DTS Reports Fourth Quarter and Fiscal 2015 Financial Results

March 2, 2016

CALABASAS, Calif., March 02, 2016 (GLOBE NEWSWIRE) -- DTS, Inc. (Nasdaq:DTSI), a leader in high-definition audio solutions and audio enhancement technologies, today announced financial results for the fourth quarter and fiscal year ended December 31, 2015.

"Our fourth quarter results were solid, driven by higher than anticipated revenue contributions from iBiquity and strong game console production," said Jon Kirchner, chairman and CEO, DTS, Inc. "Although 2015 was a challenging year, we maintained our focus on the network-connected markets where we materially advanced the development of ecosystems for our mobile and wireless audio solutions. Last week at Mobile World Congress, the Jade 2 smartphone from Acer became the world's first global smartphone to incorporate both Play-Fi® and Headphone:X®. Additionally, the acquisition of iBiquity has expanded our footprint in the automotive markets, increased the scale and profitability of our business, and strengthened our best-in-class suite of audio solutions, positioning us for continued growth in 2016 and beyond."

Financial Comparison
  Q4 2015 Q4 2014
Revenue $ 39.2 million $ 35.2 million
  Year-over-Year Growth Rate         11 %                        
 
GAAP Net Income (Loss)  $ (12.8) million $ 1.9 million
GAAP Diluted Earnings (Loss) Per Share           $ (0.74 )                                   $  0.11                  
 
Non-GAAP Operating Margin         19 %                         26 %                
Non-GAAP Net Income $   4.2 million $   6.2 million
Non-GAAP Earnings Per Share*           $ 0.23                         0.34                  
 
  FY 2015 FY 2014
Revenue $ 138.2 million    $ 143.9 million
  Year-over-Year Growth Rate         (4 )%                        
 
GAAP Net Income (Loss)  $ (12.3) million  $  27.1 million
GAAP Diluted Earnings (Loss) Per Share       $ (0.71 )                       1.55                  
 
Non-GAAP Operating Margin         23 %                         27 %                
Non-GAAP Net Income $  21.2 million $ 27.2 million
Non-GAAP Earnings Per Share*           $ 1.17                         1.55                  
 
Supplemental Information
  Q4 2015 Amount Per Diluted Share*
Stock-Based Compensation $ 3.6 million  $ 0.14                  
Amortization of Intangibles $ 5.6 million $ 0.22                  
Acquisition, Integration, Realignment and Legal Costs  $ 13.2 million $ 0.52                  
 
  FY 2015 Amount Per Diluted Share*
Stock-Based Compensation         $ 12.3 million         $ 0.47                  
Amortization of Intangibles $ 13.6 million $ 0.52                  
Acquisition, Integration, Realignment and Legal Costs $ 18.8 million $ 0.73                  
*Amount Per Diluted Share Net of Tax @ 30%

Excluding royalties from compliance activities, revenue for the fourth quarter 2015 was $37.3 million, an increase of 15% compared to $32.5 million in the fourth quarter of 2014. Excluding royalties from compliance activities, revenue for the fiscal year ended December 31, 2015 was $132.7 million, an increase of 2% compared to $130.6 million in 2014.

Included in the fourth quarter and full year 2015 results was $4.6 million in revenue, $0.9 million in cost of goods sold and $6.8 million in operating expenses from the recently acquired HD Radio business.

The Company closed the year with cash and investments totaling $61.9 million. 

The GAAP and non-GAAP reconciling items for the quarters and years ended December 31, 2015 and 2014 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.DTS.com.

Business Outlook

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

In 2016, stock-based compensation expense is expected to be in the range of $0.52 to $0.53 per diluted share net of tax and amortization of intangibles is expected to be in the range of $0.87 to $0.89 per diluted share net of tax. The Company expects its tax rate excluding discrete items, for both GAAP and non-GAAP purposes, to be approximately 30%. 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, acquisition and integration, realignment and certain legal 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 March 2, 2016

DTS will host a conference call and live webcast at 1:30 p.m. Pacific Time to discuss the fourth quarter and fiscal year 2015 results. To access the conference call, dial 1-800-768-6544 or 1-785-830-7990 (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, March 2, 2016 through 11:59 p.m. Pacific Time, March 9, 2016, by dialing 1-888-203-1112 or 1-719-457-0820 (outside the U.S. and Canada) and entering pass code 2489005#.

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, cinema, automobiles and more, 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' network-connected devices. For more information, please visit www.dts.com.

Copyright 2016, 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, financial or operating performance, or future effective tax rates, including statements regarding overall profitability in 2016; 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 Company's ability to penetrate the on-line and mobile content delivery market and adapt DTS' technologies for that market, 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, 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 key customers or licensees, changes in domestic and international market and political conditions, unanticipated changes in 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  
            December 31,   December 31,  
              2015       2014    
            (Unaudited)  
ASSETS  
Current assets:            
  Cash and cash equivalents   $   52,208     $   99,435    
  Short-term investments       9,657         -    
  Accounts receivable, net       12,454         12,364    
  Deferred income taxes       -         12,095    
  Prepaid expenses and other current assets       5,855         5,892    
  Income taxes receivable       4,130         3,925    
    Total current assets       84,304         133,711    
Property and equipment, net        29,022         27,089    
Intangible assets, net       157,936         48,543    
Goodwill             108,726         50,356    
Deferred income taxes       24,018         26,176    
Other long-term assets       3,934         2,395    
      Total assets   $   407,940     $   288,270    
                   
                   
                   
LIABILITIES AND STOCKHOLDERS' EQUITY   
Current liabilities:            
  Accounts payable    $   5,979     $   4,492    
  Accrued expenses       22,960         16,761    
  Deferred revenue       5,711         10,827    
  Income taxes payable       123         294    
  Current portion of long-term debt       21,486         5,000    
    Total current liabilities       56,259         37,374    
Long-term debt         136,666         20,000    
Other long-term liabilities       9,983         11,993    
                   
Stockholders' equity:          
  Preferred stock       -         -    
  Common stock       3         3    
  Additional paid-in capital       258,660         241,053    
  Treasury stock, at cost       (111,331 )       (92,184 )  
  Accumulated other comprehensive income       778         808    
  Retained earnings       56,922         69,223    
    Total stockholders' equity        205,032         218,903    
      Total liabilities and stockholders' equity   $   407,940     $   288,270    
                   

 

                     
DTS, INC.  
                     
CONSOLIDATED STATEMENTS OF OPERATIONS  
(Amounts in thousands, except per share amounts)  
                     
                     
      For the Three Months Ended   For the Twelve Months Ended  
      December 31,   December 31,  
        2015       2014       2015       2014    
      (Unaudited)  
             
Revenue   $   39,173     $   35,213     $   138,209     $   143,913    
Cost of revenue     6,848         3,002         15,077         11,095    
Gross profit     32,325         32,211         123,132         132,818    
Operating expenses:                
  Selling, general and administrative     32,959         18,557         92,276         78,570    
  Research and development     14,426         10,200         42,985         37,298    
  Change in fair value of contingent consideration     (20 )       100         (420 )       400    
    Total operating expenses     47,365         28,857         134,841         116,268    
Operating income (loss)     (15,040 )       3,354         (11,709 )       16,550    
Interest and other expense, net     (1,463 )       (281 )       (2,255 )       (413 )  
Income (loss) before income taxes     (16,503 )       3,073         (13,964 )       16,137    
Provision (benefit) for income taxes     (3,663 )       1,125         (1,663 )       (11,006 )  
Net income (loss) $   (12,840 )   $   1,948     $   (12,301 )   $   27,143    
                     
Net income (loss) per common share:                
  Basic $   (0.74 )   $   0.11     $   (0.71 )   $   1.58    
  Diluted $   (0.74 )   $   0.11     $   (0.71 )   $   1.55    
                     
Weighted average shares outstanding:                
  Basic     17,291         17,272         17,396         17,180    
  Diluted     17,291         18,062         17,396         17,561    
                     

 

             
DTS, INC.  
             
CONSOLIDATED STATEMENTS OF CASH FLOWS  
(Amounts in thousands)  
             
             
      For the Twelve Months Ended  
      December 31,  
        2015       2014    
      (Unaudited)  
Cash flows from operating activities:    
Net income (loss) $   (12,301 )   $   27,143    
Adjustments to reconcile net income (loss) to net cash provided by operating activities:        
  Depreciation and amortization      17,692         14,404    
  Stock-based compensation charges      12,266         10,492    
  Deferred income taxes      1,288         (14,740 )  
  Tax shortfalls from stock-based awards      -         (310 )  
  Excess tax benefits from stock-based awards      -         (518 )  
  Change in fair value of contingent consideration     (420 )       400    
  Amortization of debt issuance costs     888         -    
  Other      680         117    
  Changes in operating assets and liabilities, net of business acquisitions:      
    Accounts receivable      12,992         (377 )  
    Prepaid expenses and other assets      1,128         (1,799 )  
    Accounts payable, accrued expenses and other liabilities      4,026         6,600    
    Deferred revenue     (6,135 )       459    
    Income taxes receivable/payable     (8,651 )       (805 )  
    Payment of iBiquity employee incentive plan     (19,288 )       -    
    Net cash provided by operating activities      4,165         41,066    
Cash flows from investing activities:        
  Purchases of available-for-sale investments     (34,666 )       -    
  Maturities of available-for-sale investments     22,300         5,000    
  Sales of available-for-sale investments     6,502         -    
  Cash paid for business acquisitions, net     (156,563 )       (3,200 )  
  Sale of other assets     -         725    
  Purchases of property and equipment      (4,275 )       (1,579 )  
  Purchases of intangible assets     (2,675 )       (2,025 )  
  Other investing activities     (300 )       -    
    Net cash used in investing activities      (169,677 )       (1,079 )  
Cash flows from financing activities:        
  Proceeds from long-term borrowings     160,000         30,000    
  Repayment of long-term borrowings     (25,000 )       (35,000 )  
  Payment of contingent consideration     -         (500 )  
  Payment of debt issuance costs     (3,642 )       -    
  Proceeds from the issuance of common stock under stock-based compensation plans     8,987         6,717    
  Cash paid for shares withheld for taxes     (2,913 )       (817 )  
  Excess tax benefits from stock-based awards      -         518    
  Purchases of treasury stock      (19,147 )       (7,495 )  
    Net cash provided by (used in) financing activities      118,285         (6,577 )  
    Net change in cash and cash equivalents      (47,227 )       33,410    
Cash and cash equivalents, beginning of period      99,435         66,025    
Cash and cash equivalents, end of period  $   52,208     $   99,435    
             

 

                     
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 Twelve
Months Ended
 
      December 31,   December 31,  
        2015       2014       2015       2014    
Cost of revenue:                
  GAAP cost of revenue $   6,848     $   3,002     $   15,077     $   11,095    
    Amortization of intangible assets     5,099         2,296         12,245         8,793    
  Non-GAAP cost of revenue $   1,749     $   706     $   2,832     $   2,302    
                     
Selling, general and administrative:                
  GAAP selling, general and administrative $   32,959     $   18,557     $   92,276     $   78,570    
    Amortization of intangible assets     524         248         1,316         1,024    
    Stock-based compensation     2,717         1,779         9,112         7,819    
    Acquisition*, integration, realignment and legal costs     10,746         534         15,152         1,504    
  Non-GAAP selling, general and administrative $   18,972     $   15,996     $   66,696     $   68,223    
                     
Research and development:                
  GAAP research and development $   14,426     $   10,200     $   42,985     $   37,298    
    Stock-based compensation     871         651         3,154         2,673    
    Acquisition*, integration, realignment and legal costs     2,494         147         3,619         488    
  Non-GAAP research and development $   11,061     $   9,402     $   36,212     $   34,137    
                     
Operating income:                
  GAAP operating income (loss) $   (15,040 )   $   3,354     $   (11,709 )   $   16,550    
    Amortization of intangible assets     5,623         2,544         13,561         9,817    
    Stock-based compensation     3,588         2,430         12,266         10,492    
    Acquisition*, integration, realignment and legal costs     13,240         681         18,771         1,992    
    Change in fair value of contingent consideration     (20 )       100         (420 )       400    
  Non-GAAP operating income $   7,391     $   9,109     $   32,469     $   39,251    
  Non-GAAP operating income as a % of revenue   19 %     26 %     23 %     27 %  
                     
Net income:                
  GAAP net income (loss) $   (12,840 )   $   1,948     $   (12,301 )   $   27,143    
    Amortization of intangible assets     5,623         2,544         13,561         9,817    
    Stock-based compensation     3,588         2,430         12,266         10,492    
    Acquisition*, integration, realignment and legal costs     13,240         681         18,771         1,992    
    Change in fair value of contingent consideration     (20 )       100         (420 )       400    
    Adjustment for income taxes     (5,441 )       (1,523 )       (10,727 )       (22,657 )  
  Non-GAAP net income $   4,150     $   6,180     $   21,150     $   27,187    
                     
  Non-GAAP diluted income per common share $   0.23     $   0.34     $   1.17     $   1.55    
                     
  Non-GAAP weighted average diluted shares outstanding     17,877         18,062         18,094         17,561    
                     
* On October 1, 2015, DTS completed its acquisition of iBiquity Digital Corporation              
On August 14, 2014, DTS completed its acquisition of Manzanita Systems, Inc.              
                     

 

               
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@dts.com

(818) 436-1231

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Source: DTS

 

 

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