Exhibit 99.1
SRS Labs Reports Solid 2004 Third Quarter Results
Company Reports 30% Revenue Increase and Improved Profits
SANTA ANA, Calif., Nov. 9 /PRNewswire-FirstCall/ -- SRS Labs, Inc.
(Nasdaq: SRSL), a leading provider of audio, voice and semiconductor
technology solutions, today reported financial results for its third quarter
and nine months ended September 30, 2004. For the three months ended
September 30, 2004, the company reported improved consolidated revenue of
$6.4 million, a 30 percent increase over consolidated revenue of $4.9 million
for the same quarter in 2003. For the quarter, the company delivered net
income of $737,004, or $0.05 earnings per share, compared to a net income of
$118,826, or $0.01 earnings per share, for the same period last year.
For the third quarter, SRS Labs reported semiconductor revenue of
$3.6 million from its Hong Kong-based subsidiary, Valence Technologies
Limited, representing an increase of 23 percent over last year's third quarter
revenue of $3.0 million. The company reported licensing revenue of
$2.7 million for the third quarter, an increase of 42 percent over revenue of
$1.9 million in the same period in 2003. SRS Labs reported consolidated gross
margin of 78 percent for the third quarter 2004, compared to 75 percent
reported for the third quarter last year.
For the nine months ended September 30, 2004, SRS Labs reported
consolidated revenue of $17.1 million with a net income of $1.1 million, or
$0.07 per diluted share, compared to revenue in the same period last year of
$13.9 million and a net income of $127,478, or $0.01 earnings per share. The
company's cash and investments grew to $26.3 million as of September 30, 2004,
compared to $23.3 million reported on December 31, 2003.
Business Summary
Chairman and CEO of SRS Labs, Thomas C.K. Yuen said, "With year-over-year
revenue growth for both licensing and semiconductors, our solid Q3 performance
can be attributed to the success of our diversification strategies. For
semiconductors, while our third quarter is historically strong due to
seasonality, the increase can also be attributed to the alleviation of foundry
capacity constraints which enabled us to fulfill a significant portion of our
backlog orders. One of the key drivers for the growth of semiconductor
revenue was ASP chips with SRS technology, which increased to 31 percent of
total semiconductor revenue from just 22 percent in last year's third quarter.
Yuen continued: "For licensing, we are pleased that the successful
execution of our diversification strategy into new markets resulted in a solid
42 percent increase in revenue over the third quarter of last year. We
derived revenue from new customers in several of our targeted market segments,
including set-top box, mobile phones, digital audio players and personal
computers. Many existing customers began ramping production for the holiday
selling season and expanded their use of our technologies in a variety of
segments, including advanced displays, such as plasma, projection and LCD
televisions, and A/V receivers. Then, to further advance our strategy of
branding the SRS logo to consumers, we made a strategic investment in Coming
Home Studios, who is a leader in the production of music concert DVDs."
Business Outlook
"While we showed increased semiconductors sales in the third quarter, this
sell through has significantly reduced our backlog for ASIC chips and we have
seen a slower reorder rate for the fourth quarter," Yuen said. "We also made
several additional changes in our Valence management and sales staff which we
believe will better position SRS Labs to achieve our diversification goals,
however this transition could adversely affect our short-term sales results as
the new Valence team implements its sales strategy. We believe these factors,
along with an overall slowdown within the semiconductor industry, indicate a
softer outlook for our fourth quarter and the first quarter of 2005 for our
Valence subsidiary.
Yuen concluded, "On the licensing side, our fourth quarter is an active
period for industry trade shows and events, where we work closely with our
platform partners to launch new SRS audio solutions for our target markets.
For example, in late October we launched our new SRS 3D Positional Audio at
the CTIA Wireless I.T. & Entertainment Show, which is geared for the mobile
device market. We look forward to the expanded use of our technologies by
customers in our targeted segments in the fourth quarter, as we traditionally
recognize revenue from manufacturers that ship products in Q3 for the holiday
selling season."
Investors can listen to the company's conference call live today at
2:00 pm Pacific (5:00 pm Eastern) through the investor section of SRS Labs'
website http://www.srslabs.com/IREvents.asp. Please log on at least 15
minutes early to register and follow the instructions to download and install
any necessary audio software. If you are unable to listen to the live web
cast, an online replay will be available shortly after the call. To listen to
the call live via telephone, dial (866) 246-6871, ask for the "SRS Labs 2004
Q3 Conference Call," and provide the pass code 584619. To access the taped
replay, dial (866) 219-1444 and enter the same pass code. The telephone
replay will be available until November 10 at 12:00 a.m. PST.
About SRS Labs, Inc.
SRS Labs is a recognized leader in the advancement of audio and voice
technology. The company works with the world's top manufacturers to provide a
richer entertainment experience through patented sound techniques. SRS Labs'
technologies can be heard through products ranging from televisions, LCD and
plasma monitors, DVD players, cell phones, car audio systems, headphones and
notebook and desktop computers. The company also offers hardware and software
tools to professionals and consumers for the creation, production and
broadcast of content featuring SRS Labs' technologies. SRS Labs' subsidiary,
Valence Technologies Limited, is a Hong Kong-based semiconductor company that
designs and sells custom ASICs and standard ICs to leading manufacturers
worldwide. Based in Santa Ana, Calif., the company also has licensing
representation in Hong Kong, Japan, Europe, and Korea. For more information
about SRS Labs, Inc. please visit www.srslabs.com. The information on the
aforementioned website is not incorporated by reference into this press
release.
Except for historical information contained in this release, statements in
this release, including those made by Mr. Yuen are forward-looking statements
and projections (which include statements concerning plans and objectives of
management for future operations) that are based on management's belief, as
well as assumptions made by, and information currently available to,
management. While the Company believes that its expectations are based upon
reasonable assumptions, there can be no assurances that the Company's goals
and strategy will be realized. Numerous factors, including risks and
uncertainties, may affect the Company's actual results and may cause results
to differ materially from those expressed in forward-looking statements made
by or on behalf of the Company. Some of these factors include the general
market conditions concerning the semiconductor business, the acceptance of new
SRS Labs' products and technologies, the impact of competitive products and
pricing, the timely development and release of technologies by the Company,
general business and economic conditions, especially in Asia, and other
factors detailed in the Company's Form 10-K and other periodic reports filed
with the SEC. SRS Labs specifically disclaims any obligation to update or
revise any forward-looking statement whether as a result of new information,
future developments or otherwise.
For further information, please contact: Investors, Tami Yanito of SRS
Labs, Inc., +1-949-442-1070, ext. 3093, tami@srslabs.com.
SRS LABS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2004 2003 2004 2003
Revenues:
Semiconductor $3,644,298 $2,966,923 $8,992,511 $7,244,323
Licensing 2,727,861 1,919,471 8,140,592 6,638,291
Total revenues 6,372,159 4,886,394 17,133,103 13,882,614
Cost of sales:
Semiconductor 1,320,855 1,226,407 3,269,622 2,750,437
Licensing 100,342 16,029 146,886 62,132
Total cost
of sales 1,421,197 1,242,436 3,416,508 2,812,569
Gross margin 4,950,962 3,643,958 13,716,595 11,070,045
Operating expenses:
Sales and
marketing 1,372,303 1,216,568 4,149,887 3,840,155
Research and
development 1,266,606 1,032,100 3,620,219 3,083,438
General and
administrative 1,452,236 1,143,930 4,490,732 3,668,573
Total operating
expenses 4,091,145 3,392,598 12,260,838 10,592,166
Income from
operations 859,817 251,360 1,455,757 477,879
Other income, net 118,908 131,925 455,132 414,655
Minority interest -- -- -- 5,430
Income before
income tax expense 978,725 383,285 1,910,889 897,964
Income tax expense 241,721 264,459 790,863 770,486
Net income $737,004 $118,826 $1,120,026 $127,478
Net income per
common share:
Basic $0.05 $0.01 $0.08 $0.01
Diluted $0.05 $0.01 $0.07 $0.01
Weighted average
shares used in the
calculation of
net income per
common share:
Basic 14,278,589 13,076,315 14,045,162 12,956,971
Diluted 15,395,792 14,730,290 15,991,331 13,729,676
SRS LABS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, December 31,
2004 2003
(unaudited)
ASSETS
Current Assets
Cash and cash equivalents $16,020,285 $12,795,620
Accounts receivable, net 1,258,982 1,230,423
Inventories, net 767,006 753,020
Prepaid expenses and other
current assets 991,828 1,073,696
Deferred income taxes 23,406 23,406
Total Current Assets 19,061,507 15,876,165
Investments available for sale 10,281,176 10,490,210
Investment in LLC 2,025,626 --
Furniture, fixtures and
equipment, net 1,956,784 1,661,980
Goodwill 533,031 533,031
Intangible assets, net 2,748,289 2,736,810
Deferred income taxes 213,647 193,134
Total Assets $36,820,060 $31,491,330
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $1,481,449 $1,503,851
Accrued liabilities 2,218,691 1,606,069
Income taxes payable 538,751 430,949
Total Current Liabilities 4,238,891 3,540,869
Commitments and contingencies
Stockholders' Equity
Preferred stock-$.001 par value;
2,000,000 shares authorized;
no shares issued or outstanding -- --
Common stock -- $.001 par value;
56,000,000 shares authorized;
14,626,922 and 13,682,282 shares
issued; and 14,367,965 and
13,456,982 shares outstanding
at September 30, 2004 and
December 31, 2003, respectively 14,627 13,683
Additional paid-in capital 62,058,625 58,423,249
Accumulated other
comprehensive loss (297,523) (336,346)
Accumulated deficit (28,311,498) (29,431,524)
Treasury stock at cost,
258,957 and 225,300 shares
at September 30, 2004 and
December 31, 2003 respectively (883,062) (718,601)
Total Stockholders' Equity 32,581,169 27,950,461
Total Liabilities and
Stockholders' Equity $36,820,060 $31,491,330
SOURCE SRS Labs, Inc.
-0- 11/09/2004
/CONTACT: Investors, Tami Yanito of SRS Labs, Inc., +1-949-442-1070,
ext. 3093, tami@srslabs.com/
/Company News On-Call: http://www.prnewswire.com/comp/809275.html /
/Web site: http://www.srslabs.com/IREvents.asp /
/Web site: http://www.srslabs.com /
(SRSL)
CO: SRS Labs, Inc.
ST: California
IN: CPR SEM TLS
SU: ERN ERP CCA MAV