SRS Labs Reports Third Quarter 2009 Results

• Press Release
• Source: SRS Labs, Inc.
• On 4:30 pm EST, Monday November 2, 2009

SANTA ANA, Calif., Nov. 2 /PRNewswire-FirstCall/ -- SRS Labs, Inc. (Nasdaq: SRSL - News), the industry leader in surround sound, audio and voice technologies, reported financial results for the third quarter ended September 30, 2009.

(Logo: http://www.newscom.com/cgi-bin/prnh/20070322/LATH036LOGO)

Revenues in the third quarter 2009 totaled a record $7.2 million, an increase of 67% from $4.3 million in the same period a year ago. The improvement was primarily due to increased revenues in the home entertainment, personal telecommunications and personal computer markets, as well a recovery of previously under-reported royalties.

Operating expenses in the quarter totaled $5.7 million, an increase of 17% from $4.9 million in the same quarter a year ago. The increase was primarily attributable to the continued investment in additional sales, marketing and engineering personnel.

For the third quarter of 2009, operating income totaled $1.4 million, an improvement from an operating loss of $0.6 million in the third quarter of 2008, and net income totaled $1.5 million or $0.10 per basic and diluted share, an improvement from a net loss of $0.3 million or $(0.02) per basic and diluted share in the third quarter of 2008.

Quarter-end cash and cash equivalents and short-term investments totaled $40.3 million as of September 30, 2009, as compared to $39.4 million at the end of the prior quarter.

"This record revenue quarter, which also marked our fourth quarter of consecutive year-over-year revenue growth, was driven by increased revenues from our new licensees and our royalty recovery program," said Thomas C.K. Yuen, SRS Lab's chairman and CEO. "We are pleased that revenues from our four most important markets; television, mobile, personal computers and MSO/Set Top Box, all had significant growth from the prior quarter, and as compared to the same quarter in the prior year.

During the third quarter of 2009 we intensified our marketing campaign to build the SRS brand by taking advantage of the strong positive consumer reaction to our TruVolume audio leveling solution. Beginning in October, our TruVolume television and movie theater advertising campaign premiered in select major metropolitan areas," said Yuen.

Business Outlook

Based on current business conditions and expectations, SRS Labs expects revenues for the fiscal year 2009 ending December 31 to exceed a 30% annual growth rate as compared to fiscal year 2008.

Conference Call

SRS Labs will hold a conference call later today (November 2, 2009) to discuss these third quarter 2009 financial results. Chairman and CEO Thomas C.K. Yuen, CFO Ulrich Gottschling and VP of Marketing Allen Gharapetian will host the call starting at 5:00 p.m. Eastern time. A question and answer session will follow management's presentation.

Dial-In Number: 1-866-219-5894

Conference ID#: 1401604

Please call the conference telephone number 5-10 minutes prior to the start time. An operator will register your name and organization and instruct you to wait until the call begins. If you have any difficulty connecting with the conference call, please contact the Liolios Group at 949-574-3860.

Investors may also listen to the conference call live online via a link available on the SRS Labs investor relations home page at www.srslabs.com.

The website will host a replay of the call available after 8:00 p.m. Eastern time. Investors may also listen to the replay by dialing 1-866-837-8032 and entering conference ID#: 1401604, available until November 16, 2009.

About SRS Labs, Inc.

Founded in 1993, SRS Labs is the industry leader in audio signal processing for consumer electronics. Beginning with the audio technologies originally developed at Hughes Aircraft, SRS Labs holds over 150 worldwide patents and is recognized by the industry as the foremost authority in research and application of audio post processing technologies based on the human auditory principles. Through partnerships with leading global CE companies, semiconductor manufacturers and software partners, SRS is recognized as the de facto standard in audio enhancement, surround sound, volume leveling and voice processing technologies. SRS solutions have been included in over one billion electronic products sold worldwide including flat panel HDTVs, STBs, mobile phones, portable media devices, PCs and automotive entertainment. SRS Labs supports its partners around the globe with a network of offices in regions including the U.S., China, Europe, Japan, Korea and Taiwan. For more information, visit www.srslabs.com. Visit SRS Labs' blog at soundingoff.srslabs.com, on Facebook at www.facebook.com/srslabs or on Twitter at www.twitter.com/srslabs.

Safe Harbor Statement

This press release includes forward-looking statements that are based on our current expectations, estimates and projections about SRS Labs, Inc., management's beliefs and certain assumptions made by us, and events beyond our control, all of which are subject to change. Such forward-looking statements include, but are not limited to, statements relating to our future growth opportunities, competitive position, expansion and investment plans, and operating results and profitability. Forward-looking statements can often be identified by words such as "expects," "anticipates," "intends," "plans," "predicts," "believes," "seeks," "estimates," "may," "will," "should," "would," "could," "likely," "potential," "continue," similar expressions, and variations or negatives of these words. These forward-looking statements are not guarantees of future results or the commitments made by us herein, and they are subject to risks, uncertainties and assumptions that could cause actual results to differ materially and adversely from those expressed in any forward-looking statement. The risks and uncertainties referred to above include, but are not limited to, the loss of any significant customer; the acceptance of new SRS Labs products and technologies; our ability to increase our brand awareness and enter into new or expanded license arrangements; the impact of competitive products and pricing; general economic and business conditions that may adversely impact sales of consumer products incorporating our technologies or that otherwise may impact our operating results and future performance; the timely development and release of technologies by the Company; and such other factors described in our filings with the Securities and Exchange Commission. The forward-looking statements in this press release speak only as of the date they are made. We do not undertake any obligation to revise or update publicly any forward-looking statement for any reason.

    Company Contacts:
    Ulrich Gottschling
    Chief Financial Officer
    SRS Labs, Inc.
    Tel 949-442-5596
    ir@srslabs.com

    Matt Glover
    Investor Relations
    Liolios Group, Inc.
    Tel 949-574-3860
    info@liolios.com

                     SRS LABS, INC. AND SUBSIDIARIES
                  CONDENSED CONSOLIDATED BALANCE SHEETS

                                 September 30, 2009   December 31, 2008
                                 ------------------   -----------------
                                     (unaudited)
                 ASSETS
    Current Assets
        Cash and cash equivalents    $26,793,969     $31,599,087
        Accounts receivable, net       1,014,915         332,711
        Prepaid expenses and other
         current assets                1,181,189         864,095
        Short-term investments        13,501,000       7,836,000
                                      ----------       ---------
          Total Current Assets        42,491,073      40,631,893

        Property and equipment, net      481,125         423,921
        Intangible assets, net         2,519,578       2,354,725
        Deferred income taxes, net     5,011,442       3,471,421
                                       ---------       ---------
         Total Assets                $50,503,218     $46,881,960
                                     ===========     ===========

            LIABILITIES AND STOCKHOLDERS' EQUITY
    Current Liabilities
        Accounts payable                $553,473        $314,382
        Accrued liabilities            1,396,561         996,268
        Deferred revenue               1,461,055       1,802,024
                                       ---------       ---------
         Total Current Liabilities     3,411,089       3,112,674

    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; 14,476,094 and
     14,419,418 shares issued
     and outstanding at
     September 30, 2009 and
     December 31, 2008,
     respectively                         14,477          14,420
        Additional paid-in capital    64,299,297      62,639,075
        Accumulated deficit          (17,221,645)    (18,884,209)
                                     -----------     -----------
          Total Stockholders' Equity  47,092,129      43,769,286
                                      ----------      ----------
          Total Liabilities and
           Stockholders' Equity      $50,503,218     $46,881,960
                                     ===========     ===========

                          SRS LABS, INC. AND SUBSIDIARIES
                   CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                     (Unaudited)


                               Three Months Ended         Nine Months Ended
                                 September 30,               September 30,
                              -------------------         ------------------
                              2009           2008         2009          2008
                              ----           ----         ----          ----

    Revenues             $7,230,118    $4,319,433  $17,989,657   $13,438,565
    Cost of sales            67,858        22,107      202,032        88,426
                             ------        ------      -------        ------

    Gross profit          7,162,260     4,297,326   17,787,625    13,350,139

    Operating expenses:
      Sales and
       marketing (1)      2,852,165     2,399,362    8,089,263     6,946,502
      Research and
       development (1)    1,481,555       999,969    4,059,132      2,859,899
      General and
       administrative
       (1)                1,411,162     1,524,529    4,217,046      4,490,484
                          ---------     ---------    ---------      ---------
        Total operating
         expenses         5,744,882     4,923,860   16,365,441     14,296,885
                          ---------     ---------   ----------     ----------

    Operating (loss)
     income               1,417,378      (626,534)   1,422,184      (946,746)
    Other income, net        82,724       310,219      279,543      1,093,543
                             ------       -------      -------      ---------
     (Loss) income
      before income
      taxes               1,500,102      (316,315)   1,701,727        146,797
     Income taxes            25,088             -       39,163         13,232
                             ------           ---       ------         ------
     Net (loss) income   $1,475,014     $(316,315)  $1,662,564       $133,565
                         ==========     =========   ==========       ========

    Net (loss) income
     per common share:
      Basic                   $0.10        $(0.02)       $0.12          $0.01
      Diluted                 $0.10        $(0.02)       $0.11          $0.01

    Weighted average
     shares used in the
     per share
     calculations:
      Basic              14,627,089    15,779,486   14,439,228     15,778,493
      Diluted            15,184,824    15,779,486   14,762,281     16,249,158


    (1)  Includes share-based compensation as follows:

                              Three Months Ended         Nine Months Ended
                                 September 30,            September 30,
                             --------------------       -------------------
                             2009            2008       2009           2008
                             ----            ----       ----           ----

    Sales and marketing    $134,804      $111,751    $381,721      $381,607
    Research and
     development            114,949        85,734     333,768       294,684
    General and
     administrative         233,224       227,706     714,851       666,142
                            -------       -------     -------       -------
      Total share-based
       compensation        $482,977      $425,191  $1,430,340    $1,342,433
                           ========      ========  ==========    ==========

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