DTS Inc. ( DTSI ) reported
first-quarter 2013 non-GAAP earnings per share of 22 cents compared
with 37 cents per share earned in the year-ago quarter.
Including stock-based compensation, earnings per share came in
at 7 cents, much better than the Zacks Consensus Estimate of a loss
of 7 cents per share.
Revenues for the quarter increased 21.7% on a year-over-year
basis to $32.7 million. The year-over-year increase in
revenues was primarily boosted by DTSI's network-connected business
(up 246.0% year over year).
However, DTSI recorded year-over-year declines from the Home A/V
(down 16.0% year over year) and Blu ray (down 27.0% year over year)
business. Reported revenues marginally lagged the Zacks Consensus
Estimate of $33.0 million.
Operating expenses (excluding amortization & acquisition
cost but including stock-based compensation) jumped 49.3% year over
year to $28.7 million, primarily due to a 71.1% surge in research
& development expense (R&D) and a 42.6% rise in selling,
general & administrative expense (SG&A) related to
continuing investments in network connected business in the
As a percentage of revenues, operating expenses expanded from
71.6% in the year-ago quarter to 87.8%.
DTSI reported operating profit (excluding amortization &
acquisition cost but including stock-based compensation) of $3.9
million compared with $7.6 million in the previous-year quarter,
due to higher operating expenses.
Net income (excluding amortization & acquisition costs but
including stock-based compensation) was $1.29 million or 7 cents
compared to a net profit of $4.57 million or 27 cents reported in
the previous-year quarter.
Exiting the first quarter, DTSI had cash and short-term
investments of $69.1 million compared with $72.0 million at the end
of the fourth quarter of 2012. Cash used in operations was $1.3
million compared with $2.5 million of cash flow from operations in
the previous quarter.
DTSI reiterated its 2013 revenue guidance range of $140-$146
million. The company expects revenues from the Blu-ray segment to
be approximately 25% of the total revenue, due to the impact of new
game console cycle. However, DTSI expects flat to marginal growth
in standalone players and a decline in Blu-ray-enabled PCs.
DTSI expects non-GAAP operating margin in the low to mid-20s and
non-GAAP earnings per share in the range of $1.05 to $1.20.
Moreover, DTSI hinted that the primary growth drivers in 2013 will
be network connected business (TV and mobile devices).
We believe that DTSI 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
network-connected TV space.
Moreover, DTSI continues to invest in the network connected
business, which will help it to gain significant market share going
forward. This, coupled with higher penetration in the Chinese
smartphone market and incremental revenue from the acquisition of
SRS labs, will drive top-line growth in the long term.
Additionally, partnership with Samsung to provide sound
solutions for the TV and inclusion of DTSI's technologies in
Qualcomm ( QCOM ) latest
generation of processors are positives for the company. The company
has also garnered several partnerships with tablet makers such as
Pantech, Lenovo and Panasonic.
However, the ongoing volatile 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. ( DLB ), Sony
Corp. ( SNE
) and privately-held THX Limited, which may hurt its
Currently, DTSI has a Zacks Rank #1 (Strong Buy).DOLBY LAB INC-A (DLB): Free Stock Analysis
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