EX-99.1 2 e19673ex99_1.txt PRESS RELEASE Exhibit 99.1 SRS Labs Reports Solid 2004 Third Quarter Results Company Reports 30% Revenue Increase and Improved Profits SANTA ANA, Calif., Nov. 9 /PRNewswire-FirstCall/ -- SRS Labs, Inc. (Nasdaq: SRSL), a leading provider of audio, voice and semiconductor technology solutions, today reported financial results for its third quarter and nine months ended September 30, 2004. For the three months ended September 30, 2004, the company reported improved consolidated revenue of $6.4 million, a 30 percent increase over consolidated revenue of $4.9 million for the same quarter in 2003. For the quarter, the company delivered net income of $737,004, or $0.05 earnings per share, compared to a net income of $118,826, or $0.01 earnings per share, for the same period last year. For the third quarter, SRS Labs reported semiconductor revenue of $3.6 million from its Hong Kong-based subsidiary, Valence Technologies Limited, representing an increase of 23 percent over last year's third quarter revenue of $3.0 million. The company reported licensing revenue of $2.7 million for the third quarter, an increase of 42 percent over revenue of $1.9 million in the same period in 2003. SRS Labs reported consolidated gross margin of 78 percent for the third quarter 2004, compared to 75 percent reported for the third quarter last year. For the nine months ended September 30, 2004, SRS Labs reported consolidated revenue of $17.1 million with a net income of $1.1 million, or $0.07 per diluted share, compared to revenue in the same period last year of $13.9 million and a net income of $127,478, or $0.01 earnings per share. The company's cash and investments grew to $26.3 million as of September 30, 2004, compared to $23.3 million reported on December 31, 2003. Business Summary Chairman and CEO of SRS Labs, Thomas C.K. Yuen said, "With year-over-year revenue growth for both licensing and semiconductors, our solid Q3 performance can be attributed to the success of our diversification strategies. For semiconductors, while our third quarter is historically strong due to seasonality, the increase can also be attributed to the alleviation of foundry capacity constraints which enabled us to fulfill a significant portion of our backlog orders. One of the key drivers for the growth of semiconductor revenue was ASP chips with SRS technology, which increased to 31 percent of total semiconductor revenue from just 22 percent in last year's third quarter. Yuen continued: "For licensing, we are pleased that the successful execution of our diversification strategy into new markets resulted in a solid 42 percent increase in revenue over the third quarter of last year. We derived revenue from new customers in several of our targeted market segments, including set-top box, mobile phones, digital audio players and personal computers. Many existing customers began ramping production for the holiday selling season and expanded their use of our technologies in a variety of segments, including advanced displays, such as plasma, projection and LCD televisions, and A/V receivers. Then, to further advance our strategy of branding the SRS logo to consumers, we made a strategic investment in Coming Home Studios, who is a leader in the production of music concert DVDs." Business Outlook "While we showed increased semiconductors sales in the third quarter, this sell through has significantly reduced our backlog for ASIC chips and we have seen a slower reorder rate for the fourth quarter," Yuen said. "We also made several additional changes in our Valence management and sales staff which we believe will better position SRS Labs to achieve our diversification goals, however this transition could adversely affect our short-term sales results as the new Valence team implements its sales strategy. We believe these factors, along with an overall slowdown within the semiconductor industry, indicate a softer outlook for our fourth quarter and the first quarter of 2005 for our Valence subsidiary. Yuen concluded, "On the licensing side, our fourth quarter is an active period for industry trade shows and events, where we work closely with our platform partners to launch new SRS audio solutions for our target markets. For example, in late October we launched our new SRS 3D Positional Audio at the CTIA Wireless I.T. & Entertainment Show, which is geared for the mobile device market. We look forward to the expanded use of our technologies by customers in our targeted segments in the fourth quarter, as we traditionally recognize revenue from manufacturers that ship products in Q3 for the holiday selling season." Investors can listen to the company's conference call live today at 2:00 pm Pacific (5:00 pm Eastern) through the investor section of SRS Labs' website http://www.srslabs.com/IREvents.asp. Please log on at least 15 minutes early to register and follow the instructions to download and install any necessary audio software. If you are unable to listen to the live web cast, an online replay will be available shortly after the call. To listen to the call live via telephone, dial (866) 246-6871, ask for the "SRS Labs 2004 Q3 Conference Call," and provide the pass code 584619. To access the taped replay, dial (866) 219-1444 and enter the same pass code. The telephone replay will be available until November 10 at 12:00 a.m. PST. About SRS Labs, Inc. SRS Labs is a recognized leader in the advancement of audio and voice technology. The company works with the world's top manufacturers to provide a richer entertainment experience through patented sound techniques. SRS Labs' technologies can be heard through products ranging from televisions, LCD and plasma monitors, DVD players, cell phones, car audio systems, headphones and notebook and desktop computers. The company also offers hardware and software tools to professionals and consumers for the creation, production and broadcast of content featuring SRS Labs' technologies. SRS Labs' subsidiary, Valence Technologies Limited, is a Hong Kong-based semiconductor company that designs and sells custom ASICs and standard ICs to leading manufacturers worldwide. Based in Santa Ana, Calif., the company also has licensing representation in Hong Kong, Japan, Europe, and Korea. For more information about SRS Labs, Inc. please visit www.srslabs.com. The information on the aforementioned website is not incorporated by reference into this press release. Except for historical information contained in this release, statements in this release, including those made by Mr. Yuen are forward-looking statements and projections (which include statements concerning plans and objectives of management for future operations) that are based on management's belief, as well as assumptions made by, and information currently available to, management. While the Company believes that its expectations are based upon reasonable assumptions, there can be no assurances that the Company's goals and strategy will be realized. Numerous factors, including risks and uncertainties, may affect the Company's actual results and may cause results to differ materially from those expressed in forward-looking statements made by or on behalf of the Company. Some of these factors include the general market conditions concerning the semiconductor business, the acceptance of new SRS Labs' products and technologies, the impact of competitive products and pricing, the timely development and release of technologies by the Company, general business and economic conditions, especially in Asia, and other factors detailed in the Company's Form 10-K and other periodic reports filed with the SEC. SRS Labs specifically disclaims any obligation to update or revise any forward-looking statement whether as a result of new information, future developments or otherwise. For further information, please contact: Investors, Tami Yanito of SRS Labs, Inc., +1-949-442-1070, ext. 3093, tami@srslabs.com. SRS LABS, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, 2004 2003 2004 2003 Revenues: Semiconductor $3,644,298 $2,966,923 $8,992,511 $7,244,323 Licensing 2,727,861 1,919,471 8,140,592 6,638,291 Total revenues 6,372,159 4,886,394 17,133,103 13,882,614 Cost of sales: Semiconductor 1,320,855 1,226,407 3,269,622 2,750,437 Licensing 100,342 16,029 146,886 62,132 Total cost of sales 1,421,197 1,242,436 3,416,508 2,812,569 Gross margin 4,950,962 3,643,958 13,716,595 11,070,045 Operating expenses: Sales and marketing 1,372,303 1,216,568 4,149,887 3,840,155 Research and development 1,266,606 1,032,100 3,620,219 3,083,438 General and administrative 1,452,236 1,143,930 4,490,732 3,668,573 Total operating expenses 4,091,145 3,392,598 12,260,838 10,592,166 Income from operations 859,817 251,360 1,455,757 477,879 Other income, net 118,908 131,925 455,132 414,655 Minority interest -- -- -- 5,430 Income before income tax expense 978,725 383,285 1,910,889 897,964 Income tax expense 241,721 264,459 790,863 770,486 Net income $737,004 $118,826 $1,120,026 $127,478 Net income per common share: Basic $0.05 $0.01 $0.08 $0.01 Diluted $0.05 $0.01 $0.07 $0.01 Weighted average shares used in the calculation of net income per common share: Basic 14,278,589 13,076,315 14,045,162 12,956,971 Diluted 15,395,792 14,730,290 15,991,331 13,729,676 SRS LABS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS September 30, December 31, 2004 2003 (unaudited) ASSETS Current Assets Cash and cash equivalents $16,020,285 $12,795,620 Accounts receivable, net 1,258,982 1,230,423 Inventories, net 767,006 753,020 Prepaid expenses and other current assets 991,828 1,073,696 Deferred income taxes 23,406 23,406 Total Current Assets 19,061,507 15,876,165 Investments available for sale 10,281,176 10,490,210 Investment in LLC 2,025,626 -- Furniture, fixtures and equipment, net 1,956,784 1,661,980 Goodwill 533,031 533,031 Intangible assets, net 2,748,289 2,736,810 Deferred income taxes 213,647 193,134 Total Assets $36,820,060 $31,491,330 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Accounts payable $1,481,449 $1,503,851 Accrued liabilities 2,218,691 1,606,069 Income taxes payable 538,751 430,949 Total Current Liabilities 4,238,891 3,540,869 Commitments and contingencies Stockholders' Equity Preferred stock-$.001 par value; 2,000,000 shares authorized; no shares issued or outstanding -- -- Common stock -- $.001 par value; 56,000,000 shares authorized; 14,626,922 and 13,682,282 shares issued; and 14,367,965 and 13,456,982 shares outstanding at September 30, 2004 and December 31, 2003, respectively 14,627 13,683 Additional paid-in capital 62,058,625 58,423,249 Accumulated other comprehensive loss (297,523) (336,346) Accumulated deficit (28,311,498) (29,431,524) Treasury stock at cost, 258,957 and 225,300 shares at September 30, 2004 and December 31, 2003 respectively (883,062) (718,601) Total Stockholders' Equity 32,581,169 27,950,461 Total Liabilities and Stockholders' Equity $36,820,060 $31,491,330 SOURCE SRS Labs, Inc. -0- 11/09/2004 /CONTACT: Investors, Tami Yanito of SRS Labs, Inc., +1-949-442-1070, ext. 3093, tami@srslabs.com/ /Company News On-Call: http://www.prnewswire.com/comp/809275.html / /Web site: http://www.srslabs.com/IREvents.asp / /Web site: http://www.srslabs.com / (SRSL) CO: SRS Labs, Inc. ST: California IN: CPR SEM TLS SU: ERN ERP CCA MAV