DTS REPORTS FIRST QUARTER FISCAL 2016 FINANCIAL RESULTS

CALABASAS, Calif., May 09, 2016 (GLOBE NEWSWIRE) — DTS, Inc. (Nasdaq:DTSI), a leader in high-definition audio solutions and audio enhancement technologies, today announced financial results for the first quarter ended March 31, 2016.

“We are pleased with our first quarter performance, driven by further penetration in mobile and automotive, as well as slightly higher than expected royalty recoveries,” said Jon Kirchner, chairman and CEO, DTS, Inc. “These results set us up nicely to meet our expectations for 2016. Importantly, with the acquisition and integration of HD Radio complete, and our first full quarter together under our belts, we are already seeing the benefits with non-GAAP operating income growth of 58% year-over-year, a 37% increase in operating cash flow, and improving profit margins. Over the longer run, we believe we are strategically positioned to grow our footholds in the home, mobile device and automotive markets by building content support and selling the broadest suite of innovative end-to-end audio solutions. Our vision is to deliver the highest quality audio experience anywhere, anytime, on any device.”

Financial Comparisons
  Q1 2016 Q1 2015
Revenue $ 45.2 million $ 33.9 million
Year-over-Year Growth Rate   33  %    
GAAP Net Income $ 0.54 million $ 1.1 million
GAAP Earnings Per Share* $ 0.03     $  0.06    
Non-GAAP Operating Margin    25 %    21 %  
Non-GAAP Net Income $ 7.2 million $ 5.0 million
Non-GAAP Earnings Per Share**                       $  0.41     $  0.27    

*Earnings Per Diluted Share Net of Tax
 

Supplemental Information
  Q1 2016 Amount Per Diluted Share**
Stock-Based Compensation           $ 3.8 million $ 0.15
Amortization of Intangibles $ 5.5 million $ 0.22

**Amount Per Diluted Share Net of Tax @ 30%

DTS closed the quarter with cash and investments totaling $57.4 million. 

The GAAP and non-GAAP reconciling items for the quarters ended March 31, 2016 and 2015 can be found in the “Non-GAAP Financial Metrics” schedule attached to this press release and on the Investor Relations section of the Company’s website at www.dtsb2b.wpengine.com.

Business Outlook

For fiscal year 2016, the Company continues to expect revenue in the range of $180 to $190 million. The Company expects growth in 2016 to primarily come from the mobile and automotive markets. 

The Company expects non-GAAP operating margins in the low-to-mid 30s and non-GAAP diluted EPS in the range of $2.10 to $2.25. On a GAAP basis, the Company expects operating margins in the range of 10% to 15% and diluted EPS in the range of $0.70 to $0.85.  

This 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 by excluding charges and the related estimated income tax effects for stock-based compensation, the amortization of intangible assets, and acquisition, integration, and realignment costs. Over the past several years, the Company’s GAAP tax rate has varied substantially. As a result of the completion of an international restructuring in 2014, management believes the most appropriate measure for its estimated annual effective tax rate is approximately 30%. 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 May 9, 2016

DTS will host a conference call and live webcast at 1:30 p.m. Pacific Time to discuss the first quarter ended March 31, 2016 results. To access the conference call, dial 1-888-364-3109 or 1-719-325-2494 (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.dtsb2b.wpengine.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 at4:30 p.m. Pacific Time, May 9, 2016 through 4:30 p.m. Pacific Time, May 16, 2016, by registering at https://jsp.premiereglobal.com/webrsvp and entering 4117504.

About DTS, Inc.

Since 1993, DTS, Inc. (Nasdaq:DTSI) has been dedicated to making the world sound better. Through its pioneering audio solutions for mobile devices, home theater systems, cinemas, automotive and beyond, DTS provides incredibly high-quality, immersive and engaging audio experiences to listeners everywhere. DTS technology is integrated in more than two billion devices globally, and the world’s leading video and music streaming services are increasingly choosing DTS to deliver premium sound to their listeners’ devices. For more information, please visit www.dtsb2b.wpengine.com.

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, financial or operating performance, or future effective tax rates, including statements regarding overall profitability in 2016; any statements regarding anticipated growth in the automotive, home and mobile 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, our ability to penetrate the on-line and mobile content delivery market and adapt our technologies for that market, our ability to further penetrate the automotive, home and mobile markets, the continued decline in optical disc-based product sales, 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)
               
               
          As of   As of
          March 31,   December 31,
            2016       2015  
          (Unaudited)
ASSETS
Current assets:          
  Cash and cash equivalents   $ 37,161     $ 52,208  
  Short-term investments     20,280       9,657  
  Accounts receivable, net     12,266       12,454  
  Prepaid expenses and other current assets     5,827       5,855  
  Income taxes receivable     4,669       4,130  
    Total current assets     80,203       84,304  
Property and equipment, net     28,352       29,022  
Intangible assets, net     152,971       157,936  
Goodwill         108,854       108,726  
Deferred income taxes     22,919       24,018  
Other long-term assets     3,937       3,934  
    Total assets   $ 397,236     $ 407,940  
               
               
               
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:          
  Accounts payable   $ 4,835     $ 5,979  
  Accrued expenses     19,751       22,960  
  Deferred revenue     2,890       5,711  
  Income taxes payable     204       123  
  Current portion of long-term debt, net     21,486       21,486  
    Total current liabilities     49,166       56,259  
Long-term debt, net     131,295       136,666  
Other long-term liabilities     9,957       9,983  
               
Stockholders’ equity:        
  Preferred stock     –       –  
  Common stock     3       3  
  Additional paid-in capital     259,905       258,660  
  Treasury stock, at cost     (111,331 )     (111,331 )
  Accumulated other comprehensive income     782       778  
  Retained earnings     57,459       56,922  
    Total stockholders’ equity     206,818       205,032  
    Total liabilities and stockholders’ equity   $ 397,236     $ 407,940  
               

 

           
DTS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except per share amounts)
           
           
      For the Three Months Ended
      March 31,
        2016       2015  
      (Unaudited)
       
Revenue   $ 45,195     $ 33,937  
Cost of revenue   6,091       2,784  
Gross profit   39,104       31,153  
Operating expenses:      
  Selling, general and administrative   24,509       19,783  
  Research and development   12,687       9,628  
    Total operating expenses   37,196       29,411  
Operating income   1,908       1,742  
Interest and other expense, net   (1,159 )     (161 )
Income before income taxes   749       1,581  
Provision for income taxes   212       527  
Net income $ 537     $ 1,054  
           
Net income per common share:      
  Basic $ 0.03     $ 0.06  
  Diluted $ 0.03     $ 0.06  
           
Weighted average shares outstanding:      
  Basic   17,410       17,461  
  Diluted   17,770       18,235  
           

 

             
DTS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
             
             
        For the Three Months Ended
        March 31,
          2016       2015  
        (Unaudited)
Cash flows from operating activities:    
Net income   $ 537     $ 1,054  
Adjustments to reconcile net income to net cash provided by operating activities:        
  Depreciation and amortization     6,679       3,581  
  Stock-based compensation charges     3,786       2,898  
  Deferred income taxes     (1,389 )     (891 )
  Excess tax benefits from stock-based awards     (47 )     (891 )
  Amortization of debt issuance costs     153       –  
  Other     (134 )     91  
  Changes in operating assets and liabilities, net of business acquisitions:        
    Accounts receivable     397       4,699  
    Prepaid expenses and other assets     18       1,916  
    Accounts payable, accrued expenses and other liabilities     (2,969 )     (6,258 )
    Deferred revenue     (2,821 )     (2,864 )
    Income taxes receivable/payable     1,413       782  
    Net cash provided by operating activities     5,623       4,117  
Cash flows from investing activities:        
  Purchases of available-for-sale investments     (13,635 )     (30,345 )
  Maturities of available-for-sale investments     3,000       –  
  Purchases of property and equipment     (733 )     (1,033 )
  Purchases of intangible assets     (965 )     (1,087 )
  Other investing activities     –       (300 )
    Net cash used in investing activities     (12,333 )     (32,765 )
Cash flows from financing activities:        
  Repayment of long-term borrowings     (5,469 )     –  
  Payment of contingent consideration     (480 )     –  
  Holdback and other payments related to acquisitions     (370 )     –  
  Proceeds from the issuance of common stock under stock-based compensation plans     82       4,239  
  Cash paid for shares withheld for taxes     (2,147 )     (1,442 )
  Excess tax benefits from stock-based awards     47       891  
    Net cash provided by (used in) financing activities     (8,337 )     3,688  
    Net change in cash and cash equivalents     (15,047 )     (24,960 )
Cash and cash equivalents, beginning of period     52,208       99,435  
Cash and cash equivalents, end of period   $ 37,161     $ 74,475  
             

 

           
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,
        2016       2015  
Cost of revenue:      
  GAAP cost of revenue $ 6,091     $ 2,784  
    Amortization of intangible assets   4,936       2,368  
  Non-GAAP cost of revenue $ 1,155     $ 416  
           
Selling, general and administrative:      
  GAAP selling, general and administrative $ 24,509     $ 19,783  
    Amortization of intangible assets   543       265  
    Stock-based compensation   2,801       2,137  
    Acquisition, integration and realignment costs*   280       –  
  Non-GAAP selling, general and administrative $ 20,885     $ 17,381  
           
Research and development:      
  GAAP research and development $ 12,687     $ 9,628  
    Stock-based compensation   985       761  
    Acquisition, integration and realignment costs*   16       –  
  Non-GAAP research and development $ 11,686     $ 8,867  
           
Operating income:      
  GAAP operating income $ 1,908     $ 1,742  
    Amortization of intangible assets   5,479       2,633  
    Stock-based compensation   3,786       2,898  
    Acquisition, integration and realignment costs*   296       –  
  Non-GAAP operating income $ 11,469     $ 7,273  
  Non-GAAP operating income as a % of revenue   25 %     21 %
           
Net income:      
  GAAP net income $ 537     $ 1,054  
    Amortization of intangible assets   5,479       2,633  
    Stock-based compensation   3,786       2,898  
    Acquisition, integration and realignment costs*   296       –  
    Adjustment for income taxes   (2,881 )     (1,607 )
  Non-GAAP net income $ 7,217     $ 4,978  
           
  Non-GAAP diluted income per common share $ 0.41     $ 0.27  
           
  Weighted average diluted shares outstanding   17,770       18,235  
           
* On October 1, 2015, DTS completed its acquisition of iBiquity Digital Corporation
           

 

           
Non-GAAP Financial Targets      
           
           
The following tables show the Company’s fiscal year 2016 GAAP guidance reconciled to non-GAAP financial targets.
           
      Fiscal Year 2016
      Low   High
       
Operating income as a % of revenue:      
           
  GAAP operating income as a % of revenue   10 %     15 %
    Amortization of intangible assets   13 %     13 %
    Stock-based compensation   7 %     7 %
  Non-GAAP operating income as a % of revenue   30 %     35 %
           
           
Net income per diluted share:      
           
  GAAP net income per diluted share $ 0.70     $ 0.85  
    Amortization of intangible assets   1.25       1.33  
    Stock-based compensation   0.73       0.78  
    Adjustment for income taxes   (0.58 )     (0.71 )
  Non-GAAP net income per diluted share $ 2.10     $ 2.25  
           
  Weighted average shares used to compute non-GAAP net income per diluted share (millions)   18.0       18.0  
           

 

Investor Contact



DTS, Inc.

Geri Weinfeld

Director, Investor Relations

geri.weinfeld@dtsb2c.wpengine.com

(818) 436-1231

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Source: DTS

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