Network-Connected Revenue Increases 13%
Company Maintains Annual Outlook
CALABASAS, Calif., May 7, 2012 (GLOBE NEWSWIRE) -- 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 |