) reported first quarter 2012 earnings (excluding amortization but
including stock-based compensation) of 27 cents per share, beating
the Zacks Consensus Estimate by 1 cent. However, on a
year-over-year basis, earnings plunged 18.2% in the reported
Revenues increased 0.4% year over year to $26.9 million during
the quarter and moved past the Zacks Consensus Estimate of $26
million. Royalty revenue was $2.25 million in the reported quarter.
During the quarter, DTS witnessed 13% rise in the network-connected
revenue, but was offset by decrease in DVD-related products and
Blu-ray game consoles. Moreover, supply chain constrains continued
due to the Thailand flood.
Gross profit (excluding amortization but including stock-based
compensation) for the quarter increased 0.4% year over year to
$26.9 million. Gross margin remained flat on a year-over-year basis
Operating expenses increased 12.9% year over year to $19.3
million, primarily driven by a 6.9% rise in selling, general &
administrative expense (SG&A) and 39.1% increase in research
& development expense (R&D) in the quarter. As a percentage
of revenue, operating expenses deteriorated from 63.6% in the
previous-year quarter to 71.6%.
Operating income (excluding amortization but including
stock-based compensation) decreased 21.5% year over year to $7.6
million. Operating margin for the quarter was 28.3% compared with
36.2% in the previous-year quarter.
Exiting the first quarter, the company had cash and short-term
investments of $79.0 million compared with $85.6 million at the end
of fourth quarter of 2011. The company had no long-term debt at the
end of the fourth quarter. Cash flow from operations was $6.8
million compared with $9.6 million in the previous quarter.
The company reiterated its fiscal year outlook and expects
revenues in the range of $112.0 million to $116.0 million,
operating margin of approximately 40.0% and earnings in the range
of $1.60 to $1.65 per share. The earnings exclude stock-based
compensation of 37 cents to 38 cents per share. Currently, the
Zacks Consensus Estimate projects earnings of $1.24 per share
(including stock based compensation) for fiscal 2012.
We believe that DTS will continue to gain market share riding on
its strong product portfolio, and increasing penetration into
network connected devices. However, we believe that the volatile
macro environment and sluggish consumer spending will remain
headwinds for Blu-ray sales going forward.
Moreover, we believe that the strong growth of network connected
devices will eventually cannibalize the sales of DVD-based products
and Blu-ray sales. This in turn will likely hurt DTS' growth over
the long term. Further, the company faces significant competition
Dolby Laboratories Inc.
) and privately-held THX Limited, which remain the headwinds going
Thus, we remain Neutral over the long term (6-12 months).
Currently, DTS Inc. has a Zacks #3 Rank, which implies a 'Hold'
rating in the near term.
DOLBY LAB INC-A (DLB): Free Stock Analysis
DTS INC (DTSI): Free Stock Analysis Report
SONY CORP ADR (SNE): Free Stock Analysis Report
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