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41% Increase in Network-Connected Revenue Drives Year-Over-Year Growth
in Slowing Consumer Electronics Environment
Acquisition-Related Accounting and Taxes Materially Impact 2012 Earnings
Revenue for the third quarter was
Non-GAAP operating income in the third quarter of 2012 was
GAAP net loss was
The GAAP and non-GAAP reconciling items for the third quarters of 2012 and 2011 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.
The Company generated
"Consistent with our strategy, DTS delivered attractive revenue growth in the network-connected markets despite what has been a challenging macroeconomic environment," said
Business Outlook
DTS management expects continued long-term growth in the network-connected space, but in light of a softening near-term business environment, the Company has reduced its fiscal 2012 revenue expectations to a range of
Additionally, DTS management expects to resolve certain issues involving the Company's Irish structure with the
For 2013, DTS now expects revenue of
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 to exclude charges and the related income tax effect for stock-based compensation, the amortization of intangible assets, and certain acquisition and integration-related charges. 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 regarding as a replacement for (or superior to) corresponding, similarly captioned, GAAP measures.
Conference Call Information for
DTS will broadcast a conference call today,
About
The
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 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 associated with the
Company's ability to successfully integrate
DTS-I
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| CONSOLIDATED BALANCE SHEETS | ||
| (Amounts in thousands, except per share amounts) | ||
|
As of September 30, 2012 |
As of December 31, 2011 |
|
| (Unaudited) | ||
| ASSETS | ||
| Current assets: | ||
| Cash and cash equivalents | $ 56,823 | $ 46,944 |
| Short-term investments | 23,840 | 38,697 |
|
Accounts receivable, net of allowance for doubtful accounts of |
4,592 | 5,322 |
| Deferred income taxes | 1,263 | 1,296 |
| Prepaid expenses and other current assets | 2,987 | 1,823 |
| Income taxes receivable, net | 2,442 | 2,591 |
| Total current assets | 91,947 | 96,673 |
| Property and equipment, net | 33,193 | 32,800 |
| Intangible assets, net | 79,277 | 6,549 |
| Goodwill | 52,431 | 1,257 |
| Deferred income taxes | 14,830 | 13,574 |
| Long-term investments | -- | 6,922 |
| Other assets | 2,432 | 1,695 |
| Total assets | $ 274,110 | $ 159,470 |
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||
| Current liabilities: | ||
| Accounts payable | $ 2,184 | $ 1,056 |
| Accrued expenses | 13,759 | 3,605 |
| Deferred revenue | 4,017 | 1,121 |
| Total current liabilities | 19,960 | 5,782 |
| Long-term debt | 30,000 | — |
| Deferred income taxes | 24,760 | — |
| Other long-term liabilities | 21,744 | 7,886 |
| Stockholders' equity: | ||
|
Preferred stock -- |
— | — |
|
Common stock -- |
3 | 3 |
| Additional paid-in capital | 201,730 | 192,819 |
|
Treasury stock, at cost - 1,938 and 4,000 shares at |
(51,194) | (107,222) |
| Accumulated other comprehensive income | 680 | 644 |
| Retained earnings | 26,427 | 59,558 |
| Total stockholders' equity | 177,646 | 145,802 |
| Total liabilities and stockholders' equity | $ 274,110 | $ 159,470 |
|
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| CONSOLIDATED STATEMENTS OF OPERATIONS | ||||
| (Amounts in thousands, except per share amounts) | ||||
|
For the Three Months Ended |
For the Nine Months Ended |
|||
| 2012 | 2011 | 2012 | 2011 | |
| (Unaudited) | ||||
| Revenue | $ 22,235 | $ 20,546 | $ 70,874 | $ 67,910 |
| Cost of revenue | 2,105 | 217 | 2,493 | 643 |
| Gross profit | 20,130 | 20,329 | 68,381 | 67,267 |
| Operating expenses: | ||||
| Selling, general and administrative | 25,322 | 12,784 | 57,311 | 39,608 |
| Research and development | 7,625 | 3,364 | 16,915 | 9,759 |
| Total operating expenses | 32,947 | 16,148 | 74,226 | 49,367 |
| Operating income (loss) | (12,817) | 4,181 | (5,845) | 17,900 |
| Interest and other income (expense), net | 19 | 348 | (67) | 322 |
| Income (loss) before provision for income taxes | (12,798) | 4,529 | (5,912) | 18,222 |
| Provision for income taxes | 6,288 | 1,627 | 9,884 | 7,030 |
| Net income (loss) | $ (19,086) | $ 2,902 | $ (15,796) | $ 11,192 |
| Net income (loss) per common share: | ||||
| Basic | $ (1.04) | $ 0.17 | $ (0.92) | $ 0.65 |
| Diluted | $ (1.04) | $ 0.17 | $ (0.92) | $ 0.63 |
| Weighted average shares outstanding: | ||||
| Basic | 18,329 | 16,910 | 17,104 | 17,131 |
| Diluted | 18,329 | 17,434 | 17,104 | 17,768 |
|
|
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| CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||
| (Amounts in thousands) | ||||
|
For the Three Months Ended September 30, |
For the Nine Months Ended September 30, |
|||
| 2012 | 2011 | 2012 | 2011 | |
| (Unaudited) | ||||
| Cash flows from operating activities: | ||||
| Net income (loss) | $ (19,086) | $ 2,902 | $ (15,796) | $ 11,192 |
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||||
| Depreciation and amortization | 3,578 | 1,365 | 6,292 | 3,867 |
| Stock-based compensation charges | 2,842 | 2,369 | 8,358 | 6,756 |
| Deferred income taxes | 7,158 | 620 | 3,185 | 470 |
| Tax benefits (shortfalls) from stock-based awards | (2,967) | (139) | 108 | 76 |
| Excess tax shortfalls (benefits) from stock-based awards | 2,966 | 124 | (312) | (30) |
| Other | 241 | 166 | 381 | 362 |
| Changes in operating assets and liabilities, net of business acquisitions: | ||||
| Accounts receivable | 5,292 | (453) | 6,366 | 2,633 |
| Prepaid expenses and other assets | (204) | (332) | (325) | (809) |
| Accounts payable, accrued expenses and other liabilities | 4,863 | (1,689) | 6,301 | (4,622) |
| Deferred revenue | 1,918 | (1,064) | 2,390 | (4,643) |
| Income taxes receivable | 57 | 147 | 349 | (715) |
| Net cash provided by operating activities | 6,658 | 4,016 | 17,297 | 14,537 |
| Cash flows from investing activities: | ||||
| Purchases of held-to-maturity investments | -- | (2,672) | (3,450) | (36,583) |
| Purchases of available-for-sale investments | -- | (771) | (42,074) | (12,888) |
| Maturities of held-to-maturity investments | 2,585 | 13,026 | 20,120 | 55,686 |
| Maturities of available-for-sale investments | 3,147 | -- | 22,092 | -- |
| Sales of held-to-maturity investments | 9,109 | -- | 9,109 | -- |
| Sales of available-for-sale investments | 24,760 | -- | 24,760 | -- |
| Cash paid for business acquisitions, net | (59,616) | -- | (59,616) | -- |
| Purchases of property and equipment | (1,370) | (909) | (2,813) | (2,443) |
| Purchases of intangible assets | (242) | (140) | (422) | (413) |
| Net cash provided by (used in) investing activities | (21,627) | 8,534 | (32,294) | 3,359 |
| Cash flows from financing activities: | ||||
| Proceeds from the issuance of common stock under stock-based compensation plans | 36 | 595 | 1,411 | 3,596 |
| Repurchases and retirement of common stock for restricted stock tax withholdings | (11) | (31) | (966) | (1,511) |
| Excess tax benefits (shortfalls) from stock-based awards | (2,966) | (124) | 312 | 30 |
| Proceeds from long-term borrowings | 30,000 | -- | 30,000 | -- |
| Purchases of treasury stock | (3,846) | (14,387) | (5,881) | (26,810) |
| Net cash provided by (used in) financing activities | 23,213 | (13,947) | 24,876 | (24,695) |
| Net change in cash and cash equivalents | 8,244 | (1,397) | 9,879 | (6,799) |
| Cash and cash equivalents, beginning of period | 48,579 | 36,342 | 46,944 | 41,744 |
| Cash and cash equivalents, end of period | $ 56,823 | $ 34,945 | $ 56,823 | $ 34,945 |
| 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 September 30, |
For the Nine Months Ended September 30, |
|||
| 2012 | 2011 | 2012 | 2011 | |
| Cost of revenue: | ||||
| GAAP cost of revenue | $ 2,105 | $ 217 | $ 2,493 | $ 643 |
| Amortization of intangible assets | 2,037 | 184 | 2,400 | 549 |
| Stock-based compensation | -- | 3 | -- | 8 |
| Non-GAAP cost of revenue | $ 68 | $ 30 | $ 93 | $ 86 |
| Selling, general and administrative: | ||||
| GAAP selling, general and administrative | $ 25,322 | $ 12,784 | $ 57,311 | $ 39,608 |
| Amortization of intangible assets | 210 | 117 | 297 | 322 |
| Stock-based compensation | 2,258 | 1,950 | 6,682 | 5,546 |
| Acquisition and integration related costs* | 7,286 | -- | 10,057 | -- |
| Non-GAAP selling, general and administrative | $ 15,568 | $ 10,717 | $ 40,275 | $ 33,740 |
| Research and development: | ||||
| GAAP research and development | $ 7,625 | $ 3,364 | $ 16,915 | $ 9,759 |
| Amortization of intangible assets | -- | 44 | 90 | 134 |
| Stock-based compensation | 584 | 416 | 1,676 | 1,202 |
| Acquisition and integration related costs* | 882 | -- | 894 | -- |
| Non-GAAP research and development | $ 6,159 | $ 2,904 | $ 14,255 | $ 8,423 |
| Operating income (loss): | ||||
| GAAP operating income (loss) | $ (12,817) | $ 4,181 | $ (5,845) | $ 17,900 |
| Amortization of intangible assets | 2,247 | 345 | 2,787 | 1,005 |
| Stock-based compensation | 2,842 | 2,369 | 8,358 | 6,756 |
| Acquisition and integration related costs* | 8,168 | -- | 10,951 | -- |
| Non-GAAP operating income | $ 440 | $ 6,895 | $ 16,251 | $ 25,661 |
| Non-GAAP operating income as a % of revenue | 2% | 34% | 23% | 38% |
| Net income (loss): | ||||
| GAAP net income (loss) | $ (19,086) | $ 2,902 | $ (15,796) | $ 11,192 |
| Amortization of intangible assets | 2,247 | 345 | 2,787 | 1,005 |
| Stock-based compensation | 2,842 | 2,369 | 8,358 | 6,756 |
| Acquisition and integration related costs* | 8,168 | -- | 10,951 | -- |
| Tax impact of the above items | (5,303) | (1,086) | (7,695) | (3,104) |
| Non-GAAP net income (loss) | $ (11,132) | $ 4,530 | $ (1,395) | $ 15,849 |
| Non-GAAP diluted income (loss) per common share | $ (0.61) | $ 0.26 | $ (0.08) | $ 0.89 |
| Weighted average shares outstanding: | 18,329 | 17,434 | 17,104 | 17,768 |
|
* On |
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| Non-GAAP Financial Targets | ||
| The following tables show the Company's fiscal year 2012 GAAP guidance reconciled to non-GAAP financial targets. | ||
| Fiscal Year 2012 | ||
| Low | High | |
| Operating income (loss) as a % of revenue: | ||
| GAAP operating loss as a % of revenue | (10)% | (8)% |
| Amortization of intangible assets | 6 | 6 |
| Stock-based compensation | 11 | 11 |
| Acquisition and integration related costs* | 12 | 12 |
| Non-GAAP operating income as a % of revenue | 19% | 21% |
| Net income (loss) per diluted share: | ||
| GAAP net loss per diluted share | $ (1.00) | $ (0.90) |
| Amortization of intangible assets | 0.32 | 0.33 |
| Stock-based compensation | 0.64 | 0.66 |
| Acquisition and integration related costs* | 0.66 | 0.71 |
| Tax impact of the above items | (0.57) | (0.60) |
| Non-GAAP net income per diluted share | $ 0.05 | $ 0.20 |
| Weighted average shares used to compute Non-GAAP net income per diluted share (millions) | 17.5 | 17.5 |
|
* On |
||
| The following table shows the Company's fiscal year 2013 GAAP guidance reconciled to Non-GAAP financial targets. | ||
| Fiscal Year 2013 | ||
| Low | High | |
| Operating income as a % of revenue: | ||
| GAAP operating income as a % of revenue | 4% | 9% |
| Amortization of intangible assets | 8 | 8 |
| Stock-based compensation | 9 | 9 |
| Non-GAAP operating income as a % of revenue | 21% | 26% |
CONTACT: Media & Investor Contacts
Sard Verbinnen & Co
John Christiansen /Jenny Gore
jchristiansen@sardverb.com/jgore@sardverb.com
(415) 618-8750
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