DTS 2Q EPS 26c >DTSI

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

PR Newswire

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.

Business Outlook

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.

Cash Dividend

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.

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 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-I


 
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