DTS REPORTS SECOND QUARTER 2013 FINANCIAL RESULTS DTS REPORTS SECOND QUARTER 2013 FINANCIAL RESULTS
Network-Connected Business Up 100%, Driving Solid Year-Over-Year Growth
CALABASAS, Calif. (August 15, 2013) - DTS, Inc. (Nasdaq: DTSI) today announced financial results for the second quarter ended June 30, 2013.
DTS delivered attractive revenue growth in the second quarter in line with our expectations. The growth was driven by strong performance in our network-connected business. Our strategy remains squarely focused on the large network-connected opportunity, and as expected, this segment of our business contributed nearly half of total revenue during the quarter, said Jon Kirchner, chairman and CEO of DTS, Inc. As we enter the important autumn and holiday season, we are closely monitoring CE market headwinds and the timing of certain customer network-connected product rollouts. Importantly, we are very encouraged by the growing interest in our new Headphone:X and Play-Fi technologies and expect those products to see increasing design wins as we get into 2014. With growing content support and increasing device penetration, we are pleased with our strategic progress and remain focused on execution in the coming quarters.
Quarterly Financial Comparison
Q2 2013
Q2 2012
Revenue
$27.2 million
$21.8 million
Year-over-year growth rate
25%
6%
GAAP Net income/(loss)
$(2.0) million
$(755,000)
GAAP Earnings/(loss) per share*
$(0.11)
$(0.05)
Non-GAAP Operating margin
13%
26%
Non-GAAP Net income
$2.1 million
$3.5 million
Non-GAAP Earnings per share*
$0.11
$0.21
*Earnings/loss per diluted share net of tax
Other GAAP Results
Q2 2013
Amount per diluted share*
Stock-based compensation
$2.9 million
$0.10
Amortization of intangibles
$2.5 million
$0.08
Acquisition and integration-related costs
$47,000
$0.00
*Amount per diluted share net of tax
The Company generated $2.4 million in cash flow from operations during the second quarter of 2013, compared to $3.8 million during the second quarter of 2012, and closed the quarter with cash and investments totaling $76.7 million.
The Company has finalized the accounting related to a $2.9 million royalty recovery received by DTS under an SRS license. This particular royalty recovery, which resulted from a recent audit by DTS, was recorded as an adjustment to goodwill and receivables as of the acquisition date.
The GAAP and non-GAAP reconciling items for the second quarters of 2013 and 2012 can be found in the Non-GAAP Financial Metrics schedule attached to this press release and on the investor relations portion of the Companys website at www.DTS.com.
Business Outlook
Management expects continued long-term growth to be driven primarily by network-connected markets. However, a number of near-term factors have led the Company to adjust its 2013 fiscal outlook. The revised expectations are primarily due to:
Uncertainties around the timing of certain mobile and Play-Fi product shipments, which are now expected to push into 2014;
A modestly weakening near-term CE business environment, which has impacted the Companys expectations for home theater in a box systems, Blu-ray players and automotive unit volumes; and
Lower expected royalty recoveries.
GAAP EPS expectations are unchanged, as the Company expects to offset any revenue softness through active cost management. The Company has adjusted its non-GAAP EPS outlook to reflect reduced expectations for non-cash charges related to stock-based compensation and amortization expense.
The Company now expects 2013 revenue in the range of $130 to $136 million, non-GAAP operating margin in the low- to mid-20s and non-GAAP EPS in the range of $0.98 to $1.12 per diluted share based on a normalized 40% effective tax rate. Stock-based compensation expense is now expected to be in the range of $0.38 to $0.41 per diluted share net of tax and amortization of intangibles is now expected to be in the range of $0.32 to $0.35 net of tax in 2013. On a GAAP basis, the Company continues to expect an operating margin of approximately 3% to 6% and expects EPS in the range of $(0.05) to $0.00 per diluted share.
The 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 Companys 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 Companys Consolidated Statements of Operations prepared under generally accepted accounting principles (GAAP). These non-GAAP financial measures adjust the Companys 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. In addition, the Companys GAAP tax rate is currently subject to substantial volatility caused by three-year cumulative pre-tax losses in the US, which now require the Company to record a valuation allowance against all US Federal deferred tax benefits. Management believes that the Companys inability to utilize its US deferred tax benefits is temporary, and as a result, the appropriate measure for its effective tax rate, until such time as the valuation allowance issue is resolved, is to impute a normalized 40% effective tax rate on the pretax earnings of the Company. 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
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DTS REPORTS SECOND QUARTER 2013 FINANCIAL RESULTS DTS REPORTS SECOND QUARTER 2013 FINANCIAL RESULTS 
