Press Release: DTS Reports Second Quarter Fiscal 2016 Financial Results
DTS Reports Second Quarter Fiscal 2016 Financial Results
DTS Raises Fiscal 2016 Revenue and Earnings Outlook and Announces First Quarterly Dividend
CALABASAS, Calif., Aug. 8, 2016
CALABASAS, Calif., Aug. 8, 2016 /PRNewswire/ — DTS, Inc. (Nasdaq: DTSI), a leader in high-definition audio solutions and audio enhancement technologies, today announced financial results for the second quarter ended June 30, 2016.
“We had a strong second quarter driven by solid performance in automotive and continued momentum across the mobile markets. We also renewed several contracts in the home category and saw additional penetration of DTS:X in the AVR market. As a result of this strong performance, we are raising the low end of our full year 2016 revenue outlook and increasing our earnings outlook to reflect our confidence in the second half of 2016,” said Jon Kirchner, chairman and CEO of DTS.
Kirchner continued, “Importantly, our business continues to generate improving operating margins and strong cash flow, and we are focused on optimizing our balance sheet and cash flow to generate value for shareholders. As a result, our Board of Directors has approved the addition of a quarterly cash dividend to our capital allocation strategy. Under this program, the initial quarterly dividend has been set at $0.02 per share. This is an important milestone and reiterates our commitment to growing the business through continued investments in our technology portfolio, and responsibly returning capital to shareholders through dividends and opportunistic share repurchases. These actions reflect our confidence in the future of DTS and our ability to create long-term value.”
Financial Comparisons Q2 2016 Q2 2015 Revenue $48.7 million $ 34.4 million Year-over-Year Growth Rate 41% GAAP Operating Margin 19% 11% GAAP Net Income $4.7 million $ 2.3 million GAAP Earnings Per Share* $0.26 $ 0.12 Non-GAAP Operating Margin 38% 27% Non-GAAP Net Income $12.1 million $ 6.2 million Non-GAAP Earnings Per Share** $0.67 $ 0.34 Supplemental Information Amount Per Q2 2016 Diluted Share** Stock-Based Compensation $3.0 million $ 0.12 Amortization of Intangibles $5.6 million $ 0.22 *Amount Per Diluted Share Net of Tax **Amount Per Diluted Share Net of Estimated Tax [a] 30% Stock Market Quotes, Business News, Financial News from http://commodity-market-news.com
DTS closed the quarter with cash and cash equivalents totaling $43.8 million.
The GAAP and non-GAAP reconciling items for the quarters ended June 30, 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.dts.com.
As a result of better-than-expected performance in the second quarter, the Company is revising its outlook for the full year 2016. The Company now expects revenue in the range of $185 to $190 million. The Company expects growth in 2016 to come from the mobile and automotive markets.
On a GAAP basis, the Company expects operating margins in the range of 10% to 15% and diluted earnings per share in the range of $0.70 to $0.80. The Company expects non-GAAP operating margins in the low-to-mid 30s and non-GAAP diluted earnings per share in the range of $2.18 to $2.28.
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.
The Company declared a cash dividend of $0.02 per common share to be paid on August 31, 2016 to shareholders of record at the close of business on August 22, 2016.
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 restructuring related costs. Over the past several years, the Company’s GAAP tax rate has varied substantially. As a result of recent international restructurings, management believes the most appropriate measure for its estimated annual effective tax rate is approximately 30% and as such, a 30% tax rate has been used in the computation of non-GAAP net income. 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 August 8, 2016
DTS will host a conference call and live webcast at 1:30 p.m. Pacific Time to discuss the second quarter ended June 30, 2016 results. A live webcast of the call will be available on the investor relations website at http://investor.dts.com and via replay beginning two hours after the completion of the call. To access the conference call, dial 1-888-713-3587 or 1-913-312-1462 (outside the U.S. and Canada). An audio replay of the call will also be available to investors beginning at 4:30 p.m. Pacific Time, August 8, 2016 through 4:30 p.m. Pacific Time, August 17, 2016. You can register for the replay by clicking here and entering 3443727.
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.dts.com.
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 technologies, 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.
Press Release: DTS Reports Second Quarter Fiscal -2-
DTS, INC. CONSOLIDATED BALANCE SHEETS (Amounts in thousands) As of As of June 30, December 31, 2016 2015 (Unaudited) ASSETS Current assets: Cash and cash equivalents $ 43,762 $ 52,208 Short-term investments - 9,657 Accounts receivable, net 20,447 12,454 Prepaid expenses and other current assets 6,342 5,855 Income taxes receivable 2,084 4,130 Total current assets 72,635 84,304 Property and equipment, net 27,971 29,022 Intangible assets, net 147,920 157,936 Goodwill 87,625 108,726 Deferred income taxes 40,843 24,018 Other long-term assets 7,288 3,934 Total assets $ 384,282 $ 407,940 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 4,420 $ 5,979 Accrued expenses 12,503 22,960 Deferred revenue 3,204 5,711 Income taxes payable 104 123 Current portion of long-term debt, net 31,486 21,486 Total current liabilities 51,717 56,259 Long-term debt, net 105,923 136,666 Other long-term liabilities 9,990 9,983 Stockholders' equity: Preferred stock - - Common stock 3 3 Additional paid-in capital 265,054 258,660 Treasury stock, at cost (111,331) (111,331) Accumulated other comprehensive income 782 778 Retained earnings 62,144 56,922 Total stockholders' equity 216,652 205,032 Total liabilities and stockholders' equity $ 384,282 $ 407,940 DTS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (Amounts in thousands, except per share amounts) For the Three Months For the Six Months Ended Ended June 30, June 30, 2016 2015 2016 2015 (Unaudited) Revenue $ 48,655 $ 34,426 $ 93,850 $ 68,363 Cost of revenue 6,211 2,743 12,302 5,527 Gross profit 42,444 31,683 81,548 62,836 Operating expenses: Selling, general and administrative 20,771 18,186 45,280 37,969 Research and development 12,612 9,611 25,299 19,239 Total operating expenses 33,383 27,797 70,579 57,208 Operating income 9,061 3,886 10,969 5,628 Interest and other expense, net (1,240) (458) (2,399) (619) Income before income taxes 7,821 3,428 8,570 5,009 Provision for income taxes 3,136 1,141 3,348 1,668 Net income $ 4,685 $ 2,287 $ 5,222 $ 3,341 Net income per common share: Basic $ 0.27 $ 0.13 $ 0.30 $ 0.19 Diluted $ 0.26 $ 0.12 $ 0.29 $ 0.18 Weighted average shares outstanding: Basic 17,568 17,580 17,489 17,521 Diluted 17,965 18,415 17,867 18,326 DTS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Amounts in thousands) For the Six Months Ended June 30, 2016 2015 (Unaudited) Cash flows from operating activities: Net income $ 5,222 $ 3,341 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 13,396 7,181 Stock-based compensation charges 6,740 5,640 Deferred income taxes (2,392) (2,029) Excess tax benefits from stock-based awards (71) (1,696) Amortization of debt issuance costs 306 - Other (104) 310 Changes in operating assets and liabilities: Accounts receivable (7,816) (4,419) Prepaid expenses and other assets 126 2,339 Accounts payable, accrued expenses and other liabilities (10,806) (7,369) Deferred revenue (2,507) (1,068) Income taxes receivable/payable 4,226 1,948 Net cash provided by operating activities 6,320 4,178 Cash flows from investing activities: Purchases of available-for-sale investments (13,635) (32,344) Maturities of available-for-sale investments 11,125 - Sales of available-for-sale investments 12,125 - Purchases of property and equipment (1,453) (1,544) Purchases of intangible assets (1,378) (1,660) Other investing activities - (300) Net cash provided by (used in) investing activities 6,784 (35,848) Cash flows from financing activities: Repayments of long-term borrowings (20,938) - 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 2,375 7,664 Cash paid for shares withheld for taxes (2,208) (2,774) Excess tax benefits from stock-based awards 71 1,696 Purchases of treasury stock - (19,147) Net cash used in financing activities (21,550) (12,561) Net change in cash and cash equivalents (8,446) (44,231) Cash and cash equivalents, beginning of period 52,208 99,435 Cash and cash equivalents, end of period $ 43,762 $ 55,204 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 Six Months Ended June 30, June 30, 2016 2015 2016 2015 Cost of revenue: GAAP cost of revenue $ 6,211 $ 2,743 $ 12,302 $ 5,527 Amortization of intangible assets 5,038 2,386 9,974 4,754 Non-GAAP cost of revenue $ 1,173 $ 357 $ 2,328 $ 773 Selling, general and administrative: GAAP selling, general and administrative $ 20,771 $ 18,186 $ 45,280 $ 37,969 Amortization of intangible assets 534 261 1,077 526 Stock-based compensation 2,073 1,990 4,874 4,127 Acquisition, integration and restructuring related costs* 726 - 1,006 - Non-GAAP selling, general and administrative $ 17,438 $ 15,935 $ 38,323 $ 33,316 Research and development: GAAP research and development $ 12,612 $ 9,611 $ 25,299 $ 19,239 Stock-based compensation 881 752 1,866 1,513 Acquisition, integration and restructuring related costs* 147 - 163 - Non-GAAP research and development $ 11,584 $ 8,859 $ 23,270 $ 17,726 Operating income: GAAP operating income $ 9,061 $ 3,886 $ 10,969 $ 5,628 Amortization of intangible assets 5,572 2,647 11,051 5,280 Stock-based compensation 2,954 2,742 6,740 5,640 Acquisition, integration and restructuring related costs* 873 - 1,169 - Non-GAAP operating income $ 18,460 $ 9,275 $ 29,929 $ 16,548 GAAP operating income as a % of revenue 19% 11% 12% 8% Non-GAAP operating income as a % of revenue 38% 27% 32% 24% Net income: GAAP net income $ 4,685 $ 2,287 $ 5,222 $ 3,341 Amortization of intangible assets 5,572 2,647 11,051 5,280 Stock-based compensation 2,954 2,742 6,740 5,640 Acquisition, integration and restructuring related costs* 873 - 1,169 - Adjustment for income taxes (2,030) (1,504) (4,911) (3,111) Non-GAAP net income $ 12,054 $ 6,172 $ 19,271 $ 11,150 GAAP diluted income per common share $ 0.26 $ 0.12 $ 0.29 $ 0.18 Non-GAAP diluted income per common share $ 0.67 $ 0.34 $ 1.08 $ 0.61 Weighted average diluted shares outstanding 17,965 18,415 17,867 18,326
Press Release: DTS Reports Second Quarter Fiscal -3-
* 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 $0.80 Amortization of intangible assets 1.25 1.33 Stock-based compensation 0.73 0.78 Adjustment for income taxes (0.50) (0.63) Non-GAAP net income per diluted share $2.18 $2.28 Weighted average shares used to compute non-GAAP net income per diluted share (millions) 18.0 18.0
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SOURCE DTS, Inc.
/Web site: http://www.dts.com