DTS Reports Third Quarter 2009 Results

November 9, 2009 4:15 PM EST

CALABASAS, Calif.--(BUSINESS WIRE)-- DTS, Inc. (Nasdaq: DTSI) today announced its financial results for the third quarter and nine months ended September 30, 2009.

For the third quarter of 2009, DTS reported revenue of $15.1 million and net income from continuing operations of $2.0 million, or $0.11 per diluted share. This compares to revenue of $13.9 million and net income from continuing operations of $2.0 million, or $0.11 per diluted share, reported in the third quarter of 2008.

Results of the third quarter of 2009 reflect approximately $300,000 in royalty recovery payments. Royalty recoveries in the third quarter of 2008 totaled $1.6 million. Results also included $1.3 million, or $0.04 per diluted share net of tax, in stock-based compensation expense and $225,000, or $0.01 per diluted share net of tax, in amortization of intangible assets associated with the Neural Audio business acquisition.

"Our quarter reflected increasing production of Blu-ray stand alone players, which helped drive Blu-ray revenue to 24% of total for the period," commented Jon Kirchner, president and CEO of DTS, Inc. "With the pace of adoption accelerating, the outlook for the Blu-ray format is encouraging, with wider availability of players and increasing retail promotion driving player prices below $100. We are also seeing retailers beginning to offer attractive flat panel TV/player bundles and lower content price points, both of which are expected to drive further adoption of the format.

"We strongly believe that the Blu-ray market has reached a mass market acceleration point and we expect to see that impact our results going forward. Our Q4 results will include licensee production activity through September, and thus will not fully reflect all of this recent momentum. We are therefore narrowing our outlook for fiscal year 2009 revenue to be in the range of $76 million to $77 million and GAAP EPS to the range of $0.57 to $0.59. Looking into 2010, we expect to see Blu-ray momentum build off of a solid holiday season and an environment of improving consumer electronics spending in general, which we believe will favorably impact revenue growth in our business," concluded Kirchner.

For the first nine months of 2009, DTS reported revenue of $56.5 million, and net income from continuing operations of $5.8 million, or $0.33 per diluted share. This compares to revenue of $42.0 million and net income from continuing operations of $6.6 million, or $0.36 per diluted share, reported in the first nine months of 2008. Results for the first nine months of 2009 included approximately $0.9 million, or $0.05 per diluted share net of tax, in net income arising from the settlement of the Zoran litigation matters.

DTS closed the third quarter of 2009 with cash and investments of $80.5 million, up $6.2 million year to date.

Conference Call Information

DTS will broadcast a conference call today, Monday, November 9, 2009, starting at 1:30 p.m. Pacific Time. To access the conference call, dial 877-941-4774 or 480-629-9760 (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, November 9 through November 16, 2009, by dialing 800-406-7325 or 303-590-3030 (outside the U.S. and Canada) and entering pass code 4172616#.

About DTS

DTS, Inc. (NASDAQ: DTSI) is a digital technology company dedicated to delivering the ultimate entertainment experience. DTS decoders are in virtually every major brand of multi-channel surround processors, and there are hundreds of millions of DTS-licensed consumer electronics products available worldwide. A pioneer in multi-channel audio, DTS technology is in home theatre, car audio, PC and game console products, as well as DVD-Video, Blu-ray Disc and surround music software. Founded in 1993, DTS' corporate headquarters are located in Calabasas, California with its licensing operations headquartered in Limerick, Ireland. DTS also has offices in Northern California, Washington, Canada, China, France, Hong Kong, Japan, South Korea, Taiwan and the United Kingdom. For further information, please visit www.dts.com. DTS is a registered trademark of DTS, Inc. (C) 2009 DTS Inc. All rights reserved.

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," "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 related to integrating acquisitions, greater than expected costs, the departure of key employees, the current financial crisis and global economic downturn, a loss of one or more of our key customers or licensees, changes in domestic and international market and political conditions, and other risks and uncertainties more fully described in DTS' public filings with the Securities and Exchange Commission, available at www.sec.gov. 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, INC.

CONSOLIDATED BALANCE SHEETS

(Amounts in thousands, except per share amounts)

                                                     As of         As of

                                                     December 31,  September 30,

                                                       2008          2009

                                                     (Unaudited)

ASSETS

Current assets:

Cash and cash equivalents                            $ 25,658      $ 38,528

Short-term investments                                 42,365        30,733

Accounts receivable, net of allowance for doubtful
accounts of $64 and $229 at December 31, 2008 and      8,835         6,966
September 30, 2009, respectively

Deferred income taxes                                  4,644         4,639

Prepaid expenses and other current assets              1,410         1,380

Income taxes receivable, net                           2,467         2,747

Total current assets                                   85,379        84,993

Property and equipment, net                            23,778        33,648

Intangible assets, net                                 7,557         6,681

Goodwill                                               972           754

Deferred income taxes                                  13,145        13,876

Long-term investments                                  6,347         11,282

Other assets                                           500           562

Total assets                                         $ 137,678     $ 151,796

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable                                     $ 1,448       $ 4,637

Accrued expenses and other current liabilities         7,158         5,522

Total current liabilities                              8,606         10,159

Other long-term liabilities                            3,783         5,576

Stockholders' equity:

Preferred stock - $0.0001 par value, 5,000 shares
authorized at

December 31, 2008 and September 30, 2009; no shares

issued and outstanding                                 -             -

Common stock - $0.0001 par value, 70,000 shares
authorized at

December 31, 2008 and September 30, 2009; 19,290
and

19,485 shares issued at December 31, 2008 and
September 30, 2009,

respectively; 17,290 and 17,485 outstanding at
December 31, 2008

and September 30, 2009, respectively                   2             2

Additional paid-in capital                             151,894       156,919

Treasury stock, at cost - 2,000 at December 31,        (41,608 )     (41,608 )
2008 and September 30, 2009

Accumulated other comprehensive income                 355           340

Retained earnings                                      14,646        20,408

Total stockholders' equity                             125,289       136,061

Total liabilities and stockholders' equity           $ 137,678     $ 151,796

DTS, INC.

CONSOLIDATED STATEMENTS OF INCOME

(Amounts in thousands, except per share amounts)

                          For the Three Months Ended  For the Nine Months Ended

                          September 30,               September 30,

                            2008      2009              2008      2009

                          (Unaudited)

Revenue                   $ 13,943  $ 15,078          $ 41,982  $ 56,505

Cost of revenue             322       448               930       1,342

Gross profit                13,621    14,630            41,052    55,163

Operating expenses:

Selling, general and        8,895     9,589             26,418    38,444
administrative

Research and development    1,725     2,072             5,364     6,635

Total operating expenses    10,620    11,661            31,782    45,079

Income from operations      3,001     2,969             9,270     10,084

Interest and other          534       251               1,801     1,113
income, net

Income from continuing
operations before income    3,535     3,220             11,071    11,197
taxes

Provision for income        1,526     1,251             4,437     5,412
taxes

Income from continuing      2,009     1,969             6,634     5,785
operations

Income (loss) from
discontinued operations,    17        (24    )          1,722     (23    )
net of tax

Net income                $ 2,026   $ 1,945           $ 8,356   $ 5,762

Earnings per share -
basic:

Income from continuing    $ 0.11    $ 0.11            $ 0.37    $ 0.34
operations

Discontinued operations,    -         -                 0.10      -
net of tax

Net income                $ 0.11    $ 0.11            $ 0.47    $ 0.34

Earnings per share -
diluted:

Income from continuing    $ 0.11    $ 0.11            $ 0.36    $ 0.33
operations

Discontinued operations,    -         -                 0.10      -
net of tax

Net income                $ 0.11    $ 0.11            $ 0.46    $ 0.33

Weighted average shares
used to compute net
income per common share:

Basic                       17,963    17,181            17,735    17,124

Diluted                     18,509    17,786            18,310    17,599

    Source: DTS, Inc.

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