EXHIBIT 99.1
DTS Reports Third Quarter 2015 Financial Results
CALABASAS, Calif., Nov. 9, 2015 (GLOBE NEWSWIRE) -- DTS, Inc. (Nasdaq:DTSI), a leader in high-definition audio solutions and audio enhancement technologies, today announced financial results for the third quarter ended September 30, 2015.
"Q3 was a challenging quarter, impacted by softening market conditions and slower than expected releases of certain partner products. Despite these short term headwinds, we are making solid progress in strengthening multiple DTS ecosystems across mobile, wireless audio, cinema and auto," said Jon Kirchner, chairman and CEO of DTS, Inc. "While we are disappointed with our financial performance, we are taking steps to strategically build a larger and stronger licensing platform. Significantly, we completed the acquisition of iBiquity, which will contribute meaningful growth in revenues, profits and cash flow in 2016 and beyond."
| Financial Comparison |
| | Q3 2015 | Q3 2014 |
| Revenue | $30.7 million | $35.7 million |
| Year-to-Year Growth Rate | (14%)* | |
| |
| GAAP Net Income (Loss) | $(2.8) million | $3.9 million |
| GAAP Earnings (Loss) Per Share** | $(0.16) | $0.22 |
| |
| Non-GAAP Operating Margin | 26.9% | 27.4% |
| Non-GAAP Net Income | $5.7 million | $6.7 million |
| Non-GAAP Earnings Per Share** | $0.32 | $0.39 |
| *Excluding royalties from compliance activities, revenue in Q3 2015 was $29.6 million, a decrease of 9% compared to $32.5 million in Q3 2014 |
| **Earnings per diluted share net of tax |
| |
| Other GAAP Results |
| | Q3 2015 | Amount Per Diluted Share* |
| Stock-Based Compensation | $3.0 million | $0.12 |
| Amortization of Intangibles | $2.7 million | $0.10 |
| *Amount per diluted share net of 30% tax rate |
DTS closed the quarter with cash and investments totaling $95.6 million dollars.
The GAAP and non-GAAP reconciling items for the quarters ended September 30, 2015 and 2014 can be found in the "Non-GAAP Financial Metrics" schedule attached to this press release and on the investor relations portion of the Company's website at www.dts.com.
Business Outlook
With the addition of iBiquity, the Company's preliminary 2016 outlook for revenue is in the range of $180 million to $190 million, with non-GAAP operating margin in the low-to-mid 30s, and non-GAAP diluted EPS in the range of $2.15 to $2.30. This outlook reflects the Company's ability to drive meaningful cost efficiencies, resulting in EBITDA north of $60 million. On a GAAP basis, preliminary estimates are for 2016 operating margins in the range of 10% to 15%, and diluted EPS of $0.75 to $0.90.
For 2015, the Company is revising its full year revenue outlook to the range of $130 million to $135 million. The Company now expects non-GAAP diluted EPS in the range of $1.00 to $1.10. The Company also expects non-GAAP operating margins in the low 20s. On a GAAP basis, the Company expects a number of acquisition, integration and restructuring related charges which will impact near- term profitability, some of which are currently under evaluation. Excluding the portion of such charges under evaluation, the Company currently expects operating margins in the range of (6)% to (2)% and loss per share in the range of $0.25 to $0.20.
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.
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, acquisition and integration related expenses, and realignment costs. Over the past several years, the Company's GAAP tax rate has varied substantially. As a result of the completion of an international restructuring in 2014, management believes the most appropriate measure for its estimated annual effective tax rate is approximately 30%. 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 November 9, 2015
DTS will host a conference call and live webcast at 1:30 p.m. Pacific Time to discuss the third quarter ended September 30, 2015 results. To access the conference call, dial 1-888-523-1225 or 1-719-457-2628 (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, 2015 through 11:59 p.m. Pacific Time, November 16, 2015, by dialing 1-888-203-1112 or 1-719-457-0820 (outside the U.S. and Canada) and entering pass code 1150454.
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 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' network-connected 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 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 2015; any statements regarding anticipated growth in the network-connected markets and in the Blu-ray, automotive and home AV 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, the Company's ability to penetrate the on-line and mobile content delivery market and adapt DTS' technologies for that market, 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, 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 key customers or licensees, changes in domestic and international market and political conditions, unanticipated changes in 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.
DTS-I
| DTS, INC. |
| | | |
| CONSOLIDATED BALANCE SHEETS |
| (Amounts in thousands) |
| | | |
| | As of | As of |
| | September 30, | December 31, |
| | 2015 | 2014 |
| | (Unaudited) |
| ASSETS | | |
| Current assets: | | |
| Cash and cash equivalents | $ 72,297 | $ 99,435 |
| Short-term investments | 23,264 | -- |
| Accounts receivable, net | 12,851 | 12,364 |
| Deferred income taxes | 12,767 | 12,095 |
| Prepaid expenses and other current assets | 4,410 | 5,892 |
| Income taxes receivable | 2,028 | 3,925 |
| Total current assets | 127,617 | 133,711 |
| Property and equipment, net | 27,178 | 27,089 |
| Intangible assets, net | 41,899 | 48,543 |
| Goodwill | 50,356 | 50,356 |
| Deferred income taxes | 29,822 | 26,176 |
| Other long-term assets | 3,419 | 2,395 |
| Total assets | $ 280,291 | $ 288,270 |
| | | |
| LIABILITIES AND STOCKHOLDERS' EQUITY | | |
| Current liabilities: | | |
| Accounts payable | $ 5,848 | $ 4,492 |
| Accrued expenses | 13,633 | 16,761 |
| Deferred revenue | 7,996 | 10,827 |
| Income taxes payable | 1,670 | 294 |
| Current portion of long-term debt | 8,750 | 5,000 |
| Total current liabilities | 37,897 | 37,374 |
| Long-term debt | 16,250 | 20,000 |
| Other long-term liabilities | 11,345 | 11,993 |
| | | |
| Stockholders' equity: | | |
| Preferred stock | -- | -- |
| Common stock | 3 | 3 |
| Additional paid-in capital | 255,554 | 241,053 |
| Treasury stock, at cost | (111,331) | (92,184) |
| Accumulated other comprehensive income | 811 | 808 |
| Retained earnings | 69,762 | 69,223 |
| Total stockholders' equity | 214,799 | 218,903 |
| Total liabilities and stockholders' equity | $ 280,291 | $ 288,270 |
| |
| DTS, INC. |
| | | | | |
| CONSOLIDATED STATEMENTS OF OPERATIONS |
| (Amounts in thousands, except per share amounts) |
| | | | | |
| | For the Three Months Ended | For the Nine Months Ended |
| | September 30, | September 30, |
| | 2015 | 2014 | 2015 | 2014 |
| | (Unaudited) |
| | | |
| Revenue | $ 30,673 | $ 35,676 | $ 99,036 | $ 108,700 |
| Cost of revenue | 2,702 | 3,302 | 8,229 | 8,093 |
| Gross profit | 27,971 | 32,374 | 90,807 | 100,607 |
| Operating expenses: | | | | |
| Selling, general and administrative | 21,348 | 18,712 | 59,317 | 60,013 |
| Research and development | 9,320 | 9,092 | 28,559 | 27,098 |
| Change in fair value of contingent consideration | (400) | 200 | (400) | 300 |
| Total operating expenses | 30,268 | 28,004 | 87,476 | 87,411 |
| Operating income (loss) | (2,297) | 4,370 | 3,331 | 13,196 |
| Interest and other expense, net | (173) | (149) | (792) | (132) |
| Income (loss) before income taxes | (2,470) | 4,221 | 2,539 | 13,064 |
| Provision (benefit) for income taxes | 332 | 352 | 2,000 | (12,131) |
| Net income (loss) | $ (2,802) | $ 3,869 | $ 539 | $ 25,195 |
| | | | | |
| Net income (loss) per common share: | | | | |
| Basic | $ (0.16) | $ 0.23 | $ 0.03 | $ 1.47 |
| Diluted | $ (0.16) | $ 0.22 | $ 0.03 | $ 1.45 |
| | | | | |
| Weighted average shares outstanding: | | | | |
| Basic | 17,255 | 17,126 | 17,431 | 17,149 |
| Diluted | 17,255 | 17,418 | 18,167 | 17,392 |
| |
| DTS, INC. |
| | | |
| CONSOLIDATED STATEMENTS OF CASH FLOWS |
| (Amounts in thousands) |
| | | |
| | For the Nine Months Ended |
| | September 30, |
| | 2015 | 2014 |
| | (Unaudited) |
| Cash flows from operating activities: | |
| Net income | $ 539 | $ 25,195 |
| Adjustments to reconcile net income to net cash provided by operating activities: | | |
| Depreciation and amortization | 10,838 | 10,826 |
| Stock-based compensation charges | 8,678 | 8,062 |
| Deferred income taxes | (5,310) | (19,189) |
| Tax shortfalls from stock-based awards | -- | (654) |
| Excess tax benefits from stock-based awards | (914) | (20) |
| Change in fair value of contingent consideration | (400) | 300 |
| Other | 353 | (122) |
| Changes in operating assets and liabilities, net of business acquisitions: | | |
| Accounts receivable | (669) | (8,544) |
| Prepaid expenses and other assets | 881 | 1,469 |
| Accounts payable, accrued expenses and other liabilities | (1,884) | 3,321 |
| Deferred revenue | (2,831) | 2,140 |
| Income taxes receivable/payable | 4,758 | 2,993 |
| Net cash provided by operating activities | 14,039 | 25,777 |
| Cash flows from investing activities: | | |
| Purchases of available-for-sale investments | (34,666) | -- |
| Maturities of available-for-sale investments | 8,800 | -- |
| Sales of available-for-sale investments | 2,502 | -- |
| Cash paid for business acquisitions | -- | (3,200) |
| Sale of other assets | -- | 725 |
| Purchases of property and equipment | (2,525) | (1,242) |
| Purchases of intangible assets | (1,853) | (575) |
| Other investing activities | (300) | -- |
| Net cash used in investing activities | (28,042) | (4,292) |
| Cash flows from financing activities: | | |
| Proceeds from long-term borrowings | -- | 30,000 |
| Repayment of long-term borrowings | -- | (30,000) |
| Proceeds from the issuance of common stock under stock-based compensation plans | 7,962 | 2,245 |
| Cash paid for shares withheld for taxes | (2,864) | (765) |
| Excess tax benefits from stock-based awards | 914 | 20 |
| Purchases of treasury stock | (19,147) | (7,495) |
| Net cash used in financing activities | (13,135) | (5,995) |
| Net change in cash and cash equivalents | (27,138) | 15,490 |
| Cash and cash equivalents, beginning of period | 99,435 | 66,025 |
| Cash and cash equivalents, end of period | $ 72,297 | $ 81,515 |
| |
| 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 Nine Months Ended |
| | September 30, | September 30, |
| | 2015 | 2014 | 2015 | 2014 |
| Cost of revenue: | | | | |
| GAAP cost of revenue | $ 2,702 | $ 3,302 | $ 8,229 | $ 8,093 |
| Amortization of intangible assets | 2,392 | 2,200 | 7,146 | 6,497 |
| Non-GAAP cost of revenue | $ 310 | $ 1,102 | $ 1,083 | $ 1,596 |
| | | | | |
| Selling, general and administrative: | | | | |
| GAAP selling, general and administrative | $ 21,348 | $ 18,712 | $ 59,317 | $ 60,013 |
| Amortization of intangible assets | 266 | 134 | 792 | 776 |
| Stock-based compensation | 2,268 | 1,987 | 6,395 | 6,040 |
| Acquisition and integration related costs* | 4,130 | 185 | 4,130 | 185 |
| Realignment costs | -- | -- | -- | 785 |
| Non-GAAP selling, general and administrative | $ 14,684 | $ 16,406 | $ 48,000 | $ 52,227 |
| | | | | |
| Research and development: | | | | |
| GAAP research and development | $ 9,320 | $ 9,092 | $ 28,559 | $ 27,098 |
| Stock-based compensation | 770 | 678 | 2,283 | 2,022 |
| Acquisition and integration related costs* | 1,125 | 8 | 1,125 | 8 |
| Realignment costs | -- | -- | -- | 333 |
| Non-GAAP research and development | $ 7,425 | $ 8,406 | $ 25,151 | $ 24,735 |
| | | | | |
| Operating income: | | | | |
| GAAP operating income (loss) | $ (2,297) | $ 4,370 | $ 3,331 | $ 13,196 |
| Amortization of intangible assets | 2,658 | 2,334 | 7,938 | 7,273 |
| Stock-based compensation | 3,038 | 2,665 | 8,678 | 8,062 |
| Acquisition and integration related costs* | 5,255 | 193 | 5,255 | 193 |
| Change in fair value of contingent consideration | (400) | 200 | (400) | 300 |
| Realignment costs | -- | -- | -- | 1,118 |
| Non-GAAP operating income | $ 8,254 | $ 9,762 | $ 24,802 | $ 30,142 |
| Non-GAAP operating income as a % of revenue | 27% | 27% | 25% | 28% |
| | | | | |
| Net income: | | | | |
| GAAP net income (loss) | $ (2,802) | $ 3,869 | $ 539 | $ 25,195 |
| Amortization of intangible assets | 2,658 | 2,334 | 7,938 | 7,273 |
| Stock-based compensation | 3,038 | 2,665 | 8,678 | 8,062 |
| Acquisition and integration related costs* | 5,255 | 193 | 5,255 | 193 |
| Change in fair value of contingent consideration | (400) | 200 | (400) | 300 |
| Realignment costs | -- | -- | -- | 1,118 |
| Adjustment for income taxes | (2,092) | (2,532) | (5,203) | (21,134) |
| Non-GAAP net income | $ 5,657 | $ 6,729 | $ 16,807 | $ 21,007 |
| | | | | |
| Non-GAAP diluted income per common share | $ 0.32 | $ 0.39 | $ 0.93 | $ 1.21 |
| | | | | |
| Non-GAAP weighted average diluted shares outstanding | 17,855 | 17,418 | 18,167 | 17,392 |
| | | | | |
| * On October 1, 2015, DTS completed its acquisition of iBiquity Digital Corporation |
| On August 14, 2014, DTS completed its acquisition of Manzanita Systems, Inc. |
| |
| Non-GAAP Financial Targets |
| | | |
| The following tables show the Company's fiscal year 2015 GAAP guidance reconciled to non-GAAP financial targets. |
| | | |
| | Fiscal Year 2015 |
| | Low | High |
| | |
| Operating income as a % of revenue: | | |
| | | |
| GAAP operating income (loss) as a % of revenue | (6)% | (2)% |
| Amortization of intangible assets | 10% | 10% |
| Stock-based compensation | 9% | 9% |
| Acquisition and integration related costs | 7% | 7% |
| Non-GAAP operating income as a % of revenue | 20% | 24% |
| | | |
| | | |
| Net income per diluted share: | | |
| | | |
| GAAP net income (loss) per diluted share | $ (0.25) | $ (0.20) |
| Amortization of intangible assets | 0.70 | 0.74 |
| Stock-based compensation | 0.68 | 0.68 |
| Change in fair value of contingent consideration | (0.02) | (0.02) |
| Acquisition and integration related costs | 0.54 | 0.56 |
| Adjustment for income taxes | (0.65) | (0.66) |
| Non-GAAP net income per diluted share | $ 1.00 | $ 1.10 |
| | | |
| Weighted average shares used to compute non-GAAP net income per diluted share (millions) | 18.0 | 18.0 |
| | | |
| Note: Acquisition and integration related costs for 2015 are still under evaluation and are subject to change. |
| |
| 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 | 12% | 13% |
| Stock-based compensation | 8% | 8% |
| Non-GAAP operating income as a % of revenue | 30% | 36% |
| | | |
| Net income per diluted share: | | |
| | | |
| GAAP net income per diluted share | $ 0.75 | $ 0.90 |
| Amortization of intangible assets | 1.28 | 1.28 |
| Stock-based compensation | 0.75 | 0.75 |
| Adjustment for income taxes | (0.63) | (0.63) |
| Non-GAAP net income per diluted share | $ 2.15 | $ 2.30 |
| | | |
| Weighted average shares used to compute non-GAAP net income per diluted share (millions) | 18.4 | 18.4 |
| | | |
| Note: The 2016 guidance excludes the impact of acquisition and integration related costs, as such amounts are currently under evaluation. |
CONTACT: Investor Contact
DTS, Inc.
Geri Weinfeld
Director, Investor Relations
geri.weinfeld@dts.com
(818) 436-1231