DTS Inc. (
reported third quarter earnings of 8 cents per share, recovering
from a loss of 70 cents per share reported in the year-ago
Revenues jumped 26.6% year over year to $28.2 million, but
lagged the Zacks Consensus Estimate of $31.0 million. The strong
year-over-year growth was primarily driven by the company's
network-connected business, which grew 104% on a year-over-year
Within the network-connected category, network-connected TV
contributed the maximum, and moved up 92% on a year-over-year
Operating expenses (excluding amortization & acquisition
cost but including stock-based compensation) as a percentage of
revenues declined to 88.3% from 110.5% in the year-ago quarter.
This was primarily attributed to a decrease in selling, general
& administrative expense (SG&A) as a percentage of
revenues, which declined from 80.2% in the year ago quarter, to
61.7%, while research & development expense (R&D) as a
percentage of revenues declined to 26.6% from 30.3% reported in
the year ago quarter.
DTS reported operating income (excluding amortization &
acquisition cost but including stock-based compensation) of $3.1
million compared with a loss of $2.4 million in the year-ago
Net income (excluding amortization & acquisition costs but
including stock-based compensation) was $2.45million compared to
a net loss of $12.8 million in the year-ago quarter.
Exiting the third quarter, DTS had cash and short-term
investments of $76.1 million compared with $71.7 million at the
end of the second quarter. Cash flow from operations was $11.4
million compared with $2.4 million cash generated in operations
in the previous quarter.
For fiscal 2013, the company expects GAAP operating income as
a percentage of revenues to remain in the range of 5 - 8%,
whereas non-GAAP operating income as a percentage of revenue is
likely to be in the range of 21.0 - 26.0%.GAAP net income per
share is expected to be in the range of 3 cents to 8 cents while
non-GAAP net income per share is likely to be 98 cents to
DTS reported a modest third quarter numbers, with the company
reporting a profit and revenues substantially up from the year
ago quarter. We believe that DTS will continue to gain market
share riding on its strong product portfolio, increasing online
availability and accelerated expansion of the DTS technology into
new markets, such as smartphones, portable devices, digital media
players and smart TV space.
Moreover, the company's extended partnership programs with
Samsung to provide sound solutions for TV and inclusion of DTS's
) latest generation of processors are positives for the company.
This apart, other partnerships with mobile and tablet makers such
as Huawei, Pantech, Lenovo and Panasonic are also
On the other hand, unpredictable macroeconomic environment,
weakness in the consumer electronics market and sluggish consumer
spending are the near-term headwinds for the company. Moreover,
higher costs are likely to hurt profitability in the near term.
Further, the company faces significant competition from
Dolby Laboratories Inc.
) and privately-held THX Limited, which may hurt its
Currently, DTSI has a Zacks Rank #3 (Hold).
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