DTS Posts Q2 2013 Loss, Lowers Full Year Outlook

Posted by Joe Zaller
Aug 19 2013

Audio processing specialist DTS announced that its revenue for the first quarter of 2013 was $27.2m, an increase of 25% versus the same period a year ago, and a decline of 17% versus the previous quarter.

The company said its network-connected business, which includes connected TVs, PCs and mobile devices, doubled versus last year.  However, the company saw revenue decline 19% versus last year in its Home AV business, and decline 10% in its Blu-Ray business.

Network connected revenue accounted for about 50% of total sales in the quarter. Blu-Ray and home AV represented just under 20% and just under 15% of total revenue respectively.

Broadcast revenue in the quarter was up slightly, while automotive remained relatively flat on a year-over-year basis. Broadcast and automotive represented less than 5% and 15%, respectively, of total revenue for the second quarter.

The GAAP net loss for the first quarter of 2013 was $2m, or $0.11 per share, compared to a GAAP net loss of $775,000, or $0.05 per share, in the second quarter of 2012, and a GAAP net loss of $1.5m, or $0.08 per share last quarter.

Non-GAAP net income in the quarter was $2.1m, or $0.11 per share, compared to non-GAAP net income of $3.5m, or $0.21 per share, last year, and non-GAAP net income of $4m, or $0.22 per share last quarter.

Operating expenses for the quarter were $26.6m, or 98% of total revenue.  This is an increase of 24% versus the previous year.

SG&A expenses for the quarter were $18,75m, up 12% versus the previous year. Research and development costs in the quarter were $7.8m, up 64% versus last year.

The non-GAAP operating margin in the second quarter of 2013 were 21%, down from 38% in the first quarter of 2012.

The non-GAAP operating margin in the second quarter of 2013 was 13%, down from 26% last year, and down from 21% last quarter.

The Company closed the quarter with cash and investments totaling $76.7m, flat with last quarter.

“DTS delivered attractive revenue growth in the second quarter in line with our expectations,” said DTS chairman and CEO Jon Kirchner. “The growth was driven by strong performance in our network-connected business. Our strategy remains squarely focused on the large network-connected opportunity, and as expected, this segment of our business contributed nearly half of total revenue during the quarter. As we enter the important autumn and holiday season, we are closely monitoring CE market headwinds and the timing of certain customer network-connected product rollouts. Importantly, we are very encouraged by the growing interest in our new Headphone:X and Play-Fi technologies and expect those products to see increasing design wins as we get into 2014. With growing content support and increasing device penetration, we are pleased with our strategic progress and remain focused on execution in the coming quarters.”

 

Business Outlook

The company lowered its forward guidance due to “uncertainties around the timing of certain mobile and Play-Fi product shipments, which are now expected to push into 2014; and a modestly weakening near-term CE business environment, which has impacted the Company’s expectations for home theater in a box systems, Blu-ray players and automotive unit volumes; and lower expected royalty recoveries.”

The Company now expects 2013 revenue in the range of $130 to $136 million, down from previously issued guidance of $140 to $146 million.

Management says it will offset any revenue weakness through active cost management, and therefore says its GAAP EPS expectations are unchanged.  On a GAAP basis, DTS continues to expect an operating margin of approximately 3% to 6% and expects EPS in the range of $(0.05) to $0.00 per diluted share.

Non-GAAP earnings for the year are now expected to be in the range of $0.98 to $1.12 per diluted share, down from previously issued guidance of non-GAAP EPS in the range of $1.05 to $1.20 per diluted share.

Stock-based compensation expense is now expected to be in the range of $0.38 to $0.41 per diluted share, down from previously issued guidance of $0.44 to $0.47 per diluted share.

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Related Content:

Press Release: DTS Reports Second Quarter 2013 Financial Results

Previous Quarter: DTS Q1 2013 Revenue Rises 22 Percent

Previous Year: DTS Posts Loss in Q2 2012 Due to Weak Consumer Demand for Blu-Ray

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