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Company Posts Continued Revenue and Earnings Growth

For the second quarter of 2003, DTS reported total revenues of $11.7 million, an increase of 40% over $8.4 million in the second quarter of 2002. Gross margins for the second quarter were strong at 76% compared to 69% in the prior year quarter. Net income attributable to common stockholders was $1.4 million, or $0.13 per diluted share, in the second quarter of 2003, compared to a net loss attributable to common stockholders of $124,000, or ($0.03) per basic and diluted share, in the second quarter of 2002.

For the six-month period ended June 30, 2003, DTS reported total revenues of $23.5 million, representing an increase of 32% over $17.8 million in the same period of 2002. Gross margins for the first six months of 2003 were 78% compared to 71% in the prior year period. Net income attributable to common stockholders was $2.9 million for the six-month period ended June 30, 2003, or $0.27 per diluted share, compared to $885,000, or $0.10 per diluted share, in the same period of 2002.

"Following our initial public offering in which we raised net proceeds of $63.2 million, DTS is pleased to report such solid results in our first quarterly earnings announcement," commented Jon Kirchner, President and CEO of DTS. "We saw progress across all areas of our business in the quarter, particularly in our new product and emerging markets. We are pleased with our overall financial progress, considering this has historically been our slowest quarter.

"Within our Consumer business, we continued to experience solid growth across several segments. In addition, our broadcast trial with Swedish Radio has continued to generate positive interest from consumers. In our DTS Entertainment business, we released several important titles and laid the groundwork for broader distribution partnerships, both in the U.S. and abroad.

"Our Theatrical Division continued to license its technology to leading studios for incorporation of DTS soundtracks into major U.S. films. During the quarter, we also began shipping our XD-10 Cinema Media player to our exhibition customers. We expect the XD-10 Cinema Media player, together with our recently introduced DTS-CSS system which offers compelling benefits for both foreign subtitling and domestic captioning, to be significant drivers of growth in the future."

Conference Call Information

DTS will broadcast a conference call discussing the company's second quarter results today, Thursday, August 7, 2003, starting at 5:00 p.m. Eastern Time. A live Webcast of the call will be available from the Investor Relations section of the company's corporate website at http://phx.corporate-ir.net/phoenix.zhtml?c=142468&p=irol-IRHome. A replay of the Webcast will begin two hours after the completion of the call, and will be available through August 21, 2003. An audio replay of the call will also be available to investors beginning at 7:00 p.m. ET on August 7, 2003, through August 10, 2003, by dialing 800-405-2236 and entering the passcode 547171.

About DTS

Digital Theater Systems, Inc. (DTS) is a digital technology company dedicated to delivering the ultimate entertainment experience. DTS decoders are in virtually every major brand of 5.1-channel surround processors, and there are more than 100 million DTS-licensed consumer electronics products available worldwide. A pioneer in multi-channel audio, DTS technology is in home theater, car audio, PC and game console products, as well as 5.1 Music Discs, DVD-Video, DVD-Audio and DVD-ROM software. Additionally, DTS is featured on more than 20,000 motion picture screens worldwide. Founded in 1993, DTS is headquartered in Agoura Hills, California and has offices in the United Kingdom, Japan and China. For further information, please visit www.dtsonline.com.

DTS, DTS-ES and Neo:6 are trademarks of Digital Theater Systems, Inc.

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," "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 or financial or operating performance; 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, 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, 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, changes in domestic and international market and political conditions, and other risks and uncertainties more fully described in the Company's Form S-1 registration statement as declared effective on July 9, 2003 by the Securities and Exchange Commission. DTS assumes no obligation to update any forward-looking statement to reflect events or circumstances arising after the date on which it was made.

                             (TABLES TO FOLLOW )



                        DIGITAL THEATER SYSTEMS, INC.

                    CONSOLIDATED STATEMENTS OF OPERATIONS
          (Amounts in thousands, except share and per share amounts)

                         For the Three Months Ended   For the Six Months Ended
                                   June 30,                   June 30,
                             2002          2003           2002        2003
                                 (Unaudited)                 (Unaudited)
    Revenues:
       Technology and film
        licensing           $6,237        $9,554        $13,524       $19,678
       Product sales and
        other revenues       2,143         2,147          4,273         3,779
          Total revenues     8,380        11,701         17,797        23,457
    Cost of goods sold:
       Technology and film
        licensing              967         1,045          1,933         1,885
       Product sales and
        other revenues       1,608         1,744          3,308         3,317
          Total cost of
           goods sold        2,575         2,789          5,241         5,202
    Gross profit             5,805         8,912         12,556        18,255
    Operating expenses:
       Selling, general and
        administrative
        (includes stock-based
        compensation of $22 and
        $425 for the three and
        six months ended
        June 30, 2003,
        respectively)        4,211         4,865          7,712         9,856
       Research and
        development          1,031         1,174          1,861         2,344
          Total operating
           expenses          5,242         6,039          9,573        12,200
    Income from operations     563         2,873          2,983         6,055
    Interest and other
     (income) expense, net      33           (13)            94            53
    Income before provision
     for income taxes          530         2,886          2,889         6,002
    Provision for income
     taxes                     197         1,041          1,076         2,128
    Net income                 333         1,845          1,813         3,874
    Accretion and accrued
     dividends on preferred
     stock                    (457)         (467)          (928)         (935)
    Net income (loss)
     attributable to common
     stockholders            $(124)       $1,378           $885        $2,939
    Net income (loss)
     attributable to common
     stockholders per
     common share:
       Basic                $(0.03)        $0.31          $0.21         $0.66
       Diluted              $(0.03)        $0.13          $0.10         $0.27
    Weighted average
     shares used to compute
     net income (loss)
     attributable to common
     stockholders per
     common share:
       Basic             4,295,419     4,500,885      4,295,419     4,462,479
       Diluted           4,295,419    10,970,303      9,137,588    10,801,941


                        DIGITAL THEATER SYSTEMS, INC.

                         CONSOLIDATED BALANCE SHEETS
          (Amounts in thousands, except share and per share amounts)

                                                 As of            As of
                                             December 31,       June 30,
                                                 2002             2003
                                                               (Unaudited)
                                      ASSETS
    Current assets:
       Cash and cash equivalents                 $1,907            $3,222
       Short-term investments                     2,144             2,156
       Accounts receivable, net of allowance
        for doubtful accounts of $437
        and $506 at December 31, 2002 and
        June 30, 2003, respectively               5,618             5,417
       Inventories                                4,646             5,394
       Deferred tax assets, net                   5,129             5,129
       Prepaid expenses and other                   729             1,402
             Total current assets                20,173            22,720
    Property and equipment, net                   3,099             3,014
    Patents and trademarks                          442               409
    Deferred tax asset                            2,049             2,049
    Other assets                                     16                21
             Total assets                       $25,779           $28,213


    LIABILITIES, MANDATORILY REDEEMABLE PREFERRED STOCK, AND STOCKHOLDERS'
     EQUITY (DEFICIT)
    Current liabilities:
       Accounts payable                          $2,638            $2,114
       Accrued expenses                           5,627             6,293
       Income taxes payable                       2,527             1,833
             Total current liabilities           10,792            10,240
    Commitments and contingencies
    Mandatorily redeemable preferred stock -
     $0.0001 par value, 10,000,000 shares
     authorized; 7,800,891 shares outstanding
     at December 31, 2002 and June 30, 2003      21,302            20,919
    Stockholders' equity (deficit):
     Common stock - $0.0001 par value,
      30,000,000 shares authorized; 4,412,116
      and 4,566,924 issued and outstanding
      at December 31, 2002 and June 30, 2003,
      respectively.                                   1                 1
       Additional paid-in capital                (1,008)             (578)
       Accumulated deficit                       (5,308)           (2,369)
          Total stockholders' deficit            (6,315)           (2,946)
             Total liabilities, mandatorily
              redeemable preferred stock and
              stockholders' deficit             $25,779           $28,213