Network-Connected Revenue Increases 13%
Company Maintains Annual Outlook
DTS, Inc. (Nasdaq:DTSI) today announced financial results for the
first quarter ended March 31, 2012.
Revenue for the first quarter was $26.9 million, including 13%
year-over-year growth from the network-connected markets and $2.25
million in royalty recoveries. This compares to revenue of $26.8
million in the first quarter of 2011, which included no royalty
recoveries. Excluding royalty recoveries, the 8% year-to-year
decline in total revenue resulted primarily from accelerating
declines in DVD-based products, completion of a broadcast
arrangement in 2011, softness as expected in Blu-ray game consoles,
and lingering effects of the Thailand floods on the supply
chain. Total revenue excluding royalty recoveries for the
first quarter of 2012 was at the high end of the Company's
previously stated expectations, which were for a sequential decline
of 10% to 15% from the fourth quarter of 2011.
Gross profit for the first quarter of 2012 was $26.7 million, or
99% of revenue, compared to $26.6 million, or 99% of revenue, for
the first quarter of 2011.
Non-GAAP net income was $6.2 million, or $0.37 per diluted share
net of tax, compared to non-GAAP net income $7.1 million, or $0.40
per diluted share net of tax, in the first quarter of
2011. Non-GAAP operating margin in the first quarter of 2012
was 38%, compared to 44% in the first quarter of 2011, as the
Company increased headcount to support expansion into the growing
network-connected space and launched its "Sound Matters"
consumer-facing marketing campaign.
GAAP net income was $4.0 million, or $0.24 per diluted share,
compared to net income of $5.7 million, or $0.32 per diluted share,
in the first quarter of 2011.
The GAAP and non-GAAP reconciling items for the first quarters
of 2011 and 2012 can be found in the "Non-GAAP Financial Metrics"
schedule attached to this press release and on the investor
relations portion of our website at www.DTS.com.
The Company generated $6.8 million in cash flow from operations
during the first quarter of 2012, compared to $3.9 million during
the first quarter of 2011, and closed the quarter with cash and
investments of $97.6 million. During the quarter, DTS
repurchased approximately 72,000 shares of common stock in the open
market for approximately $2 million under its 2 million share
repurchase program.
"We were pleased with the continued expansion of our
network-connected business during the quarter, which grew 13%
driven by strong mobile device and connected TV sales," commented
Jon Kirchner, chairman and CEO of DTS, Inc. "This expansion,
coupled with a number of recently announced strategic partnerships,
including those with Deluxe and castLabs, positions us for
accelerated growth in the network-connected markets and represents
a strong start to a year of strategic transition. In addition,
we were very pleased to announce the SRS Labs transaction last
month, which we expect to close in the third quarter of 2012, and
which we believe will further accelerate our growth in these
markets and expand our footprint in the audio processing
space. We believe the long-term opportunities being driven by
cloud-based entertainment delivery and the proliferation of
connected devices are compelling, and we continue to execute
against our long-term strategy to benefit from them.
"As we look ahead into 2012, we are very excited about the
opportunities before us and thus we are maintaining our outlook for
fiscal year 2012," concluded Kirchner.
Business Outlook
DTS' business outlook does not include the potential impact of
the acquisition of SRS Labs, Inc.
DTS management continues to expect 2012 revenue in the range of
$112 to $116 million, non-GAAP operating margin of approximately
40% and non-GAAP EPS in the range of $1.60 to $1.65 per diluted
share, excluding the charges and the related income tax effect for
stock-based compensation, the amortization of intangible assets,
and certain acquisition-related charges. Stock-based
compensation expense is expected to be in the range of $0.37 to
$0.38 per share net of tax in 2012. On a GAAP basis,
management expects operating margins of approximately 30% and EPS
in the range of $1.18 to $1.22 cents per diluted share.
Use of Non-GAAP Financial Information
Included within this press release are non-GAAP financial
measures that supplement the Company's Consolidated Statements of
Income prepared under generally accepted accounting principles
(GAAP). These non-GAP 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-related
charges. Reconciliation 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 Income. These non-GAAP measures are
not meant as a substitute for GAAP, but are included solely for
informational and comparative purposes. The Company's
management believes that this information can assist investors in
evaluating the company's operational trends, financial performance,
and cash generating capacity. Management believes these
non-GAAP measures allow investors to evaluate DTS' financial
performance using some of the same measures as
management. However, the non-GAAP financial measures should
not be regarding as a replacement for (or superior to)
corresponding, similarly captioned, GAAP measures.
Conference Call Information for Monday, May 7,
2012
DTS will broadcast a conference call today, Monday, May 7, 2012,
starting at 1:30 p.m. Pacific Time, to discuss first quarter
financial results. To access the conference call, dial
1-877-941-8609 or 1-480-629-9771 (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 4:40 p.m. Pacific Time, May
7, 2012 through 11:59 p.m. Pacific Time, May 15, 2012, by dialing
1-800-406-7325 or 1-303-590-3030 (outside the U.S. and Canada) and
entering pass code 4534746#.
About DTS, Inc.
DTS, Inc. (Nasdaq: DTSI) is dedicated to making digital
entertainment exciting, engaging and effortless by providing
state-of-the-art audio technology to hundreds of millions of
DTS-licensed consumer electronics products worldwide. From a
renowned legacy as a pioneer in 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 movies and
other forms of digital entertainment on a growing array of
network-connected consumer devices. DTS technology is in home
theaters, car audio systems, PCs, game consoles, DVD players,
televisions, digital media players, set-top boxes, smart phones,
surround music software 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 Silicon
Valley, Washington, China, France, Hong Kong, Japan, South Korea,
Taiwan, Singapore, and the United Kingdom. For further
information, please visit www.dts.com. 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. © 2012 DTS, Inc. All rights reserved. The
DTS, Inc. logo is available at
http://www.globenewswire.com/newsroom/prs/?pkgid=11752
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," "strategy," "opportunity," "anticipates" and similar
words. These statements may include, among others, plans,
strategies and objectives of management for future operations; any
statements regarding proposed new products, services or
developments; any statements regarding future economic conditions
or financial or operating performance; statements of belief and any
statements of assumptions underlying any of the foregoing. The
potential risks and uncertainties that could cause actual growth
and results to differ materially include, but are not limited to,
the transition to the next generation optical drives and consumer
adoption of such technology, the rapidly changing and competitive
nature of the digital audio, consumer electronics and entertainment
markets, the Company's inclusion in or exclusion from governmental
and industry standards, continued customer acceptance of the
Company's technology, products, services and pricing, risks related
to ownership and enforcement of intellectual property, the
continued release and availability of entertainment content
containing DTS audio soundtracks, success of the Company's research
and development efforts, risks related to integrating acquisitions,
greater than expected costs, the departure of key employees, the
current financial crisis and global economic downturn, a loss of
one or more of our key customers or licensees, changes in domestic
and international market and political conditions, and other risks
and uncertainties more fully described in DTS' public filings with
the Securities and Exchange Commission, available at www.sec.gov.
DTS does not intend to update any forward-looking statement
contained in this press release to reflect events or circumstances
arising after the date hereof.
DTS-I
DTS, INC. |
|
|
|
CONSOLIDATED BALANCE
SHEETS |
(Amounts in thousands, except
per share amounts) |
|
|
|
|
|
|
|
As of |
As of |
|
March 31, |
December 31, |
|
2012 |
2011 |
|
|
|
|
(Unaudited) |
ASSETS |
Current assets: |
|
|
Cash and cash equivalents |
$ 37,564 |
$ 46,944 |
Short-term investments |
41,508 |
38,697 |
Accounts receivable, net of
allowance for doubtful accounts of $252 |
|
|
and $251 at March 31, 2012 and
December 31, 2011, respectively |
6,744 |
5,322 |
Deferred income taxes |
1,290 |
1,296 |
Prepaid expenses and other
current assets |
1,909 |
1,823 |
Income taxes receivable,
net |
2,320 |
2,591 |
Total current assets |
91,335 |
96,673 |
Property and equipment, net |
32,082 |
32,800 |
Intangible assets, net |
6,377 |
6,549 |
Goodwill |
1,257 |
1,257 |
Deferred income taxes |
14,232 |
13,574 |
Long-term investments |
18,531 |
6,922 |
Other assets |
2,291 |
1,695 |
Total assets |
$ 166,105 |
$ 159,470 |
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS'
EQUITY |
Current liabilities: |
|
|
Accounts payable |
$ 1,735 |
$ 1,056 |
Accrued expenses |
4,724 |
3,605 |
Deferred revenue |
485 |
1,121 |
Total current liabilities |
6,944 |
5,782 |
Other long-term liabilities |
8,169 |
7,886 |
|
|
|
Stockholders' equity: |
|
|
Preferred stock -- $0.0001 par
value, 5,000 shares authorized at March 31, 2012 |
|
|
and December 31, 2011; no
shares issued and outstanding |
— |
— |
Common stock -- $0.0001 par
value, 70,000 shares authorized at March 31, 2012 |
|
|
and December 31, 2011; 20,571
and 20,536 shares issued at March 31, 2012 |
|
|
and December 31, 2011,
respectively; 16,500 and 16,536 outstanding |
|
|
at March 31, 2012 and December
31, 2011, respectively |
3 |
3 |
Additional paid-in capital |
195,962 |
192,819 |
Treasury stock, at cost - 4,072
and 4,000 shares at March 31, 2012 |
|
|
and December 31, 2011,
respectively |
(109,257) |
(107,222) |
Accumulated other comprehensive
income |
681 |
644 |
Retained earnings |
63,603 |
59,558 |
Total stockholders'
equity |
150,992 |
145,802 |
|
|
|
Total liabilities and
stockholders' equity |
$ 166,105 |
$ 159,470 |
|
|
|
|
|
DTS, INC. |
|
|
|
CONSOLIDATED STATEMENTS OF
INCOME |
(Amounts in thousands, except
per share amounts) |
|
|
|
|
|
|
|
For the Three Months
Ended |
|
March 31, |
|
2012 |
2011 |
|
(Unaudited) |
|
|
Revenue |
$ 26,885 |
$ 26,779 |
Cost of revenue |
194 |
211 |
Gross profit |
26,691 |
26,568 |
Operating expenses: |
|
|
Selling, general and
administrative |
15,283 |
13,949 |
Research and development |
4,510 |
3,252 |
Total operating expenses |
19,793 |
17,201 |
Operating income |
6,898 |
9,367 |
Interest and other income (expense), net |
(88) |
(74) |
Income before provision for income taxes |
6,810 |
9,293 |
Provision for income taxes |
2,765 |
3,604 |
Net income |
$ 4,045 |
$ 5,689 |
|
|
|
Net income per common share: |
|
|
Basic |
$ 0.25 |
$ 0.33 |
Diluted |
$ 0.24 |
$ 0.32 |
|
|
|
Weighted average shares used to
compute |
|
|
net income per common
share: |
|
|
Basic |
16,465 |
17,205 |
Diluted |
16,933 |
17,903 |
|
|
|
|
|
DTS, INC. |
|
|
|
CONSOLIDATED STATEMENTS OF CASH
FLOWS |
(Amounts in thousands, except
per share amounts) |
|
|
|
|
|
|
|
For the Three Months Ended |
|
March 31, |
|
2012 |
2011 |
|
(Unaudited) |
Cash flows from operating activities: |
|
Net income |
$ 4,045 |
$ 5,689 |
Adjustments to reconcile net income to net
cash provided by operating activities: |
|
|
Depreciation and
amortization |
1,333 |
1,263 |
Stock-based compensation
charges |
2,598 |
1,972 |
Deferred income
taxes |
(652) |
507 |
Tax benefits from stock-based
awards |
1,010 |
182 |
Excess tax benefits from
stock-based awards |
(1,136) |
(138) |
Other |
56 |
150 |
Changes in operating assets and
liabilities: |
|
|
Accounts receivable |
(2,022) |
(1,737) |
Prepaid expenses and other
assets |
(82) |
(698) |
Accounts payable, accrued
expenses and other liabilities |
2,032 |
(1,992) |
Deferred revenue |
(636) |
(1,027) |
Income taxes
receivable |
271 |
(307) |
Net cash provided by operating
activities |
6,817 |
3,864 |
Cash flows from investing activities: |
|
|
Purchases of held-to-maturity
investments |
(3,335) |
(21,159) |
Purchases of available-for-sale
investments |
(31,105) |
-- |
Maturities of held-to-maturity
investments |
12,720 |
18,995 |
Maturities of
available-for-sale investments |
7,300 |
-- |
Purchase of property and
equipment |
(311) |
(355) |
Purchase of intangible
assets |
(102) |
(140) |
Net cash used in investing
activities |
(14,833) |
(2,659) |
Cash flows from financing activities: |
|
|
Proceeds from the issuance of
common stock under stock-based compensation plans |
456 |
1,478 |
Repurchase and retirement of
common stock for restricted stock tax withholdings |
(921) |
(1,430) |
Excess tax benefits from
stock-based awards |
1,136 |
138 |
Purchase of treasury
stock |
(2,035) |
-- |
Net cash provided by (used in)
financing activities |
(1,364) |
186 |
Net increase (decrease) in cash
and cash equivalents |
(9,380) |
1,391 |
Cash and cash equivalents, beginning of
period |
46,944 |
41,744 |
Cash and cash equivalents, end of
period |
$ 37,564 |
$ 43,135 |
|
|
|
|
|
|
|
|
|
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, |
|
2012 |
2011 |
Cost of revenue: |
|
|
GAAP cost of revenue |
$ 194 |
$ 211 |
Amortization of intangible
assets |
182 |
182 |
Stock-based compensation |
-- |
3 |
Non-GAAP cost of revenue |
$ 12 |
$ 26 |
|
|
|
Selling, general and administrative: |
|
|
GAAP selling, general and
administrative |
$ 15,283 |
$ 13,949 |
Amortization of intangible
assets |
39 |
113 |
Stock-based compensation |
2,089 |
1,585 |
Acquisition costs* |
459 |
-- |
Non-GAAP selling, general and
administrative |
$ 12,696 |
$ 12,251 |
|
|
|
Research and development: |
|
|
GAAP research and
development |
$ 4,510 |
$ 3,252 |
Amortization of intangible
assets |
45 |
44 |
Stock-based compensation |
509 |
384 |
Non-GAAP research and
development |
$ 3,956 |
$ 2,824 |
|
|
|
Operating income: |
|
|
GAAP operating income |
$ 6,898 |
$ 9,367 |
Amortization of intangible
assets |
266 |
339 |
Stock-based compensation |
2,598 |
1,972 |
Acquisition costs* |
459 |
-- |
Non-GAAP operating income |
$ 10,221 |
$ 11,678 |
Non-GAAP operating income as a
% of revenue |
38% |
44% |
|
|
|
Net income: |
|
|
GAAP net income |
$ 4,045 |
$ 5,689 |
Amortization of intangible
assets |
266 |
339 |
Stock-based compensation |
2,598 |
1,972 |
Acquisition costs* |
459 |
-- |
Tax impact of the above
items |
(1,146) |
(924) |
Non-GAAP net income |
$ 6,222 |
$ 7,076 |
|
|
|
Non-GAAP diluted income per
common share |
$ 0.37 |
$ 0.40 |
Weighted average
shares used to compute Non-GAAP |
|
net income per common
share |
16,933 |
17,903 |
|
|
|
|
|
|
* On April 17, 2012, DTS
announced that it will acquire SRS Labs in cash-and-stock
transaction. |
|
|
|
|
|
|
|
|
|
Non-GAAP Financial
Targets |
|
|
|
|
|
|
|
|
The following tables show the
Company's fiscal year 2012 GAAP guidance reconciled to
non-GAAP |
financial targets included in this
release. |
|
|
|
|
|
|
Fiscal Year 2012 |
|
Low |
High |
|
|
Operating income as a % of revenue: |
|
|
|
|
|
GAAP operating income as a % of
revenue |
29% |
31% |
Amortization of intangible
assets |
1 |
1 |
Stock-based compensation |
9 |
10 |
Non-GAAP operating income as a
% of revenue |
39% |
42% |
|
|
|
|
|
|
Income from continuing operations per diluted
share: |
|
|
|
|
|
GAAP income from continuing
operations per diluted share |
$ 1.18 |
$ 1.22 |
Amortization of intangible
assets |
0.08 |
0.09 |
Stock-based compensation |
0.62 |
0.63 |
Tax impact of the above
items |
(0.28) |
(0.29) |
Non-GAAP income from continuing
operations per diluted share |
$ 1.60 |
$ 1.65 |
|
|
|
Weighted average shares used to
compute Non-GAAP |
|
|
income from continuing
operations per diluted share |
17.3 |
17.3 |
CONTACT: Media & Investor Contacts:
Sard Verbinnen & Co
John Christiansen/Jenny Gore
jchristiansen@sardverb.com/jgore@sardverb.com
(415) 618-8750
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