Emerging Product Categories Exceed 10% of Licensing Revenues for
First Time SAN DIEGO, May 7 /PRNewswire-FirstCall/ -- DivX, Inc.
(NASDAQ:DIVX), a digital media company, today announced results for
the first quarter ended March 31, 2009. (Logo:
http://www.newscom.com/cgi-bin/prnh/20081124/LA48153LOGO) The
Company reported revenues for the first quarter of $18.7 million,
comprised primarily of $18.6 million of technology licensing
revenues. This compares to revenues of $25.0 million reported for
the same period a year ago, which included $19.1 million of
technology licensing revenues and $5.9 million of media and other
distribution and services revenues. The decrease in non-licensing
revenues was due to the transition to a new distribution agreement
with Google that was signed in the first quarter and is expected to
generate revenues in the second quarter of 2009. "It has been an
active start to the year for DivX," stated Kevin Hell, Chief
Executive Officer for DivX. "We saw meaningful traction beyond DVD
players in Q1. For the first time, our emerging product categories
represented over 10% of licensing revenue and we certified hundreds
of new devices, including digital televisions, Blu-ray players and
mobile handsets. In addition, we introduced a major new release of
our software with the launch of DivX(R) 7 supporting H.264, and we
signed a new software distribution agreement with Google. With our
industry-wide presence, global brand, strong business model, and a
massive international community of DivX users, we remain confident
in our ability to realize our vision of enabling consumers to enjoy
high-quality video on any device and in any location." GAAP net
loss in the first quarter of 2009 was approximately $1.4 million,
or $0.04 per diluted share. DivX generated non-GAAP net income of
approximately $1.2 million, or $0.04 per diluted share. Non-GAAP
net income and earnings per diluted share exclude the following
expenses: (1) non-cash share-based compensation of approximately
$2.2 million ($1.3 million, or $0.04 per diluted share, net of
related taxes); (2) the scheduled amortization of purchased
intangible assets related to the acquisition of MainConcept of
$511,000 ($309,000, or $0.01 per diluted share, net of related
taxes); (3) the foreign exchange impact on our intercompany loan of
$313,000 ($189,000, or $0.01 per diluted share, net of related
taxes); and (4) a non-cash charge of approximately $750,000, or
$0.02 per diluted share, related to the change in value of certain
deferred tax assets, due to a change in California income tax law
enacted during the first quarter of 2009. Dan Halvorson, Executive
Vice President and Chief Financial Officer, added, "Despite the
ongoing weakness in the worldwide consumer electronics market, DivX
continues to deliver solid bottom line results through focused
execution and rigid expense management. In addition, we continue to
maintain a strong balance sheet with $137.8 million in cash and
investments, or $4.24 per share, and continue to operate our
business in a manner that is mindful of the global economic
conditions, while investing where appropriate to capture market
opportunities." Second Quarter 2009 Fiscal Outlook The following
table summarizes the Company's financial guidance for the second
quarter of 2009, its historic seasonably low quarter. The following
estimates are based on the Company's current business outlook as of
the date of this press release: Q2'09 Guidance --------------
Revenue (in millions) $14.0 - $15.0 GAAP earnings per share,
diluted ($0.10) - ($0.08) Adjustments: Non-cash share-based
compensation expense, net of income taxes $0.04 Amortization of
purchased intangibles, net of income taxes $0.01 --------------
Non-GAAP earnings per share, diluted ($0.05) - ($0.03)
-------------- These estimates are based on: 1. Expected revenues
for technology licensing of approximately 90% of total revenue for
the second quarter of 2009; and revenues for media and other
distribution and services of approximately 10% of total revenues
for the second quarter of 2009; 2. A projected effective tax rate
of approximately 41% for the second quarter of 2009 which is
dependent on the effective tax rates in our various domestic and
foreign jurisdictions; 3. Anticipated non-cash share-based
compensation expense of approximately $2.5 million ($1.5 million,
or $0.04 per diluted share, net of related taxes) for the second
quarter of 2009; and 4. The scheduled amortization of purchased
intangible assets related to the acquisition of MainConcept of
approximately $500,000 ($300,000, or $0.01 per diluted share, net
of related taxes) for the second quarter of 2009. Quarterly
Conference Call DivX management will host a conference call and
simultaneous audio webcast to discuss its first quarter 2009
results on May 7, 2009 at 1:30 p.m. Pacific Time or 4:30 p.m.
Eastern Time. To participate in the call, please dial (877)
604-9665 or outside the U.S. (719) 325-4893 to access the
conference call at least five minutes prior to the start time. A
live audio webcast will be available on the Events and
Presentations page of the Company's web site at
http://investors.divx.com/. In addition, an audio replay of the
call will be available between 7:30 p.m. Eastern Time May 7, 2009
and Midnight, Eastern Time May 14, 2009 by calling (888) 203-1112
or (719) 457-0820, with passcode 5400524. About DivX, Inc. DivX,
Inc. is a digital media company that enables consumers to enjoy a
high-quality video experience across any kind of device. DivX
creates, distributes and licenses digital video technologies that
span the "three screens" comprising today's consumer media
environment -- the PC, the television and mobile devices. Over 100
million DivX Certified(R) devices have shipped into the market from
leading consumer electronics manufacturers. DivX also offers
content providers and publishers a complete solution for the
distribution of secure, high-quality digital video content. Driven
by a globally recognized brand and a passionate community of
hundreds of millions of consumers, DivX is simplifying the video
experience to enable the digital home. Forward-Looking Statements
Statements in this press release that are not strictly historical
in nature constitute "forward-looking statements." Such statements
include, but are not limited to, references to the expected growth
and earnings potential of the DivX business, the Company's position
in the digital media space, uncertainties contributing to the
macroeconomic climate in 2009, anticipated financial results for
the second quarter 2009, and the uncertainty of anticipated revenue
under the Google software distribution agreement. Such
forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause DivX's actual
results to be materially different from historical results or from
any results expressed or implied by such forward-looking
statements. These factors include, but are not limited to: the risk
that customer use of DivX(R) technology may not grow as
anticipated; the risk that anticipated market opportunities may not
materialize at expected levels, or at all; the risk that the
Company's activities may not result in the growth of profitable
revenue; the uncertainties surrounding the macroeconomic climate,
the risk that the Company's financial performance for the second
quarter 2009 may not meet expectations; the risk that the Google
software distribution revenue may not meet expectations; risks and
uncertainties related to the maintenance and strength of the DivX
brand; DivX's ability to penetrate existing and new markets; the
effects of competition; DivX's dependence on its licensees and
partners; the effect of intellectual property rights claims; and
other factors discussed in the "Risk Factors" section of DivX's
most recent reports filed with the SEC. All forward-looking
statements are qualified in their entirety by this cautionary
statement. DivX is providing this information as of the date of
this release and does not undertake any obligation to update any
forward-looking statements contained in this release as a result of
new information, future events or otherwise, other than as required
under applicable securities laws. Non-GAAP Financial Measures; GAAP
EPS DivX has provided in this release financial information that
has not been prepared in accordance with GAAP. This information
includes non-GAAP net income and diluted earnings per share, which
excludes non-cash share-based compensation expense, the
amortization of purchased intangible assets, the foreign exchange
impact of our intercompany loan, and the non-cash charge related to
the change in value of certain deferred tax assets. This non-GAAP
information is provided to enhance the reader's overall
understanding of our current financial performance and prospects
for the future. Specifically, we believe this information provides
useful comparative data by excluding non-cash share-based
compensation expense, which is not consistent from
period-to-period. Also, we believe that the exclusion of
amortization of purchased intangible assets, the foreign exchange
impact of our intercompany loan, and the change in value of certain
tax deferred assets provides useful comparative data by reflecting
our business operations in a manner that is consistent with
expected future operations. Management has historically used
non-GAAP net income and non-GAAP earnings per diluted share when
evaluating operating performance because we believe the exclusion
of the items described above provides an additional measure of our
core operating results and facilitates comparisons of our core
operating performance against prior periods and our business model
objectives. The presentation of this additional information should
not be considered in isolation or as a substitute for results
prepared in accordance with accounting principles generally
accepted in the United States. We will continue to evaluate the
factors that might impact non-cash share-based compensation expense
and accruals for income tax expense. The non-cash share-based
compensation expense is expected to vary depending on the number of
new grants issued to both current and new employees, and changes in
the Company's stock price, stock market volatility, expected option
life, and risk-free interest rates (all of which are difficult to
estimate). In addition, the factors that impact our deferred tax
assets are expected to vary from period-to-period, also making our
effective tax rate difficult to estimate. DivX, Inc. CONSOLIDATED
CONDENSED BALANCE SHEETS (in thousands) March 31, December 31, 2009
2008 ---- ---- (unaudited) Assets Current assets: Cash and cash
equivalents $ 21,522 $ 43,442 Short-term investments 98,156 73,897
Accounts receivable, net 2,034 7,263 Deferred tax assets, current
1,841 1,841 Prepaid expenses and other current assets 9,182 4,732
----- ----- Total current assets 132,735 131,175 Property and
equipment, net 3,339 3,811 Long-term investments 18,139 17,968
Deferred tax assets, long-term 10,515 10,547 Purchased intangible
assets, net 12,738 10,968 Goodwill 9,830 10,358 Other assets 5,316
8,574 ----- ----- Total assets $192,612 $193,401 ======== ========
Liabilities and stockholders' equity Current liabilities: Accounts
payable $ 1,364 $ 1,319 Accrued expenses 7,338 7,909 Deferred
revenue 5,015 6,185 ----- ----- Total current liabilities 13,717
15,413 Long-term liabilities 4,181 3,888 ----- ----- Total
liabilities 17,898 19,301 Stockholders' equity 174,714 174,100
-------- -------- Total liabilities and stockholders' equity $
192,612 $ 193,401 ======== ======== DivX, Inc. CONSOLIDATED
CONDENSED STATEMENTS OF OPERATIONS (in thousands, except per share
data) (unaudited) Three Months Ended March 31, ----------------
2009 2008 ---- ---- Net revenues: Technology licensing $ 18,606 $
19,078 Media and other distribution and services 71 5,944 -- -----
Total net revenues 18,677 25,022 Cost of revenues: Cost of
technology licensing 2,411 1,036 Cost of media and other
distribution and services 176 172 --- --- Total cost of revenues
2,587 1,208 ----- ----- Gross margin 16,090 23,814 Operating
expenses: Selling, general and administrative (1)(2) 12,709 15,977
Product development (1)(2) 4,701 5,425 Impairment of acquired
intangibles - 1,000 --- ----- Total operating expenses 17,410
22,402 ------ ------ Income (loss) from operations (1,320) 1,412
Interest income (expense), net 594 1,657 Other income (expense)
(390) 517 ---- --- Income (loss) before income taxes (1,116) 3,586
Income tax provision (benefit) 316 1,105 --- ----- Net income
(loss) $ (1,432) $ 2,481 ======= ====== Basic net earnings (loss)
per share $ (0.04) $ 0.07 ====== ===== Diluted net earnings (loss)
per share $ (0.04) $ 0.07 ====== ===== Shares used to compute basic
net earnings (loss) per share 32,476 34,696 ====== ====== Shares
used to compute diluted net earnings (loss) per share 32,476 35,356
====== ====== (1) Includes share-based compensation as follows:
Selling, general and administrative $ 1,882 $ 1,518 Product
development 317 489 --- --- $ 2,199 $ 2,007 ====== ====== (2)
Includes Stage6 operating costs and related accruals as follows:
Selling, general and administrative $ - $ 3,103 Product development
- 230 --- --- $ - $ 3,333 === ====== DivX, Inc. UNAUDITED
RECONCILIATION OF NON-GAAP ADJUSTMENTS (in thousands, except per
share data) Three Months Ended March 31, ---------------- 2009 2008
---- ---- Net Income: GAAP net income (loss) $ (1,432) $ 2,481
Share-based compensation 2,199 2,007 Stage6 operating costs and
related accruals - 3,333 Impairment of acquired intangibles - 1,000
Amortization of purchased intangible assets 511 527 Fx impact on
intercompany loan 313 (465) Valuation allowance on deferred tax
assets 756 - Income tax effects of pre- tax adjustments (1,193)
(2,652) ------ ------ Non-GAAP net income $ 1,154 $ 6,231 ======
====== Diluted earnings per share: GAAP diluted earnings (loss) per
share $ (0.04) $ 0.07 Share-based compensation 0.07 0.06 Stage6
operating costs and related accruals - 0.09 Impairment of acquired
intangibles - 0.03 Amortization of purchased intangible assets 0.02
0.01 Fx impact on intercompany loan 0.01 (0.01) Valuation allowance
on deferred tax assets 0.02 - Income tax effects of pre- tax
adjustments (0.04) (0.08) ----- ----- Non-GAAP diluted earnings per
share $ 0.04 $ 0.18 ===== ===== Non-GAAP shares used to compute
diluted net earnings (loss) per share 32,818 35,356 ====== ======
The following table sets forth the computation of Non-GAAP basic
and diluted net earnings per share: Numerator: Net income $ 1,154 $
6,231 Denominator: Weighted-average common shares outstanding
(basic) 32,476 34,696 ====== ====== Weighted-average common shares
outstanding (diluted) 32,818 35,356 ====== ====== Basic net
earnings per share $ 0.04 $ 0.18 ===== ===== Diluted net earnings
per share $ 0.04 $ 0.18 ===== ===== DivX, Inc. CONSOLIDATED
CONDENSED STATEMENTS OF CASH FLOW (in thousands) (unaudited) Three
Months Ended March 31, ---------------- 2009 2008 ---- ---- Net
cash provided by operating activities $ 2,532 $ 4,070 Net cash
(used in) provided by investing activities (24,800) 14,252 Net cash
provided by (used in) financing activities 456 (9,818) Effect of
exchange rate changes on cash (108) 46 ------- ----- Net (decrease)
increase in cash and cash equivalents (21,920) 8,550 Cash and cash
equivalents at beginning of period 43,442 14,532 ------ ------ Cash
and cash equivalents at end of period $ 21,522 $ 23,082 =======
======= http://www.newscom.com/cgi-bin/prnh/20081124/LA48153LOGO
http://photoarchive.ap.org/ DATASOURCE: DivX, Inc. CONTACT:
Investor Relations, Karen Fisher, +1-858-882-6415, , or Media,
Jennifer Baumgartner, +1-503-901-5371, , both of DivX, Inc.; Todd
Friedman, , or Stacie Bosinoff, , +1-415-217-7722, both of The
Blueshirt Group Web Site: http://www.divx.com/
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