SRS Labs, Inc. (NASDAQ: SRSL), the industry leader in surround
sound, audio enhancement, and voice post-processing technologies,
reported financial results for the first quarter ended March 31,
2012.
Revenues in the first quarter 2012 increased 10% to $9.0 million
from $8.2 million in the same period a year ago primarily due to
increased licensing revenue in the PC and Personal
Telecommunications markets.
Operating expenses in the first quarter 2012 were $9.7 million
as compared to $7.8 million in the prior year period. Operating
expenses in the current period included $1.5 million in costs
associated with the announced transaction with DTS, Inc.
Net loss in the first quarter 2012 was $812,000 or $(0.06) per
diluted share. Excluding the transaction costs, net income on a
non-GAAP basis increased by 145% to $714,000 or $0.05 per diluted
share, an improvement from net income of $292,000 or $0.02 per
diluted share in the first quarter of 2011.
Cash flow from operations in the first quarter 2012 increased to
$1.2 million from $546,000 in the fourth quarter of 2011.
Depreciation and amortization was $0.3 million and stock based
compensation was $0.7 million for the quarter. Quarter-end cash and
cash equivalents, and short-term and long-term investments totaled
$39.4 million as of March 31, 2012, as compared to $38.3 million at
the end of the prior quarter.
See “Use of Non-GAAP Financial Information” below for important
information regarding the non-GAAP financial measures, which
exclude the transaction costs.
Management Commentary
“We achieved record results in Q1 2012, an increase of 10% over
Q1 of 2011, as we continued penetrating deeper within our existing
customer base and acquiring new accounts. Our Personal
Telecommunications and PC segments grew as anticipated by 24% and
51%, respectively, while the two categories combined accounted for
33% of our overall business compared to 26.5% a year ago,” said
Thomas C.K. Yuen, SRS Lab’s Chairman and CEO. “During Q1, we
renewed our multi-year Samsung Mobile contract and announced a new
global partnership with Toshiba’s PC and Tablet division.
“In the technology front, our Multi-Dimensional Audio or MDA
platform continued receiving praise from our partners and the
press. We also launched our new psychoacoustic-driven NViro depth
rendering surround sound technology in Q1 as well as rolling out
our HELM solution, which is designed to control volume fluctuations
at the head-end when broadcast is initiated. In addition, our newly
launched My Tunes Pro app for the Apple eco system was awarded
About.com’s coveted Reader’s Choice Award as the best music player
app, surpassing well-known apps such as Spotify and Slacker, just
to name a couple.
“Our Q2 and the rest of the year outlook remain encouraging as
our momentum in nearly every one of our business segments continues
to be positive. New design wins, as well as expanding business
opportunities with existing accounts, allow us to re-affirm our 15%
revenue growth guidance for 2012 while we expect to realize
improvements in our operating margins and leveling off of the
expenses.”
Conference Call
Due to the pending merger transaction with DTS, Inc., the
Company will not be conducting a conference call with simultaneous
webcast to discuss the first quarter 2012 financial results.
About SRS Labs, Inc.
Founded in 1993, SRS Labs is the industry leader in audio signal
processing for consumer electronics across the four screens: TV;
PC; Mobile Phones; and Automotive Entertainment Systems. Beginning
with the audio technologies originally developed at Hughes
Aircraft, SRS Labs holds over 150 worldwide patents and is
recognized by the industry as the foremost authority in research
and application of audio post processing technologies based on the
human auditory principles. Through partnerships with leading global
CE companies, semiconductor manufacturers, software developers, and
content aggregators, SRS is recognized as the de facto standard in
audio enhancement, surround sound, volume leveling, audio
streaming, and voice processing technologies. SRS solutions have
been included in over two billion electronic products sold
worldwide including flat panel HDTVs, AV products, STBs, PCs,
mobile phones, and automotive entertainment and telematics systems.
For more information, visit www.srslabs.com.
Use of Non-GAAP Financial Information
SRS Labs reports information in accordance with accounting
principles generally accepted in the United States (“GAAP”). This
press release also presents certain information, including net
income (loss) and net income (loss) per share presented on a
non-GAAP basis to exclude certain costs associated with the
announced transaction with DTS. A reconciliation of these non-GAAP
financial measures with the most comparable GAAP measures for the
periods presented is found in the accompanying “Reconciliation of
Non-GAAP Adjustments”.
The Company believes that these non-GAAP financial measures
provide important supplemental information to management and
investors and that excluding such costs presents the Company’s Q1
2012 results on a more comparable basis to the corresponding period
in the prior year, thereby providing management and investors with
an additional perspective to analyze the results of operations of
the Company. The Company believes that these non-GAAP financial
measures, when viewed with the GAAP results and the accompanying
reconciliation to corresponding GAAP financial measures, provides a
more complete understanding of factors and trends affecting the
Company’s business and results of operations.
The non-GAAP financial information presented herein should be
considered supplemental to, and not as a substitute for, or
superior to, financial measures calculated in accordance with GAAP.
Management strongly encourages investors to review the Company’s
consolidated financial statements in their entirety and to not rely
on any single financial measure.
Safe Harbor Statement
This press release includes forward-looking statements that are
based on our current expectations, estimates and projections about
SRS Labs, Inc., management’s beliefs and certain assumptions made
by us, and events beyond our control, all of which are subject to
change. Such forward-looking statements include, but are not
limited to, statements relating to our future operating results and
profitability as well as the market demand for our solutions, our
future growth opportunities and competitive position. Forward
looking statements can often be identified by words such as
“expects,” “anticipates,” “intends,” “plans,” “predicts,”
“believes,” “seeks,” “estimates,” “may,” “will,” “should,” “would,”
“could,” “likely,” “potential,” “continue,” similar expressions,
and variations or negatives of these words. These forward-looking
statements are not guarantees of future results or the commitments
made by us herein, and they are subject to risks, uncertainties and
assumptions that could cause actual results to differ materially
and adversely from those expressed in any forward-looking
statement. The risks and uncertainties referred to above include,
but are not limited to, the loss of any significant customer; the
acceptance of new SRS Labs products and technologies; the ability
to satisfy conditions for the closing of the DTS transaction and
the impact of the related lawsuits; the ability to complete the DTS
transaction and attain the anticipated synergies of such
transaction; our ability to increase our brand awareness and enter
into new or expanded license arrangements; the impact of
competitive products and pricing; the status of automotive market
in Japan; any continued weakness in the consumer electronics
industry; and the general economic and business conditions that may
adversely impact sales of consumer products incorporating our
technologies or that otherwise may impact our operating results and
future performance; the timely development and release of
technologies by the Company; and such other factors described in
our filings with the Securities and Exchange Commission. The
forward-looking statements in this press release speak only as of
the date they are made. We do not undertake any obligation to
revise or update publicly any forward-looking statement for any
reason.
Additional Information and Where to Find It
This press release does not constitute an offer to sell or the
solicitation of an offer to buy any securities or a solicitation of
any vote or approval, nor shall there be any sale of securities in
any jurisdiction in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the
securities laws of any such jurisdiction. No offer of securities
shall be made except by means of a prospectus meeting the
requirements of Section 10 of the Securities Act of 1933, as
amended.
In connection with the proposed merger transaction, SRS Labs and
DTS will file a registration statement and proxy
statement/prospectus with the SEC. DTS will file a registration
statement on Form S-4 that includes a proxy statement of SRS LABS
and which also constitutes a prospectus of the DTS. SRS LABS will
mail the proxy statement/prospectus to its stockholders. BEFORE
MAKING ANY VOTING DECISION, INVESTORS AND SECURITY HOLDERS ARE
URGED TO READ THE REGISTRATION STATEMENT, PROXY
STATEMENT/PROSPECTUS (INCLUDING ANY AMENDMENTS OR SUPPLEMENTS
THERETO) AND ALL OTHER RELEVANT DOCUMENTS FILED OR THAT WILL BE
FILED WITH THE SEC IN CONNECTION WITH THE PROPOSED MERGER
TRANSACTION AS THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN
IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION.
Investors and security holders may obtain a free copy of the
proxy statement/prospectus (when available) and other documents
filed by SRS LABS and DTS with the SEC at the SEC’s web site at
www.sec.gov or by directing a request when such a filing is made to
SRS Labs, Inc., 2909 Daimler Street, Santa Ana, CA 92705,
Attention: Investor Relations or by directing a request when such a
filing is made to DTS, Inc., 5220 Las Virgenes Road, Calabasas, CA
91302, Attention: Stockholder Relations.
Participants in the Solicitation
DTS, SRS Labs, their respective directors and certain of their
executive officers may be considered participants in the
solicitation of proxies in connection with the proposed merger
transaction. Information about the directors and executive officers
of SRS Labs is set forth in Annual Report on Form 10-K, filed with
the SEC on March 15, 2012 and as amended on April 30, 2012.
Information about the directors and executive officers of DTS is
set forth in its definitive proxy statement, which was filed with
the SEC on April 10, 2012. Certain directors and executive
officers of SRS Labs may have direct or indirect interests in the
proposed merger transaction due to securities holdings, preexisting
or future indemnification arrangements, vesting of options or
rights to severance payments if their employment is terminated
following the proposed merger transaction. Investors and security
holders may obtain additional information regarding the interests
of such participants by reading the proxy statement/prospectus DTS
and SRS Labs will file with the SEC when it becomes available.
SRS LABS, INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE
SHEETS
March 31,2012 December 31,2011
(Unaudited) ASSETS Current Assets Cash and
cash equivalents $ 16,329,093 $ 5,850,224 Accounts receivable, net
1,321,329 1,430,997 Prepaid expenses and other current assets
1,656,634 1,804,610 Short-term investments 18,537,000 27,837,000
Total Current Assets
37,844,056 36,922,831 Long-term investments 4,527,763
4,626,763 Property and equipment, net 1,149,353 1,247,343
Intangible assets, net 2,563,855 2,518,041 Deferred income taxes,
net 12,758,304 11,782,197
Total Assets $ 58,843,331 $
57,097,175
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities Accounts payable $ 1,123,574 $
556,342 Accrued liabilities 2,969,802 2,079,555 Deferred revenue
706,487 360,004
Total Current Liabilities 4,799,863
2,995,901 Commitments and contingencies
Stockholders’ Equity Preferred stock—$0.001 par value;
2,000,000 shares authorized; no shares issued and outstanding — —
Common stock—$0.001 par value; 56,000,000 shares authorized;
15,171,946 shares issued and 14,323,715 shares outstanding at March
31, 2012 and 15,154,926 shares issued and 14,306,695 shares
outstanding at December 31, 2011 15,173 15,156 Additional paid-in
capital 73,369,311 72,615,408 Treasury stock at cost, 848,231
shares at March 31, 2012 and December 31, 2011 (5,905,422 )
(5,905,422 ) Accumulated deficit (13,435,594 ) (12,623,868 )
Total Stockholders’ Equity 54,043,468 54,101,274
Total
Liabilities and Stockholders’ Equity $ 58,843,331 $ 57,097,175
SRS LABS, INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS
(Unaudited)
Three Months EndedMarch 31, 2012
2011 Revenues $ 8,963,261 $ 8,181,193 Cost of sales 107,968
147,131 Gross profit 8,855,293 8,034,062 Operating expenses:
Sales and marketing 3,749,845 3,801,717 Research and development
2,402,897 2,313,675 General and administrative 3,547,989 1,668,187
Total operating expenses 9,700,731 7,783,579 Operating
(loss) income (845,438 ) 250,483 Other income, net 33,712 44,667
(Loss) income before income taxes (811,726 ) 295,150 Income taxes —
2,783 Net (loss) income $ (811,726 ) $ 292,367 Net (loss)
income per common share: Basic $ (0.06 ) $ 0.02 Diluted $ (0.06 ) $
0.02 Weighted average shares used in the per common share
calculation: Basic 14,317,006 14,866,238 Diluted 14,317,006
15,884,335
________________________________________________
(i) Includes share-based compensation
expense as follows:
Three Months Ended March 31, 2012
2011 Sales and marketing $ 245,736 $ 219,749
Research and development 149,610 148,806 General and administrative
273,457 259,664 Total share-based compensation
expense $ 668,803 $ 628,219
SRS LABS, INC. AND
SUBSIDIARIES
RECONCILIATION OF NON-GAAP
ADJUSTMENTS
(Unaudited)
Three Months EndedMarch 31, 2012
2011 GAAP net (loss) income $ (811,726 ) $ 292,367 Exclude:
Transaction costs 1,525,849 — Non-GAAP net income $ 714,123 $
292,367 GAAP diluted net (loss) income per share $ (0.06 ) $
0.02 Exclude: Transaction costs (0.11 ) — Non-GAAP diluted net
income per share $ 0.05 $ 0.02 Weighted average shares used
in the: GAAP diluted per common share calculation 14,317,006
15,884,335 Non-GAAP diluted per common share calculation 14,754,980
15,884,335
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