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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Dts, Inc. | NASDAQ:DTSI | NASDAQ | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 42.52 | 42.48 | 43.73 | 0 | 01:00:00 |
Delaware
(State or other jurisdiction of
incorporation or organization)
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77-0467655
(I.R.S. Employer
Identification No.)
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5220 Las Virgenes Road
Calabasas, California 91302
(Address of principal executive
offices and zip code)
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(818) 436-1000
(Registrant's telephone number,
including area code)
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Large accelerated filer
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o
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Accelerated filer
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ý
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Non-accelerated filer
(Do not check if a smaller
reporting company)
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o
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Smaller reporting company
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o
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•
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the effect of the announcement of the DTS Merger on the Company's business relationships, operating results and business generally;
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•
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the ability to obtain the Company's stockholder approval;
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•
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the occurrence of any event, change or other circumstances that could give rise to the termination of the Merger Agreement or the payment of the termination fee provided by the Merger Agreement;
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•
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the ability to satisfy conditions to the transaction on the proposed terms and timeframe;
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•
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the possibility that the DTS Merger does not close when expected or at all;
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•
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the outcome of pending or future litigation against the Company, Tessera or others in connection with the Merger Agreement;
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•
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the ability to meet expectations regarding the timing and completion of the DTS Merger;
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•
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the amount of the costs, fees, expenses and charges related to the DTS Merger;
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•
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the Company's ability to evolve its technologies, products, and services, or develop new technologies, products, and services, that are acceptable to its customers or the evolving markets;
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•
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the Company's ability to develop proprietary technologies in markets in which “open standards” are adopted;
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•
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political, economic, currency and other risks associated with the Company's operations;
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•
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the Company's ability to protect its intellectual property;
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•
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risks associated with competition;
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•
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the failure of Tessera to obtain the necessary debt financing to complete the DTS Merger;
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•
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the risk that the DTS Merger disrupts the Company's current operations, including its relationship with its customers, or affects its ability to retain or recruit key employees;
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•
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limitations placed on the Company's ability to operate its business by the Merger Agreement; and
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•
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other risks and uncertainties.
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As of
September 30, 2016 |
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As of
December 31, 2015 |
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ASSETS
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Current assets:
|
|
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|
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||
Cash and cash equivalents
|
$
|
26,686
|
|
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$
|
52,208
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Short-term investments
|
13,083
|
|
|
9,657
|
|
||
Accounts receivable, net of allowance for doubtful accounts of $245 and $541 at September 30, 2016 and December 31, 2015, respectively
|
26,911
|
|
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12,454
|
|
||
Prepaid expenses and other current assets
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7,832
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|
|
5,855
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||
Income taxes receivable
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2,276
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|
|
4,130
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|
||
Total current assets
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76,788
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84,304
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|
||
Property and equipment, net
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28,076
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29,022
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Intangible assets, net
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144,907
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|
157,936
|
|
||
Goodwill
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90,692
|
|
|
108,726
|
|
||
Deferred income taxes
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41,866
|
|
|
24,018
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|
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Other long-term assets
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9,348
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|
|
3,934
|
|
||
Total assets
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$
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391,677
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|
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$
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407,940
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LIABILITIES AND STOCKHOLDERS' EQUITY
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|
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Current liabilities:
|
|
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Accounts payable
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$
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6,792
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$
|
5,979
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Accrued expenses
|
17,963
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|
|
22,960
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|
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Deferred revenue
|
3,096
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|
|
5,711
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|
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Income taxes payable
|
80
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|
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123
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|
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Current portion of long-term debt, net
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26,486
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21,486
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|
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Total current liabilities
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54,417
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56,259
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|
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Long-term debt, net
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100,552
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|
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136,666
|
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Other long-term liabilities
|
12,419
|
|
|
9,983
|
|
||
Commitments and contingencies (Note 9)
|
|
|
|
|
|
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Stockholders' equity:
|
|
|
|
|
|
||
Preferred stock—$0.0001 par value, 5,000 shares authorized at September 30, 2016 and December 31, 2015; no shares issued and outstanding
|
—
|
|
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—
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|
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Common stock—$0.0001 par value, 70,000 shares authorized at September 30, 2016 and December 31, 2015; 22,501 and 21,988 shares issued at September 30, 2016 and December 31, 2015, respectively; 17,834 and 17,321 shares outstanding at September 30, 2016 and December 31, 2015, respectively
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3
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|
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3
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|
||
Additional paid-in capital
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272,479
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|
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258,660
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|
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Treasury stock, at cost—4,667 at September 30, 2016 and December 31, 2015
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(111,331
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)
|
|
(111,331
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)
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Accumulated other comprehensive income
|
778
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|
|
778
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|
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Retained earnings
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62,360
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56,922
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Total stockholders' equity
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224,289
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205,032
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Total liabilities and stockholders' equity
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$
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391,677
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$
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407,940
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For the Three Months
Ended September 30, |
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For the Nine Months
Ended September 30, |
||||||||||||
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2016
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2015
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2016
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2015
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||||||||
Revenue
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$
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48,749
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$
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30,673
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$
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142,599
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$
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99,036
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Cost of revenue
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6,449
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2,702
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18,751
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8,229
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||||
Gross profit
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42,300
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27,971
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123,848
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90,807
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||||
Operating expenses:
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Selling, general and administrative
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26,283
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21,348
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71,563
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59,317
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||||
Research and development
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13,489
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9,320
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38,788
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28,559
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Change in fair value of contingent consideration
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—
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(400
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)
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—
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(400
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)
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||||
Total operating expenses
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39,772
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30,268
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110,351
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87,476
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||||
Operating income (loss)
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2,528
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(2,297
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)
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13,497
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3,331
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||||
Interest and other expense, net
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(1,234
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)
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(173
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)
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(3,633
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)
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(792
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)
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Income (loss) before income taxes
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1,294
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(2,470
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)
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9,864
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2,539
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Provision for income taxes
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724
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332
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4,072
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|
2,000
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||||
Net income (loss)
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$
|
570
|
|
|
$
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(2,802
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)
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$
|
5,792
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|
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$
|
539
|
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Net income (loss) per common share:
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||||
Basic
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$
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0.03
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|
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$
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(0.16
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)
|
|
$
|
0.33
|
|
|
$
|
0.03
|
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Diluted
|
$
|
0.03
|
|
|
$
|
(0.16
|
)
|
|
$
|
0.32
|
|
|
$
|
0.03
|
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Weighted average shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic
|
17,701
|
|
|
17,255
|
|
|
17,560
|
|
|
17,431
|
|
||||
Diluted
|
18,637
|
|
|
17,255
|
|
|
18,126
|
|
|
18,167
|
|
||||
Cash dividend declared per common share
|
$
|
0.02
|
|
|
$
|
—
|
|
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$
|
0.02
|
|
|
$
|
—
|
|
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For the Three Months
Ended September 30, |
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For the Nine Months
Ended September 30, |
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Net income (loss)
|
$
|
570
|
|
|
$
|
(2,802
|
)
|
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$
|
5,792
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|
|
$
|
539
|
|
Other comprehensive income (loss), net of tax:
|
|
|
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|
|
|
|
|
|
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|
||||
Unrealized gains and losses on available-for-sale securities and other, net
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(4
|
)
|
|
1
|
|
|
—
|
|
|
3
|
|
||||
Total comprehensive income (loss)
|
$
|
566
|
|
|
$
|
(2,801
|
)
|
|
$
|
5,792
|
|
|
$
|
542
|
|
|
For the Nine Months
Ended September 30, |
||||||
|
2016
|
|
2015
|
||||
Cash flows from operating activities:
|
|
|
|
|
|
||
Net income
|
$
|
5,792
|
|
|
$
|
539
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
||
Depreciation and amortization
|
20,103
|
|
|
10,838
|
|
||
Stock-based compensation charges
|
9,581
|
|
|
8,678
|
|
||
Deferred income taxes
|
(3,317
|
)
|
|
(5,310
|
)
|
||
Excess tax benefits from stock-based awards
|
(486
|
)
|
|
(914
|
)
|
||
Change in fair value of contingent consideration
|
—
|
|
|
(400
|
)
|
||
Amortization of debt issuance costs
|
460
|
|
|
—
|
|
||
Other
|
45
|
|
|
353
|
|
||
Changes in operating assets and liabilities, net of business combinations:
|
|
|
|
|
|
||
Accounts receivable
|
(13,015
|
)
|
|
(669
|
)
|
||
Prepaid expenses and other assets
|
(2,658
|
)
|
|
881
|
|
||
Accounts payable, accrued expenses and other liabilities
|
(4,277
|
)
|
|
(1,884
|
)
|
||
Deferred revenue
|
(2,615
|
)
|
|
(2,831
|
)
|
||
Income taxes receivable/payable
|
4,790
|
|
|
4,758
|
|
||
Net cash provided by operating activities
|
$
|
14,403
|
|
|
$
|
14,039
|
|
Cash flows from investing activities:
|
|
|
|
|
|
||
Purchases of available-for-sale investments
|
(26,718
|
)
|
|
(34,666
|
)
|
||
Maturities of available-for-sale investments
|
11,125
|
|
|
8,800
|
|
||
Sales of available-for-sale investments
|
12,125
|
|
|
2,502
|
|
||
Cash paid for business combinations, net
|
(2,404
|
)
|
|
—
|
|
||
Purchases of property and equipment
|
(2,530
|
)
|
|
(2,525
|
)
|
||
Purchases of intangible assets
|
(2,429
|
)
|
|
(1,853
|
)
|
||
Other investing activities
|
—
|
|
|
(300
|
)
|
||
Net cash used in investing activities
|
$
|
(10,831
|
)
|
|
$
|
(28,042
|
)
|
Cash flows from financing activities:
|
|
|
|
|
|
||
Repayments of long-term borrowings
|
(31,406
|
)
|
|
—
|
|
||
Payment of contingent consideration
|
(480
|
)
|
|
—
|
|
||
Holdback and other payments related to business combinations
|
(1,170
|
)
|
|
—
|
|
||
Proceeds from the issuance of common stock under stock-based compensation plans
|
6,138
|
|
|
7,962
|
|
||
Cash paid for shares withheld for taxes
|
(2,308
|
)
|
|
(2,864
|
)
|
||
Dividend payments
|
(354
|
)
|
|
—
|
|
||
Excess tax benefits from stock-based awards
|
486
|
|
|
914
|
|
||
Purchases of treasury stock
|
—
|
|
|
(19,147
|
)
|
||
Net cash used in financing activities
|
$
|
(29,094
|
)
|
|
$
|
(13,135
|
)
|
Net change in cash and cash equivalents
|
(25,522
|
)
|
|
(27,138
|
)
|
||
Cash and cash equivalents, beginning of period
|
52,208
|
|
|
99,435
|
|
||
Cash and cash equivalents, end of period
|
$
|
26,686
|
|
|
$
|
72,297
|
|
Significant non-cash transactions:
|
|
|
|
||||
Holdbacks for business combinations
|
$
|
1,658
|
|
|
$
|
—
|
|
|
As of
September 30, 2016 |
|
As of
December 31, 2015 |
||||
Cash and cash equivalents:
|
|
|
|
|
|
||
Cash
|
$
|
13,765
|
|
|
$
|
16,257
|
|
Money market accounts
|
10,923
|
|
|
35,951
|
|
||
Commercial paper
|
1,998
|
|
|
—
|
|
||
Total cash and cash equivalents
|
$
|
26,686
|
|
|
$
|
52,208
|
|
Short-term investments:
|
|
|
|
|
|
||
Corporate bonds
|
$
|
12,091
|
|
|
$
|
9,657
|
|
Commercial paper
|
992
|
|
|
—
|
|
||
Total short-term investments
|
$
|
13,083
|
|
|
$
|
9,657
|
|
|
|
|
Fair Value Measurements
|
||||||||||||
Assets (Liabilities)
|
Total
|
|
Quoted
Prices in
Active
Markets for
Identical
Assets
(Level 1)
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
||||||||
As of September 30, 2016
|
|
|
|
|
|
|
|
|
|
|
|
||||
Corporate bonds
|
$
|
12,091
|
|
|
$
|
—
|
|
|
$
|
12,091
|
|
|
$
|
—
|
|
Commercial paper
|
$
|
992
|
|
|
$
|
—
|
|
|
$
|
992
|
|
|
$
|
—
|
|
As of December 31, 2015
|
|
|
|
|
|
|
|
|
|
|
|
||||
Corporate bonds
|
$
|
9,657
|
|
|
$
|
—
|
|
|
$
|
9,657
|
|
|
$
|
—
|
|
Contingent consideration(1)
|
$
|
(480
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(480
|
)
|
(1)
|
Represents the final payment under the contingent consideration related to the acquisition of assets from Phorus, Inc. and Phorus, LLC, which was classified in accrued expenses on the consolidated balance sheet as of December 31, 2015. In the first quarter of 2016, the Company paid this remaining liability in full.
|
|
Weighted
Average Estimated Useful Life (years) |
|
|
|
Preliminary Fair Value as of December 31, 2015
|
|
Measurement Period Adjustments (1)
|
|
Final Fair Value
|
||||||
Cash and cash equivalents
|
|
|
|
|
$
|
20,837
|
|
|
|
|
$
|
20,837
|
|
||
Short-term investments
|
|
|
|
|
|
4,000
|
|
|
|
|
4,000
|
|
|||
Accounts receivable
|
|
|
|
|
|
13,468
|
|
|
644
|
|
(2)
|
14,112
|
|
||
Prepaid expenses and other current assets
|
|
|
|
|
|
1,058
|
|
|
131
|
|
(3)
|
1,189
|
|
||
Property and equipment
|
|
|
|
|
|
1,656
|
|
|
|
|
1,656
|
|
|||
Goodwill
|
|
|
|
|
|
58,370
|
|
|
(20,299
|
)
|
(4)
|
38,071
|
|
||
Identifiable intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Customer relationships
|
10
|
|
70,225
|
|
|
|
|
|
|
|
|
||||
Developed technology
|
10
|
|
33,590
|
|
|
|
|
|
|
|
|
||||
Tradenames
|
10
|
|
9,590
|
|
|
|
|
|
|
|
|
||||
IPR&D
|
|
|
7,583
|
|
|
|
|
|
|
|
|
||||
Total identifiable intangible assets
|
|
|
|
|
|
120,988
|
|
|
|
|
120,988
|
|
|||
Other long-term assets
|
|
|
|
|
|
190
|
|
|
(60
|
)
|
(3)
|
130
|
|
||
Deferred tax assets (liabilities), net
|
|
|
|
|
(13,058
|
)
|
|
21,258
|
|
(5)
|
8,200
|
|
|||
Accounts payable
|
|
|
|
|
|
(535
|
)
|
|
|
|
(535
|
)
|
|||
Accrued expenses
|
|
|
|
|
|
(21,402
|
)
|
|
(1,882
|
)
|
(6)
|
(23,284
|
)
|
||
Deferred revenue
|
|
|
|
|
|
(1,019
|
)
|
|
|
|
(1,019
|
)
|
|||
Other long-term liabilities
|
|
|
|
|
(6,783
|
)
|
|
208
|
|
(5)
|
(6,575
|
)
|
|||
Total purchase price
|
|
|
|
|
$
|
177,770
|
|
|
—
|
|
|
$
|
177,770
|
|
|
Goodwill
|
||
Balance at December 31, 2015
|
$
|
108,726
|
|
Purchase price allocation adjustments, net
|
(20,299
|
)
|
|
Increase due to current period business combinations
|
2,265
|
|
|
Balance at September 30, 2016
|
$
|
90,692
|
|
|
Weighted
Average
Life
(Years)
|
|
As of September 30, 2016
|
|
As of December 31, 2015
|
||||||||||||||||||||
Gross
Amount
|
|
Accumulated
Amortization
|
|
Net
Carrying
Amount
|
|
Gross
Amount
|
|
Accumulated
Amortization
|
|
Net
Carrying
Amount
|
|||||||||||||||
Customer relationships
|
9
|
|
$
|
116,838
|
|
|
$
|
(31,513
|
)
|
|
$
|
85,325
|
|
|
$
|
116,026
|
|
|
$
|
(22,039
|
)
|
|
$
|
93,987
|
|
Acquired technology
|
9
|
|
56,151
|
|
|
(18,375
|
)
|
|
37,776
|
|
|
52,073
|
|
|
(14,071
|
)
|
|
38,002
|
|
||||||
Tradenames
|
9
|
|
12,912
|
|
|
(3,683
|
)
|
|
9,229
|
|
|
12,851
|
|
|
(2,452
|
)
|
|
10,399
|
|
||||||
Contractual rights
|
5
|
|
8,363
|
|
|
(3,833
|
)
|
|
4,530
|
|
|
7,713
|
|
|
(2,527
|
)
|
|
5,186
|
|
||||||
Patents
|
5
|
|
5,155
|
|
|
(1,821
|
)
|
|
3,334
|
|
|
3,805
|
|
|
(1,538
|
)
|
|
2,267
|
|
||||||
Trademarks
|
10
|
|
919
|
|
|
(468
|
)
|
|
451
|
|
|
894
|
|
|
(417
|
)
|
|
477
|
|
||||||
Non-compete
|
2
|
|
553
|
|
|
(496
|
)
|
|
57
|
|
|
492
|
|
|
(457
|
)
|
|
35
|
|
||||||
Total amortizable intangible assets
|
|
|
$
|
200,891
|
|
|
$
|
(60,189
|
)
|
|
$
|
140,702
|
|
|
$
|
193,854
|
|
|
$
|
(43,501
|
)
|
|
$
|
150,353
|
|
IPR&D
|
|
|
4,205
|
|
|
—
|
|
|
4,205
|
|
|
7,583
|
|
|
—
|
|
|
7,583
|
|
||||||
Total other intangible assets
|
|
|
$
|
205,096
|
|
|
$
|
(60,189
|
)
|
|
$
|
144,907
|
|
|
$
|
201,437
|
|
|
$
|
(43,501
|
)
|
|
$
|
157,936
|
|
|
For the Three Months
Ended September 30, |
|
For the Nine Months
Ended September 30, |
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Cost of revenue
|
$
|
5,111
|
|
|
$
|
2,392
|
|
|
$
|
15,085
|
|
|
$
|
7,146
|
|
Operating expenses
|
543
|
|
|
266
|
|
|
1,620
|
|
|
792
|
|
||||
Total amortization of intangible assets
|
$
|
5,654
|
|
|
$
|
2,658
|
|
|
$
|
16,705
|
|
|
$
|
7,938
|
|
Years Ending December 31,
|
Estimated
Amortization
Expense
|
||
2016 (remaining 3 months)
|
$
|
5,775
|
|
2017
|
22,640
|
|
|
2018
|
20,559
|
|
|
2019
|
19,142
|
|
|
2020
|
15,676
|
|
|
2021 and thereafter
|
56,910
|
|
|
Total
|
$
|
140,702
|
|
|
As of
September 30, 2016 |
|
As of
December 31, 2015 |
||||
Accrued payroll and related benefits
|
$
|
13,670
|
|
|
$
|
17,998
|
|
Contingent consideration
|
—
|
|
|
480
|
|
||
Other
|
4,293
|
|
|
4,482
|
|
||
Total accrued expenses
|
$
|
17,963
|
|
|
$
|
22,960
|
|
|
As of
September 30, 2016 |
|
As of
December 31, 2015 |
||||
Debt outstanding under term loan, current portion
|
$
|
26,875
|
|
|
$
|
21,875
|
|
Debt issuance costs, current portion
|
(389
|
)
|
|
(389
|
)
|
||
Current portion of long-term debt, net
|
$
|
26,486
|
|
|
$
|
21,486
|
|
|
|
|
|
||||
Debt outstanding under term loan, long-term
|
$
|
66,719
|
|
|
$
|
103,125
|
|
Debt outstanding under revolver, long-term
|
35,000
|
|
|
35,000
|
|
||
Debt issuance costs, long-term
|
(1,167
|
)
|
|
(1,459
|
)
|
||
Long-term debt, net
|
$
|
100,552
|
|
|
$
|
136,666
|
|
Years Ending December 31,
|
|
||
2016 (remaining 3 months)
|
$
|
10,469
|
|
2017
|
21,876
|
|
|
2018
|
21,876
|
|
|
2019
|
21,876
|
|
|
2020
|
52,497
|
|
|
Total
|
$
|
128,594
|
|
For the Three Months
Ended September 30, |
|
For the Nine Months
Ended September 30, |
||||||||||||
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
$
|
983
|
|
|
$
|
75
|
|
|
$
|
3,276
|
|
|
$
|
223
|
|
|
For the Three Months
Ended September 30, |
|
For the Nine Months
Ended September 30, |
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Numerator:
|
|
|
|
|
|
|
|
||||||||
Net income (loss)
|
$
|
570
|
|
|
$
|
(2,802
|
)
|
|
$
|
5,792
|
|
|
$
|
539
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted average shares outstanding
|
17,701
|
|
|
17,255
|
|
|
17,560
|
|
|
17,431
|
|
||||
Effect of dilutive securities:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Stock options
|
638
|
|
|
—
|
|
|
363
|
|
|
568
|
|
||||
Restricted stock
|
278
|
|
|
—
|
|
|
192
|
|
|
159
|
|
||||
ESPP
|
20
|
|
|
—
|
|
|
11
|
|
|
9
|
|
||||
Weighted average diluted shares outstanding
|
18,637
|
|
|
17,255
|
|
|
18,126
|
|
|
18,167
|
|
||||
Basic net income (loss) per common share
|
$
|
0.03
|
|
|
$
|
(0.16
|
)
|
|
$
|
0.33
|
|
|
$
|
0.03
|
|
Diluted net income (loss) per common share
|
$
|
0.03
|
|
|
$
|
(0.16
|
)
|
|
$
|
0.32
|
|
|
$
|
0.03
|
|
Anti-dilutive shares excluded from the determination of diluted net income (loss) per share
|
305
|
|
|
3,779
|
|
|
1,475
|
|
|
535
|
|
•
|
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.
|
•
|
Excluding royalty recoveries, revenue in the third quarter of 2016 increased by 61% compared to the prior year quarter, driven largely by royalties from HD Radio technology acquired in October 2015.
|
•
|
Revenues from the mobile market increased 43% in the third quarter of 2016 compared to the prior year quarter.
|
|
|
|
|
|
Change
|
|||||||||
|
2016
|
|
2015
|
|
$
|
|
%
|
|||||||
|
($ in thousands)
|
|||||||||||||
Three months ended September 30,
|
$
|
48,749
|
|
|
$
|
30,673
|
|
|
$
|
18,076
|
|
|
59
|
%
|
Nine months ended September 30,
|
$
|
142,599
|
|
|
$
|
99,036
|
|
|
$
|
43,563
|
|
|
44
|
%
|
|
2016
|
|
%
|
|
2015
|
|
%
|
|
Percentage point change
in gross profit margin
|
||||
|
($ in thousands)
|
|
|
||||||||||
Three months ended September 30,
|
$
|
42,300
|
|
|
87%
|
|
$
|
27,971
|
|
|
91%
|
|
(4)%
|
Nine months ended September 30,
|
$
|
123,848
|
|
|
87%
|
|
$
|
90,807
|
|
|
92%
|
|
(5)%
|
|
|
|
|
|
Change
|
|||||||||
|
2016
|
|
2015
|
|
$
|
|
%
|
|||||||
|
($ in thousands)
|
|||||||||||||
Three months ended September 30,
|
$
|
26,283
|
|
|
$
|
21,348
|
|
|
$
|
4,935
|
|
|
23
|
%
|
% of Revenue
|
54
|
%
|
|
70
|
%
|
|
|
|
|
|
|
|||
Nine months ended September 30,
|
$
|
71,563
|
|
|
$
|
59,317
|
|
|
$
|
12,246
|
|
|
21
|
%
|
% of Revenue
|
50
|
%
|
|
60
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Change
|
|||||||||
|
2016
|
|
2015
|
|
$
|
|
%
|
|||||||
|
($ in thousands)
|
|||||||||||||
Three months ended September 30,
|
$
|
13,489
|
|
|
$
|
9,320
|
|
|
$
|
4,169
|
|
|
45
|
%
|
% of Revenue
|
28
|
%
|
|
30
|
%
|
|
|
|
|
|
|
|||
Nine months ended September 30,
|
$
|
38,788
|
|
|
$
|
28,559
|
|
|
$
|
10,229
|
|
|
36
|
%
|
% of Revenue
|
27
|
%
|
|
29
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Change
|
|||||||||
|
2016
|
|
2015
|
|
$
|
|
%
|
|||||||
|
($ in thousands)
|
|||||||||||||
Three months ended September 30,
|
$
|
(1,234
|
)
|
|
$
|
(173
|
)
|
|
$
|
(1,061
|
)
|
|
(613
|
)%
|
Nine months ended September 30,
|
$
|
(3,633
|
)
|
|
$
|
(792
|
)
|
|
$
|
(2,841
|
)
|
|
(359
|
)%
|
|
2016
|
|
2015
|
||||
|
($ in thousands)
|
||||||
Nine months ended September 30,
|
$
|
4,072
|
|
|
$
|
2,000
|
|
Effective tax rate
|
41
|
%
|
|
79
|
%
|
•
|
rapid technological change and product obsolescence;
|
•
|
new and improved product introductions;
|
•
|
changing consumer demands;
|
•
|
increasingly competitive product landscape; and
|
•
|
evolving industry standards.
|
•
|
greater name recognition;
|
•
|
a longer operating history;
|
•
|
a greater global footprint and presence;
|
•
|
more developed distribution channels and deeper relationships with our common customer base;
|
•
|
a more extensive customer base;
|
•
|
technologies that provide features that ours do not;
|
•
|
broader product and service offerings;
|
•
|
greater resources for competitive activities, such as research and development, marketing, strategic acquisitions, alliances, joint ventures, sales and marketing, subsidies and lobbying industry and government standards;
|
•
|
more technicians and engineers;
|
•
|
greater technical support;
|
•
|
the ability to offer open source or free codecs; and
|
•
|
greater inclusion in government or industry standards.
|
•
|
the number of radio stations broadcasting digitally using HD Radio technology;
|
•
|
the willingness of automobile manufacturers to include HD Radio receivers in their vehicles;
|
•
|
the willingness of manufacturers to incorporate HD Radio technology into their products;
|
•
|
the cost and availability of HD Radio enabled products; and
|
•
|
the marketing and pricing strategies that we employ and that are employed by our licensees and retailers.
|
•
|
internet streaming, cable-based audio programming and other digital audio broadcast formats;
|
•
|
satellite delivered digital audio radio services that offer numerous programming channels;
|
•
|
other digital radio competitors, such as Digital Radio Mondiale, or DAB; and
|
•
|
growth in use of portable devices for storage and playback of audio content.
|
•
|
our competitors may produce competitive technologies, products or services that do not unlawfully infringe upon our intellectual property rights;
|
•
|
the laws related to the protection of intellectual property may not be the same in all countries or may change over time resulting in no or inadequate protection for our intellectual property, or may restrict the scope of our intellectual property rights, and mechanisms for enforcement of intellectual property rights may be inadequate;
|
•
|
we may be unable to successfully identify or prosecute unauthorized uses of our technologies;
|
•
|
efforts to identify and prosecute unauthorized uses of our technologies are time consuming, expensive, and divert resources from the operation of our business;
|
•
|
our patents may be challenged, found unenforceable or invalidated by our competitors;
|
•
|
our pending patent applications may be found not patentable, may not issue, or if issued, may not provide meaningful protection for related products or proprietary rights;
|
•
|
we may not be able to practice our trade secrets as a result of patent protection afforded a third-party for such product, technique or process; and
|
•
|
we may not be able to prevent the unauthorized disclosure or use of our technical knowledge or other trade secrets by employees, consultants, and advisors.
|
•
|
problems assimilating the purchased technologies, products, or business operations;
|
•
|
significant future charges relating to in-process research and development and the amortization of intangible assets;
|
•
|
significant amount of goodwill and other intangible assets that are not amortizable and are subject to annual impairment review and potential impairment losses;
|
•
|
problems maintaining and enforcing uniform standards, procedures, controls, policies and information systems;
|
•
|
unanticipated costs, including accounting and legal fees, capital expenditures, and transaction expenses;
|
•
|
diversion of management's attention from our core business;
|
•
|
adverse effects on existing business relationships with suppliers and customers;
|
•
|
risks associated with entering markets in which we have no or limited experience;
|
•
|
unanticipated or unknown liabilities relating to the acquired businesses;
|
•
|
the need to integrate accounting, management information, manufacturing, human resources and other administrative systems and personnel to permit effective management;
|
•
|
uncovering information missed or not understood in target diligence; and
|
•
|
potential loss of key employees of acquired organizations.
|
•
|
recruit, hire, and train additional personnel;
|
•
|
implement and improve our operational and financial systems, procedures, and controls;
|
•
|
maintain our cost structure at an appropriate level based on the revenues and cash we forecast and generate
|
•
|
manage multiple concurrent development projects; and
|
•
|
manage operations in multiple time zones with different cultures and languages.
|
•
|
our existing employment agreements with the members of our management team allow such persons to terminate their employment with us at any time;
|
•
|
we do not have employment agreements with a majority of our key engineering and technical personnel;
|
•
|
not maintaining a competitive compensation package, including cash and equity compensation;
|
•
|
our ability to obtain stockholder support for new or amended equity plans to provide the level of initial and annual equity grants expected by key talent in today's competitive job market; and
|
•
|
significant portions of the equity awards are vested or may be underwater.
|
•
|
expand our sales and marketing activities, including the continued development of our international operations and increased advertising;
|
•
|
adopt a more customer-focused business model which is expected to entail additional hiring;
|
•
|
acquire businesses or technologies and integrate them into our existing organization;
|
•
|
increase our research and development efforts to advance our existing technologies, products, and services and develop new technologies, products, and services;
|
•
|
hire additional personnel, including engineers and other technical staff;
|
•
|
expand and defend our intellectual property portfolio; and
|
•
|
upgrade our operational and financial systems, procedures, and controls.
|
•
|
unusual or burdensome foreign laws or regulatory requirements or unexpected changes to those laws or requirements;
|
•
|
tariffs, trade protection measures, import or export licensing requirements, trade embargos, and other trade barriers;
|
•
|
difficulties in attracting and retaining qualified personnel and managing foreign operations;
|
•
|
competition from foreign companies;
|
•
|
longer accounts receivable collection cycles and difficulties in collecting accounts receivable;
|
•
|
less effective and less predictable protection and enforcement of our intellectual property;
|
•
|
changes in the political or economic condition of a specific country or region, particularly in emerging markets;
|
•
|
fluctuations in the value of foreign currency versus the US dollar and the cost of currency exchange;
|
•
|
potentially adverse tax consequences, including withholding taxes, VAT, and other sales-related taxes, and changes in tax laws;
|
•
|
nationalization, expropriation or limitations on repatriation of cash; and
|
•
|
cultural differences in the conduct of business.
|
•
|
making it more difficult for us to pay or refinance our debts as they become due during adverse economic and industry conditions, because we may not have sufficient cash flows to make our scheduled debt payments;
|
•
|
causing us to use a larger portion of our cash flows to fund interest and principal payments, reducing the availability of cash to fund working capital, capital expenditures, and other business activities;
|
•
|
making it more difficult for us to take advantage of significant business opportunities, such as acquisition opportunities, and to react to changes in market or industry conditions; and
|
•
|
limiting our ability to borrow additional monies in the future to fund working capital, capital expenditures and other general corporate purposes.
|
•
|
acceptance of, and demand for, our technologies, products and services;
|
•
|
the costs of developing new technologies or products;
|
•
|
the extent to which we invest in new technologies and research and development projects;
|
•
|
the number and timing of acquisitions and other strategic investments;
|
•
|
the costs associated with our expansion; and
|
•
|
the costs of litigation and enforcement activities to defend our intellectual property.
|
•
|
actual or anticipated fluctuations in our results of operations or non-GAAP operating income or loss;
|
•
|
market perception of our progress toward announced objectives;
|
•
|
announcements of technological innovations by us or our competitors or technology standards;
|
•
|
announcements of significant contracts or partnerships by us or our competitors;
|
•
|
changes in our pricing policies or the pricing policies of our competitors;
|
•
|
developments with respect to intellectual property rights;
|
•
|
the introduction of new technologies or products or product enhancements by us or our competitors;
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the commencement of or our involvement in litigation;
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resolution of significant litigation in a manner adverse to our business;
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our sale or purchase of common stock or other securities in the future;
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conditions and trends in technology and entertainment industries;
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changes in market valuation or earnings of our competitors;
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the trading volume of our common stock;
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announcements of potential acquisitions or strategic investments;
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the adoption rate of new products incorporating our or our competitors' technologies, including mobile devices;
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changes in the estimation of the future size and growth rate of our markets; and
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general economic conditions.
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authorize the issuance of preferred stock which can be created and issued by the Board of Directors without prior stockholder approval, with rights senior to those of the common stock;
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provide for a classified Board of Directors, with each director serving a staggered three-year term;
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prohibit stockholders from filling Board vacancies, calling special stockholder meetings, or taking action by written consent; and
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require advance written notice of stockholder proposals and director nominations.
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DTS, Inc.
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||
Date:
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November 7, 2016
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by:
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/s/ JON E. KIRCHNER
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Jon E. Kirchner
Chairman and Chief Executive Officer
(Duly Authorized Officer)
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||
Date:
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November 7, 2016
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by:
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/s/ MELVIN L. FLANIGAN
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Melvin L. Flanigan
Executive Vice President, Finance and
Chief Financial Officer
(Principal Financial and Accounting Officer)
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‡
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This certification is being furnished solely to accompany this report pursuant to 18 U.S.C. 1350, and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.
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