and December 31, 2012,
Additional paid-in capital                             219,920   213,787
Treasury stock, at cost - 2,634 and 2,502 shares at    (62,602)  (59,848)
June 30, 2013 and December 31, 2012, respectively
Accumulated other comprehensive income                 725       659
Retained earnings                                      22,766    26,325
Total stockholders' equity                            180,812   180,926
Total liabilities and stockholders' equity             $243,211 $247,059

(Amounts in thousands, except per share amounts)
                          For the Three Months Ended For the Six Months Ended
                           June 30,                   June 30,
                          2013          2012         2013         2012
Revenue                    $27,188     $21,754    $59,916    $48,639
Cost of revenue            2,412        194         4,734       388
Gross profit               24,776       21,560      55,182      48,251
Operating expenses:                                             
Selling, general and       18,749       16,706      40,439      31,989
Research and development   7,842        4,780       15,521      9,290
Total operating expenses   26,591       21,486      55,960      41,279
Operating income (loss)    (1,815)      74          (778)       6,972
Interest and other income  (174)        2           (419)       (86)
(expense), net
Income (loss) before       (1,989)      76          (1,197)     6,886
provision for income taxes
Provision for income taxes 38           831         2,362       3,596
Net income (loss)          $(2,027)    $(755)     $(3,559)   $3,290
Net income (loss) per                                           
common share:
Basic                      $(0.11)     $(0.05)    $(0.19)    $0.20
Diluted                    $(0.11)     $(0.05)    $(0.19)    $0.19
Weighted average shares                                         
Basic                      18,306       16,503      18,263      16,484
Diluted                    18,306       16,503      18,263      16,938

(Amounts in thousands)
                          For the Three Months Ended For the Six Months Ended
                           June 30,                   June 30,
                          2013          2012         2013         2012
Cash flows from operating                                       
Net income (loss)          $(2,027)    $(755)     $(3,559)   $3,290
Adjustments to reconcile
net income (loss) to net                                        
cash provided by operating
Depreciation and           3,921        1,381       7,758       2,714
Stock-based compensation   2,912        2,918       5,925       5,516
Deferred income taxes     (1,667)      (3,321)     (1,305)     (3,973)
Tax benefits (shortfalls)  (72)         2,065       (391)       3,075
from stock-based awards
Excess (tax benefits)
shortfalls from            21           (2,142)     24          (3,278)
stock-based awards
Other                     50           84          81          140
Changes in operating                                            
assets and liabilities:
Accounts receivable       (1,316)      3,096       (2,047)     1,074
Prepaid expenses and other (599)        (39)        330         (121)
Accounts payable, accrued
expenses and other         (372)        (594)       (4,629)     1,438
Deferred revenue           1,319        1,108       698         472
Income taxes receivable   186          21          760         292
Net cash provided by       2,356        3,822       3,645       10,639
operating activities
Cash flows from investing                                       
Purchases of
held-to-maturity           --           (115)       --          (3,450)
Purchases of
available-for-sale         54           (10,969)    (5,005)     (42,074)
Maturities of
held-to-maturity           --           4,815       --          17,535
Maturities of
available-for-sale         7,691        11,645      15,440      18,945
Purchases of property and  (582)        (1,132)     (1,355)     (1,443)
Purchases of intangible    (224)        (78)        (484)       (180)
Net cash provided by (used 6,939        4,166       8,596       (10,667)
in) investing activities
Cash flows from financing                                       
Proceeds from the issuance
of common stock under      1,306        919         1,403       1,375
stock-based compensation
Repurchases and retirement
of common stock for        (37)         (34)        (804)       (955)
restricted stock tax
Excess tax benefits
(shortfalls) from          (21)         2,142       (24)        3,278
stock-based awards
Purchases of treasury      (2,754)      --          (2,754)     (2,035)
Net cash provided by (used (1,506)      3,027       (2,179)     1,663
in) financing activities
Net change in cash and     7,789        11,015      10,062      1,635
cash equivalents
Cash and cash equivalents, 60,104       37,564      57,831      46,944
beginning of period
Cash and cash equivalents, $67,893     $48,579    $67,893    $48,579
end of 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 Six Months Ended
                         June 30,                    June 30,
                        2013           2012         2013          2012
Cost of revenue:                                                
GAAP cost of revenue     $2,412       $194       $4,734      $388
Amortization of          2,235         181         4,438        363
intangible assets
Non-GAAP cost of revenue $177         $13        $296        $25
Selling, general and                                            
GAAP selling, general    $18,749      $16,706    $40,439     $31,989
and administrative
Amortization of          264           48          514          87
intangible assets
Stock-based compensation 2,204         2,335       4,505        4,424
Acquisition and
integration related      47            2,312       397          2,771
Non-GAAP selling,
general and              $16,234      $12,011    $35,023     $24,707
Research and                                                    
GAAP research and        $7,842       $4,780     $15,521     $9,290
Amortization of          --            45          --           90
intangible assets
Stock-based compensation 708           583         1,420        1,092
Acquisition and
integration related      --            12          38           12
Non-GAAP research and    $7,134       $4,140     $14,063     $8,096
Operating income (loss):                                        
GAAP operating income    $(1,815)     $74        $(778)      $6,972
Amortization of          2,499         274         4,952        540
intangible assets
Stock-based compensation 2,912         2,918       5,925        5,516
Acquisition and
integration related      47            2,324       435          2,783
Non-GAAP operating       $3,643       $5,590     $10,534     $15,811
Non-GAAP operating       13%            26%          18%           33%
income as a % of revenue
Net income (loss):                                              
GAAP net income (loss)   $(2,027)     $(755)     $(3,559)    $3,290
Amortization of          2,499         274         4,952        540
intangible assets
Stock-based compensation 2,912         2,918       5,925        5,516
Acquisition and
integration related      47            2,324       435          2,783
Tax adjustment           (1,350)       (1,277)     (1,684)      (2,422)
Non-GAAP net income      $2,081       $3,484     $6,069      $9,707
Non-GAAP diluted income  $0.11        $0.21      $0.33       $0.57
per common share
Weighted average diluted 18,478        16,943      18,463       16,938
shares 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                         8           9
Stock-based compensation                                  9           10
Acquisition and integration related costs*                1           1
Non-GAAP operating income as a % of revenue               21%         26%
Net income per diluted share:                                        
GAAP net loss per diluted share                           $(0.05)   $--
Amortization of intangible assets                         0.53       0.59
Stock-based compensation                                  0.63       0.68
Acquisition and integration related costs*                0.04       0.05
Tax adjustment                                            (0.17)     (0.20)
Non-GAAP net income per diluted share                     $0.98     $1.12
Weighted average shares used to compute Non-GAAP net      18.5       18.5
income per diluted share (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.

CONTACT: Media & Investor Contacts
         Sard Verbinnen & Co
         John Christiansen/Jenny Gore
         (415) 618-8750

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