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HD Radio Owner Reports Q3 Numbers

Revenue increases reported as company preps for Tessera acquisition

DTS Chairman and CEO Jon Kirchner says the company continues to ride momentum in the auto and mobile segments.

The Calabasas, Calif.,-based DTS reported on Monday a big jump in revenue to $48.7 million for the third quarter compared to $30.7 million for the same period a year ago. Its GAAP net income was only $570,000 for the quarter following a loss of $2.8 million in Q3 2015.

“Our strong quarterly results reflect the continued successful execution of our long-term strategy across the home, mobile and automotive markets,” Kirchner said in a company press release.

The high definition audio solutions provider, which acquired iBiquity Digital and its HD Radio technology for $172 million in 2015, closed the quarter with cash, cash equivalents and short-term investments totaling $39.8 million, according to the filing.

HD Radio appears to be giving DTS revenues a boost, according to the company’s latest Form 10Q filing with the Securities and Exchange Commission on Monday. “HD Radio technology has expanded our automotive footprint, with automotive royalties comprising over 35% of total revenues for the third quarter of 2016, positioning us for continued growth in 2016 and beyond,” according to DTS.

Historically, DTS’ revenue was primarily dependent upon the DVD and Blu-ray Disc-based home theater markets, according to the SEC filing. However, the company says that is changing.

“Because we are a mandatory technology in the Blu-ray standard, our revenue stream from this market is closely tracking the sales trend of Blu-ray equipped players, game consoles and PCs. However, the market for optical disc based media players has slowed in favor of a growing trend toward network-based delivery of entertainment content to network-connected devices,” according to the company filing. “In response to this shift in entertainment delivery and consumption over the past several years, we have transitioned our focus to providing end-to-end audio solutions to the network-connected markets both in the home and on-the-go.”

Also not to be forgotten, DTS added software developer Artic Palm Technology Inc. to its portfolio in October.

Kirchner said DTS continued to drive increased penetration of HD Radio technology across North America, as new 2017 model year vehicles hit local dealerships, including the Hyundai Ioniq, Audi A4, Lincoln Continental and more.

Tessera Technologies’ $850 million acquisition of DTS is on the fast track to close early next month, according to Kirchner. “We remain excited about the opportunities ahead and expect the transaction with Tessera to close in December subject to DTS stockholder approval. We believe that the combination of DTS and Tessera will deliver the world’s leading audio and imaging solutions to all of our key markets, driving meaningful value for our customers and partners.”

In light of the pending acquisition of DTS by Tessera Technologies Inc., DTS did not hold a conference call to discuss its financial results.

DTS did acknowledge in its SEC filing it is facing two lawsuits recently filed by stockholders. The punitive class action lawsuits, one filed in Delaware and the other in California, allege DTS board of directors failed to disclose all material facts concerning the Tessera deal.

The complaints allege the company’s directors “breached their fiduciary duties by agreeing to inadequate merger consideration and engaging in a sales process that is in their best interests, but not the interests of the other stockholders.” DTS says it believes the complaints are meritless and intends to defend the actions.