DTS, Inc. announced financial results for its second quarter ended June 30, 2014.

DTS trades on the NASDAQ under the symbol DTSI.

For more information visit: www.dts.com

Unedited press release follows:

DTS Reports Strong Second Quarter 2014 Financial Results

Company Raises Full Year 2014 Revenue and EPS Outlook

CALABASAS, Calif., Aug. 11, 2014—  DTS, Inc. (Nasdaq:DTSI), a leader in high-definition audio solutions, today announced financial results for the second quarter ended June 30, 2014.

“DTS achieved strong revenue and earnings growth in the second quarter, with double-digit organic growth driven by progress in TV and game console markets as well as continued progress on our comprehensive royalty audit program,” said Jon Kirchner, chairman and CEO of DTS, Inc. “Importantly, we continue to see momentum in key areas of our business and market interest in innovative technologies like Play-Fi and Headphone:X. Our progress in the first half coupled with a growing product release pipeline has caused us to raise our full year outlook. Looking ahead, we remain focused on the large and attractive opportunities in network-connected devices, including smartphones, TVs and PCs, and expect to see accelerating organic growth over the next few years.”

DTS closed the quarter with cash and investments totaling $69.5 million and generated $5.5 million in operating cash flow.

The GAAP and non-GAAP reconciling items for the quarters ended June 30, 2014 and 2013 can be found in the “Non-GAAP Financial Metrics” schedule attached to this press release and on the investor relations portion of the Company’s website at www.DTS.com.

Business Outlook
The Company raised its outlook for the full year and now expects revenue in the range of $137 to $142 million, non-GAAP operating margins in the mid to upper 20s and non-GAAP diluted EPS in the range of $1.40 to $1.50 based on a 30% effective tax rate. Stock-based compensation expense is expected to be in the range of $0.42 to $0.46 per diluted share net of tax and amortization of intangibles is expected to be in the range of $0.36 to $0.40 per diluted share net of tax. On a GAAP basis, the Company expects its effective tax rate to be approximately negative 5% to negative 10%, which is net of five to six million dollars of discrete item credits. The Company expects GAAP operating margins of approximately 9% to 11% and GAAP diluted EPS in the range of $0.85 to $0.95.

The Company continues to expect its organic growth in 2014 to come primarily from the network-connected markets, specifically connected TVs, mobile devices and PCs. Network-connected markets are expected to represent more than 50% of total revenue in 2014.

Use of Non-GAAP Financial Information
Included within this press release are non-GAAP financial measures that supplement the Company’s Consolidated Statements of Operations prepared under generally accepted accounting principles (GAAP). These non-GAAP financial measures adjust the Company’s actual results prepared under GAAP to exclude charges and the related income tax effect for stock-based compensation, the amortization of intangible assets, and certain acquisition, integration and restructuring-related costs. Over the past several years, the Company’s GAAP tax rate has been subject to substantial variability caused by three-year cumulative pre-tax losses in the US, which required the Company to record a valuation allowance against all United States Federal deferred tax benefits. For the second quarter of 2013, the Company’s pre-tax earnings included a normalized 40% effective tax rate as management believed that the Company’s inability to utilize its US deferred tax benefits would be temporary. In 2014, the Company effected a complex restructuring of certain intellectual property rights which addressed the issue of US taxable income. With the Company’s global entity structure now optimized, management believes the appropriate measure for its second quarter 2014 results is to impute a normalized 30% effective tax rate on the pre-tax earnings of the Company. Reconciliations of GAAP to non-GAAP amounts for the periods presented herein are provided in schedules accompanying this release and should be considered together with the Consolidated Statements of Operations. These non-GAAP measures are not meant as a substitute for GAAP, but are included solely for informational and comparative purposes. The Company’s management believes that this information can assist investors in evaluating the Company’s operational trends, financial performance, and cash generating capacity. Management believes these non-GAAP measures allow investors to evaluate DTS’ financial performance using some of the same measures as management. However, the non-GAAP financial measures should not be regarded as a replacement for or superior to corresponding, similarly captioned, GAAP measures.

Conference Call Information for August 11, 2014
DTS will host a conference call and live webcast at 1:30 p.m. Pacific Time to discuss the second quarter ended June 30, 2014 results. To access the conference call, dial 1-888-287-5563 or 1-719-325-2361 (outside the U.S. and Canada). A live webcast of the call will be available from the Investor Relations section of the Company’s corporate website at www.dts.com and via replay beginning two hours after the completion of the call. An audio replay of the call will also be available to investors beginning at 4:30 p.m. Pacific Time, August 11, 2014 through 4:30 p.m. Pacific Time, August 18, 2014, by dialing 1-888-203-1112 or 1-719-457-0820 (outside the U.S. and Canada) and entering pass code 3860665.

About DTS, Inc.
DTS, Inc. (Nasdaq:DTSI) is a premier audio solutions provider for high-definition entertainment experiences—anytime, anywhere, on any device. DTS exists to make the world sound better. DTS’ audio solutions are designed to enable recording, delivery and playback of simple, personalized, and immersive high-definition audio, and are incorporated by hundreds of licensee customers around the world into an array of consumer electronics devices. From a renowned legacy as a pioneer in high definition multi-channel audio, DTS became a mandatory audio format in the Blu-ray Disc™ standard and is now increasingly deployed in enabling digital delivery of compelling movies, music, games and other forms of digital entertainment to a growing array of network-connected consumer devices. DTS technology is in televisions, personal computers, smartphones, tablets, digital media players, video game consoles, Blu-ray Disc players, audio/video receivers, soundbars, DVD based products, automotive audio systems, set-top-boxes, and home theater systems. Founded in 1993, DTS’ corporate headquarters are located in Calabasas, California. DTS also has offices in Los Gatos and Santa Ana, California, Washington, China, France, Hong Kong, Ireland, Japan, Singapore, South Korea, Taiwan and the United Kingdom. Copyright 2014, DTS, Inc. DTS, the Symbol, and DTS and the Symbol together are registered trademarks of DTS, Inc. All other trademarks are the properties of their respective owners. All rights reserved.

Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that involve risks, uncertainties, assumptions and other factors which, if they do not materialize or prove correct, could cause DTS’ results to differ materially from historical results or those expressed or implied by such forward-looking statements. All statements, other than statements of historical fact, are statements that could be deemed forward-looking statements, including statements containing the words “planned,” “expects,” “believes,” “intends,” “strategy,” “opportunity,” “anticipates” and similar words. These statements may include, among others, plans, strategies and objectives of management for future operations; any statements regarding proposed new products, services or developments; any statements regarding future economic conditions, financial or operating performance, or future effective tax rates, including statements regarding overall profitability in 2014; any statements regarding anticipated growth in the network-connected markets and in the Blu-ray, automotive and home AV markets; statements of belief and any statements of assumptions underlying any of the foregoing. The potential risks and uncertainties that could cause actual growth and results to differ materially include, but are not limited to, our ability to penetrate the on-line and mobile content delivery market and adapt our technologies for that market, the continued decline in optical disc-based product sales, the rapidly changing and competitive nature of the digital audio, consumer electronics and entertainment markets, the Company’s inclusion in or exclusion from governmental and industry standards, continued customer acceptance of the Company’s technology, products, services and pricing, risks related to ownership and enforcement of intellectual property, the continued release and availability of entertainment content containing DTS audio soundtracks, success of the Company’s research and development efforts, risks related to integrating acquisitions, greater than expected costs, the departure of key employees, negative trends in the general economy, continued weakness in the global financial markets and decreases in consumer confidence, a loss of one or more of our key customers or licensees, changes in domestic and international market and political conditions, unanticipated changes in our tax provisions and other risks and uncertainties more fully described in DTS’ public filings with the Securities and Exchange Commission, including DTS’ most recent Forms 10-K and 10-Q, available at www.sec.gov. Readers are urged not to place undue reliance on these forward looking statements, which speak only as of the date of this press release. DTS does not intend to update any forward-looking statement contained in this press release to reflect events or circumstances arising after the date hereof.

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