DTS Reports Third Quarter 2013 Financial Results

DTS Reports Third Quarter 2013 Financial Results

Network-Connected Markets Continue to Lead Growth

CALABASAS, Calif., Nov. 6, 2013 (GLOBE NEWSWIRE) -- DTS, Inc. (Nasdaq:DTSI)
today announced financial results for the third quarter ended September 30,
2013.

"Our third quarter results reflect increasing penetration in the
network-connected markets, which were up more than 100% year over year," said
Jon Kirchner, chairman and CEO of DTS, Inc. "We continue to proactively
position the business for future growth in a dynamic environment, and we are
encouraged by the progress we are making in the connected television, mobile,
PC and wireless audio categories. Our efforts are helping to lay the
foundation for a transformative audio entertainment ecosystem. From our mobile
Headphone:X technology, which is driving excitement among artists, labels,
studios and product manufacturers, to Play-Fi, which is the only technology
available that enables wireless audio in the home across Android, iOS and
Windows, DTS is helping redefine the entertainment experience for today's
connected consumer. As we enter the holiday period amidst some broader CE
market weakness, we remain confident in our strategic direction and growth
prospects as we look into 2014 and beyond."


Quarterly Financial Comparison
                                            Q3 2013        Q3 2012
Revenue                                      $28.2 million  $22.2 million
Year-over-year growth rate                   27%            8%

GAAP Net income/(loss)                       $2.0 million   $(19.1) million
GAAP Earnings/(loss) per share*              $0.11          $(1.04)

Non-GAAP Operating margin                    21%            2%
Non-GAAP Net income/(loss)                   $3.6 million   $(11.1) million
Non-GAAP Earnings/(loss) per share*          $0.19          $(0.61)

*Earnings/(loss) per diluted share net of tax


Other GAAP Results
                                            Q3 2013        Amount per diluted
                                                            share*
Stock-based compensation                     $2.8 million   $0.09
Amortization of intangibles                  $2.5 million   $0.08
Acquisition and integration- related costs   $1.1 million   $0.04
Net adjustment to Phorus-related intangibles ($2.5 million) ($0.08)
and contingent consideration

*Amount per diluted share net of tax

The Company generated $11.4 million in cash flow from operations during the
third quarter of 2013, compared to $6.7 million during the third quarter of
2012, and closed the quarter with cash and investments totaling $81.1
million.

The GAAP and non-GAAP reconciling items for the third 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

The Company expects 2013 revenue in the lower end of its previously-stated
range of $130 to $136 million. Non-GAAP operating margin is expected to be 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 expected to be in the range of $0.38 to $0.41 per
diluted share net of tax and amortization of intangibles is expected to be in
the range of $0.32 to $0.35 per share net of tax in 2013.On a GAAP basis, the
inclusion of the carrying value adjustments relating to the Phorus assets and
liability noted above net to an increase in the Company's expected GAAP
operating margin of approximately 2 percentage points and expected GAAP EPS of
approximately $0.08 per diluted share.As a result, the Company expects a GAAP
operating margin of approximately 5% to 8% and GAAP EPS in the range of $0.03
to $0.08 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 variability caused by three-year cumulative
pre-tax losses in the US, which 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 pre-tax 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, November 6, 2013

DTS will host a conference call and live webcast at 1:30 p.m. Pacific Time to
discuss the third quarter results.To access the conference call, dial
1-877-941-6010 or 1-480-629-9770 (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 6, 2013
through 11:59 p.m. Pacific Time, November 13, 2013, by dialing 1-800-406-7325
or 1-303-590-3030 (outside the U.S. and Canada) and entering pass code
4646564#.

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. Copyright 2013, DTS, Inc. DTS, the
Symbol, and DTS and the Symbol together are registered trademarks of DTS, Inc.
All other trademarks are the properties of their respective owners. All rights
reserved.

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 and future effective tax rates; 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 hereof.

                                    DTS-I

                                                                
DTS, INC.
                                                                
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except per share amounts)
                                                                
                                                   As of         As of
                                                   September 30, December 31,
                                                   2013          2012
                                                                
                                                   (Unaudited)
ASSETS                                                           
Current assets:                                                  
Cash and cash equivalents                           $73,586     $57,831
Short-term investments                              2,542        14,214
Accounts receivable, net of allowance for doubtful
accounts of $1,061 and $679 at September 30, 2013   6,916        9,460
and December 31, 2012, respectively
Deferred income taxes                               1,395        1,998
Prepaid expenses and other current assets           4,282        4,875
Income taxes receivable                             3,113        5,107
Total current assets                                91,834       93,485
Property and equipment, net                        31,009       33,325
Intangible assets, net                              52,296       61,400
Goodwill                                            48,418       48,418
Deferred income taxes                               4,320        605
Long-term investments                               5,002        5,000
Other assets                                        4,824        4,826
Total assets                                        $237,703    $247,059
                                                                
                                                                
LIABILITIES AND STOCKHOLDERS' EQUITY                            
Current liabilities:                                             
Accounts payable                                   $2,905      $2,796
Accrued expenses                                    9,947        15,861
Deferred revenue                                    9,217        7,659
Total current liabilities                           22,069       26,316
Long-term debt                                      30,000       30,000
Other long-term liabilities                         5,604        9,817
                                                                
Stockholders' equity:                                            
Preferred stock -- $0.0001 par value, 5,000 shares
authorized at September 30, 2013 and December 31,   —           —
2012; no shares issued and outstanding
Common stock -- $0.0001 par value, 70,000 shares
authorized at September 30, 2013 and December 31,
2012; 20,897 and 20,710 shares issued at September  3            3
30, 2013 and December 31, 2012, respectively;
17,985 and 18,208 outstanding at September 30, 2013
and December 31, 2012, respectively
Additional paid-in capital                          222,796      213,787
Treasury stock, at cost - 2,912 and 2,502 shares at
September 30, 2013 and December 31, 2012,           (68,266)     (59,848)
respectively
Accumulated other comprehensive income              743          659
Retained earnings                                   24,754       26,325
Total stockholders' equity                         180,030      180,926
                                                                
Total liabilities and stockholders' equity          $237,703    $247,059
                                                                

                                                              
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,
                         2013         2012          2013         2012
                         (Unaudited)
                                                   
Revenue                   $ 28,159    $ 22,235     $ 88,075    $ 70,874
Cost of revenue           2,433       2,105        7,167       2,493
Gross profit              25,726      20,130       80,908      68,381
Operating expenses:                                            
Selling, general and      18,784      25,322       59,223      57,311
administrative
Research and development  7,490       7,625        23,011      16,915
Change in fair value of   (5,300)     --          (5,300)     --
contingent consideration
Impairment of intangible  2,820       --          2,820       --
assets
Total operating expenses  23,794      32,947       79,754      74,226
Operating income (loss)   1,932       (12,817)     1,154       (5,845)
Interest and other income (27)        19           (446)       (67)
(expense), net
Income (loss) before
provision for income      1,905       (12,798)     708         (5,912)
taxes
Provision (benefit) for   (83)        6,288        2,279       9,884
income taxes
Net income (loss)         $1,988     $ (19,086)   $ (1,571)   $ (15,796)
                                                              
Net income (loss) per                                          
common share:
Basic                     $0.11      $(1.04)     $(0.09)    $(0.92)
Diluted                   $0.11      $(1.04)     $(0.09)    $(0.92)
                                                              
Weighted average shares                                        
outstanding:
Basic                     18,191      18,329       18,239      17,104
Diluted                   18,445      18,329       18,239      17,104
                                                              

                                                               
DTS, INC.
                                                               
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
                                                               
                                                               
                                 For the Three Months  For the Nine Months
                                  Ended                 Ended
                                 September 30,        September 30,
                                 2013      2012        2013       2012
                                 (Unaudited)
Cash flows from operating                              
activities:
Net income (loss)                 $1,988  $ (19,086) $ (1,571) $ (15,796)
Adjustments to reconcile net
income (loss) to net cash                                       
provided by operating activities:
Depreciation and amortization    3,952    3,578      11,710    6,292
Stock-based compensation charges 2,849    2,842      8,774     8,358
Deferred income taxes            (1,936)  7,158      (3,241)   3,185
Tax benefits (shortfalls) from    58       (2,967)    (333)     108
stock-based awards
Excess tax shortfalls (benefits)  (72)     2,966      (48)      (312)
from stock-based awards
Change in fair value of           (5,300)  --         (5,300)   --
contingent consideration
Impairment of intangible assets   2,820    --         2,820     --
Other                            481      241        562       381
Changes in operating assets and
liabilities, net of business                                    
acquisitions:
Accounts receivable              4,591    5,292      2,544     6,366
Prepaid expenses and other        (160)    (204)      170       (325)
assets
Accounts payable, accrued         15       4,863      (4,614)   6,301
expenses and other liabilities
Deferred revenue                  860      1,918      1,558     2,390
Income taxes receivable          1,234    57         1,994     349
Net cash provided by operating    11,380   6,658      15,025    17,297
activities
Cash flows from investing                                       
activities:
Purchases of held-to-maturity     --       --         --        (3,450)
investments
Purchases of available-for-sale   (9)      --         (5,014)   (42,074)
investments
Maturities of held-to-maturity    --       2,585      --        20,120
investments
Maturities of available-for-sale  1,244    3,147      16,684    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         (967)    (1,370)    (2,322)   (2,813)
equipment
Purchases of intangible assets    (332)    (242)      (816)     (422)
Net cash provided by (used in)    (64)     (21,627)   8,532     (32,294)
investing activities
Cash flows from financing                                       
activities:
Proceeds from the issuance of
common stock under stock-based    69       36         1,472     1,411
compensation plans
Repurchases and retirement of
common stock for restricted stock (100)    (11)       (904)     (966)
tax withholdings
Excess tax benefits (shortfalls)  72       (2,966)    48        312
from stock-based awards
Proceeds from long-term           --       30,000     --        30,000
borrowings
Purchases of treasury stock      (5,664)  (3,846)    (8,418)   (5,881)
Net cash provided by (used in)    (5,623)  23,213     (7,802)   24,876
financing activities
Net change in cash and cash       5,693    8,244      15,755    9,879
equivalents
Cash and cash equivalents,        67,893   48,579     57,831    46,944
beginning of period
Cash and cash equivalents, end of $ 73,586 $ 56,823   $ 73,586  $ 56,823
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,
                        2013          2012           2013        2012
Cost of revenue:                                               
GAAP cost of revenue     $2,433      $2,105       $7,167    $2,493
Amortization of          2,267        2,037         6,705      2,400
intangible assets
Non-GAAP cost of revenue $166        $68          $462      $93
                                                              
Selling, general and                                           
administrative:
GAAP selling, general    $ 18,784     $ 25,322      $ 59,223   $ 57,311
and administrative
Amortization of          274          210           788        297
intangible assets
Stock-based compensation 2,139        2,258         6,644      6,682
Acquisition and
integration related      1,131        7,286         1,528      10,057
costs*
Non-GAAP selling,
general and              $15,240      $ 15,568      $ 50,263   $ 40,275
administrative
                                                              
Research and                                                   
development:
GAAP research and        $7,490      $7,625       $ 23,011   $ 16,915
development
Amortization of          --           --            --         90
intangible assets
Stock-based compensation 710          584           2,130      1,676
Acquisition and
integration related      --           882           38         894
costs*
Non-GAAP research and    $6,780      $6,159       $ 20,843   $ 14,255
development
                                                              
Operating income (loss):                                       
GAAP operating income    $1,932      $ (12,817)    $1,154    $(5,845)
(loss)
Amortization of          2,541        2,247         7,493      2,787
intangible assets
Stock-based compensation 2,849        2,842         8,774      8,358
Acquisition and
integration related      1,131        8,168         1,566      10,951
costs*
Change in fair value of  (5,300)      --            (5,300)    --
contingent consideration
Impairment of intangible 2,820        --            2,820      --
assets
Non-GAAP operating       $5,973      $440         $16,507    $ 16,251
income
Non-GAAP operating       21%           2%             19%         23%
income as a % of revenue
                                                              
Net income (loss):                                             
GAAP net income (loss)   $1,988      $(19,086)     $ (1,571)  $ (15,796)
Amortization of          2,541        2,247         7,493      2,787
intangible assets
Stock-based compensation 2,849        2,842         8,774      8,358
Acquisition and
integration related      1,131        8,168         1,566      10,951
costs*
Change in fair value of  (5,300)      --            (5,300)    --
contingent consideration
Impairment of intangible 2,820        --            2,820      --
assets
Tax impact of the above  (2,461)      (5,303)       (4,145)    (7,695)
items
Non-GAAP net income      $3,568      $ (11,132)    $9,637    $(1,395)
(loss)
                                                              
Non-GAAP diluted income  $0.19       $(0.61)      $0.52     $(0.08)
(loss) per common share
                                                              
Weighted average shares  18,445       18,329        18,457     17,104
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                       5%       8%
Amortization of intangible assets                             8%       9%
Stock-based compensation                                      9%       10%
Change in fair value of contingent consideration              -4%      -4%
Impairment of intangible assets                               2%       2%
Acquisition and integration related costs*                    1%       1%
Non-GAAP operating income as a % of revenue                   21%      26%
                                                                     
Net income per diluted share:                                         
                                                                     
GAAP net income per diluted share                             $ 0.03  $ 0.08
Amortization of intangible assets                             0.53    0.59
Stock-based compensation                                      0.63    0.68
Change in fair value of contingent consideration              (0.29)  (0.29)
Impairment of intangible assets                               0.15    0.15
Acquisition and integration related costs*                    0.07    0.09
Tax adjustments                                               (0.14)  (0.18)
Non-GAAP net income per diluted share                         $ 0.98  $ 1.12
                                                                     
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 for DTS, Inc.
         John Christiansen/Jenny Gore
         jchristiansen@sardverb.com/jgore@sardverb.com
         (415) 618-8750/(312) 895-4700

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