DivX Fast Forwards Its Growth in New Product Categories Positioned
to Redefine the Internet TV Experience Balance Sheet Remains Strong
with $143 Million or $4.38 per Share in Cash and Investments SAN
DIEGO, Nov. 9 /PRNewswire-FirstCall/ -- DivX, Inc. (NASDAQ:DIVX), a
leading digital media company, today announced results for the
three and nine months ended September 30, 2009. (Logo:
http://www.newscom.com/cgi-bin/prnh/20081124/DIVXLOGO) The Company
reported revenues for the third quarter of $16.6 million, comprised
of $14.6 million of technology licensing revenues and $2.0 million
of media and other distribution and services revenues. This
compares to revenues of $24.4 million reported for the same period
a year ago, which included $19.1 million of technology licensing
revenues and $5.3 million of media and other distribution and
services revenues. "DivX is undergoing an exciting transition in
its business," stated Kevin Hell, Chief Executive Officer for DivX,
Inc. "We are moving beyond our core DVD licensing business into new
categories such as Blu-ray players, digital televisions, mobile
phones and set-top-boxes, driven by our substantial progress with
premium Hollywood content initiatives and our DivX Plus(TM) high
definition software and hardware solutions. Additionally and
perhaps even more notably, through our acquisition of AnySource
Media in August, we believe we are well positioned to define the
next big evolutionary step in the television experience - Internet
TV. We believe the opportunity in front of us is transformational,
and will drive the business to the next stage." As part of the
broader transition of its business, DivX today promoted Matt Milne
to the position of Senior Vice President and General Manager, DivX
Licensing. Prior to joining DivX in July 2009, Matt was Senior Vice
President of Sales and Marketing for MediaFLO USA, a wholly owned
subsidiary of Qualcomm Incorporated. Matt will assume the CE
licensing responsibilities of Eric Rodli who has left the Company
to pursue other interests. Added Hell, "We want to thank Eric for
his contributions to DivX and wish him well in future endeavors."
The Company also announced that it plans to demo its Internet TV
solution at the Consumer Electronics Show (CES) in Las Vegas on
January 7-9, 2010. GAAP net income in the third quarter of 2009 was
approximately $4.0 million, or $0.12 per diluted share. DivX
incurred a non-GAAP net loss of $319,000, or a loss of $0.01 per
diluted share. Non-GAAP net loss and loss per diluted share exclude
the following items: (1) a $9.5 million litigation settlement gain
($6.1 million, or $0.19 per diluted share, net of related taxes);
(2) non-cash share-based compensation of approximately $2.3 million
($1.5 million, or $0.05 per diluted share, net of related taxes);
(3) the scheduled amortization of purchased intangible assets
related to the acquisition of MainConcept of $558,000 ($357,000, or
$0.01 per diluted share, net of related taxes); (4) the foreign
exchange benefit on the Company's Euro-denominated intercompany
loan of $231,000 ($148,000, or less than $0.01 per diluted share,
net of related taxes); and (5) a non-cash charge of approximately
$120,000, or less than $0.01 per diluted share, related to the
write-off of deferred tax assets associated with cancelled stock
options. Dan Halvorson, Chief Financial Officer and Executive Vice
President Operations, added, "As reported by many partners and CE
vendors, consumer spending continues to be weak but we once again
delivered a solid quarter. We believe our focus on managing
expenses keeps us on course while maximizing our ability to invest
in the future growth of the business. We anticipate emerging
products as a percentage of total technology licensing revenues
will continue to grow and is projected to increase from
approximately 16% for the third quarter to approximately 25% by the
end of the fourth quarter of 2009. Our balance sheet remains strong
with $143 million in cash and investments, or $4.38 per share, and
we are focused on investing in technical innovation that drives
growth in our core and new businesses." Fourth Quarter 2009 Fiscal
Outlook The following table summarizes the Company's financial
guidance for the fourth quarter of 2009. The following estimates
are based on the Company's current business outlook as of the date
of this press release: Q4'09 Guidance ----------------- Revenue (in
millions) $17.5 - $18.5 GAAP earnings (loss) per share, diluted
($0.05) - ($0.03) Adjustments: Non-cash share-based compensation
expense, net of income taxes $0.05 Amortization of purchased
intangibles, net of income taxes $0.01 ----------------- Non-GAAP
earnings per share, diluted $0.01 - $0.03 ----------------- These
estimates are based on: 1. Expected revenues for technology
licensing of approximately 85% to 90% of total revenue for the
fourth quarter of 2009; and revenues for media and other
distribution and services of approximately 10% to 15% of total
revenues for the fourth quarter of 2009; 2. A projected non-GAAP
effective tax rate of approximately 40% for the fourth 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 $2.4 million
($1.4 million, or $0.05 per diluted share, net of related taxes)
for the fourth quarter of 2009; 4. The scheduled amortization of
purchased intangible assets related to the acquisition of
MainConcept and the impact of contingent consideration fair value
true-ups related to the acquisition of AnySource Media of
approximately $650,000 ($390,000, or $0.01 per diluted share, net
of related taxes) for the fourth quarter of 2009; and 5. No
significant foreign exchange benefit or expense on the Company's
Euro-denominated intercompany loan. Quarterly Conference Call DivX
management will host a conference call and simultaneous audio
webcast to discuss its third quarter 2009 results on November 9,
2009 at 1:30 p.m. Pacific Time or 4:30 p.m. Eastern Time. To
participate in the call, please dial (888) 857-6932 or outside the
U.S. (719) 457-2734 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 at
http://investors.divx.com/. In addition, an audio replay of the
call will be available between 7:30 p.m. Eastern Time November 9,
2009 and Midnight, Eastern Time November 16, 2009 by calling (888)
203-1112 or (719) 457-0820, with passcode 4032925. About DivX, Inc.
DivX, Inc. is a leading 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 200 million DivX 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. For more information, visit
http://www.divx.com/. 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 Company's business, the Company's position in the
digital media space, including Internet TV, the Company's plans to
participate in CES, the anticipated growth of emerging products as
a percentage of the Company's total technology licensing revenues,
the anticipated financial results for the fourth quarter of 2009,
and the anticipated benefits of the acquisition of AnySource Media
LLC to the Company, its customers and partners, including the
ability of AnySource Media products and technology to increase the
Company's market opportunity and accelerate penetration of key
emerging products. Such forward-looking statements involve known
and unknown risks, uncertainties and other factors which may cause
the Company'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 technology may not
grow as anticipated; the risk that anticipated market
opportunities, including Internet TV, may not materialize at
expected levels, or at all; uncertainties related to the current
macroeconomic climate; the risk that the Company's activities may
not result in the growth of profitable revenue; risks related to
the implementation of the acquisition of AnySource Media; the risk
that the Company's financial performance for the fourth quarter of
2009 may not meet expectations; risks and uncertainties related to
the maintenance and strength of the DivX brand; the Company's
ability to penetrate existing and new markets; the effects of
competition; the Company's dependence on its licensees and
partners; the effect of intellectual property rights claims; risks
relating to the Company's ability to integrate acquired business
and technologies into its existing infrastructure; and other
factors discussed in the "Risk Factors" section of the Company'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 (loss) and earnings (loss) per diluted
share, which excludes non-cash share-based compensation expense,
the litigation settlement gain, the amortization of purchased
intangible assets, the foreign exchange impact of our
Euro-denominated 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 the
litigation settlement gain, amortization of purchased intangible
assets, the foreign exchange impact of our Euro-denominated
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
(loss) and non-GAAP earnings (loss) 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 GAAP. The non-GAAP financial measures
used by the Company may be calculated differently from, and
therefore may not be comparable to, similarly titled measures used
by other companies. 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) September 30, December 31,
2009 2008 ------------- ------------ (unaudited) Assets Current
assets: Cash and cash equivalents $25,328 $43,442 Short-term
investments 113,820 73,897 Accounts receivable, net 2,800 7,263
Deferred tax assets, current 3,062 1,841 Prepaid expenses and other
current assets 6,220 4,732 -------- -------- Total current assets
151,230 131,175 Property and equipment, net 2,426 3,811 Long-term
investments 4,070 17,968 Deferred tax assets, long-term 10,150
10,547 Purchased intangible assets, net 14,107 10,968 Goodwill
18,921 10,358 Other assets 7,855 8,574 -------- -------- Total
assets $208,759 $193,401 ======== ======== Liabilities and
stockholders' equity Current liabilities: Accounts payable $1,143
$1,319 Accrued expenses 10,830 7,909 Deferred revenue 5,471 6,185
-------- -------- Total current liabilities 17,444 15,413 Long-term
liabilities 8,185 3,888 -------- -------- Total liabilities 25,629
19,301 Stockholders' equity 183,130 174,100 -------- -------- Total
liabilities and stockholders' equity $208,759 $193,401 ========
======== DivX, Inc. CONSOLIDATED CONDENSED STATEMENTS OF INCOME (in
thousands, except per share data) (unaudited) Three Months Ended
Nine Months Ended September 30, September 30, ----------------
---------------- 2009 2008 2009 2008 ------- ------ ------- ------
Net revenues: Technology licensing $14,642 $19,108 $46,973 $54,596
Media and other distribution and services 1,993 5,301 3,573 16,154
------ ------ ------ ------ Total net revenues 16,635 24,409 50,546
70,750 Cost of revenue: Cost of technology licensing 2,320 963
6,896 2,955 Cost of media and other distribution and services 120
190 432 548 ------ ------ ------ ------ Total cost of revenues
2,440 1,153 7,328 3,503 ------ ------ ------ ------ Gross margin
14,195 23,256 43,218 67,247 Operating expenses: Selling, general
and administrative (1) (2) 12,696 13,300 37,280 41,849 Product
development (1) (2) 5,612 4,642 14,946 15,433 Litigation settlement
gain (9,500) - (9,500) - Impairment of acquired intangibles - - -
1,250 ------ ------ ------ ------ Total operating expenses 8,808
17,942 42,726 58,532 ------ ------ ------ ------ Income from
operations 5,387 5,314 492 8,715 Interest income (expense), net 310
908 1,336 3,675 Other income (expense) 157 (677) 296 (175) ------
------ ------ ------ Income before income taxes 5,854 5,545 2,124
12,215 Income tax provision 1,898 2,265 1,959 4,776 ------ ------
------ ------ Net income $3,956 $3,280 $165 $7,439 ====== ======
====== ====== Basic net earnings per share $0.12 $0.10 $0.01 $0.22
====== ====== ====== ====== Diluted net earnings per share $0.12
$0.10 $0.01 $0.22 ====== ====== ====== ====== Shares used to
compute basic net earnings per share 32,681 32,312 32,582 33,133
====== ====== ====== ====== Shares used to compute diluted net
earnings per share 33,031 32,818 32,931 33,688 ====== ====== ======
====== (1) Includes share-based compensation as follows: Selling,
general and administrative $1,573 $1,851 $5,286 $5,221 Product
development 732 539 1,573 1,602 ------ ------ ------ ------ $2,305
$2,390 $6,859 $6,823 ====== ====== ====== ====== (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 Nine Months Ended September 30, September 30,
------------------ ----------------- 2009 2008 2009 2008 -------
------ ------- ------- Net Income: GAAP net income $3,956 $3,280
$165 $7,439 Share-based compensation 2,305 2,390 6,859 6,823
Amortization of purchased intangible assets 558 594 1,601 1,652 Fx
impact on intercompany loan (231) 662 (205) 204 Litigation
settlement gain (9,500) - (9,500) - Valuation allowance /
adjustments on deferred tax assets 120 - 1,338 - Stage6 operating
costs and related accruals - - - 3,333 Impairment of acquired
intangibles - - - 1,250 Income tax effects of pre-tax adjustments
2,473 (1,556) 486 (5,638) ------ ------ ------ ------- Non-GAAP net
income (loss) $(319) $5,370 $744 $15,063 ====== ====== ======
======= Diluted earnings per share: GAAP diluted earnings per share
$0.12 $0.10 $0.01 $0.22 Share-based compensation 0.07 0.07 0.21
0.20 Amortization of purchased intangible assets 0.02 0.02 0.05
0.05 Fx impact on intercompany loan (0.01) 0.02 (0.01) 0.01
Litigation settlement gain (0.29) - (0.29) - Valuation allowance /
adjustments on deferred tax assets - - 0.04 - Stage6 operating
costs and related accruals - - - 0.10 Impairment of acquired
intangibles - - - 0.04 Income tax effects of pre-tax adjustments
0.08 (0.05) 0.01 (0.17) ------ ------ ------ ------- Non-GAAP
diluted earnings (loss) per share $(0.01) $0.16 $0.02 $0.45 ======
====== ====== ======= Non-GAAP shares used to compute diluted net
earnings (loss) per share 32,681 32,818 32,931 33,688 ====== ======
====== ======= The following table sets forth the computation of
Non-GAAP basic and diluted net earnings (loss) per share:
Numerator: Net income (loss) $(319) $5,370 $744 $15,063
Denominator: Weighted-average common shares outstanding (basic)
32,681 32,312 32,582 33,133 ====== ====== ====== =======
Weighted-average common shares outstanding (diluted) 32,681 32,818
32,931 33,688 ====== ====== ====== ======= Basic net earnings
(loss) per share $(0.01) $0.17 $0.02 $0.45 ====== ====== ======
======= Diluted net earnings (loss) per share $(0.01) $0.16 $0.02
$0.45 ====== ====== ====== ======= DivX, Inc. CONSOLIDATED
CONDENSED STATEMENTS OF CASH FLOW (in thousands) (unaudited) Three
Months Ended Nine Months Ended September 30, September 30,
------------------ ----------------- 2009 2008 2009 2008 --------
------- ------- ------- Net cash provided by operating activities
$11,409 $14,504 $15,459 $16,896 Net cash (used in) provided by
investing activities (9,293) (3,169) (34,658) 28,019 Net cash (used
in) provided by financing activities 21 (76) 981 (19,458) Effect of
exchange rate changes on cash (15) (62) 104 (7) ------- -------
------- ------- Net increase (decrease) in cash and cash
equivalents 2,122 11,197 (18,114) 25,450 Cash and cash equivalents
at beginning of period 23,206 28,785 43,442 14,532 ------- -------
------- ------- Cash and cash equivalents at end of period $25,328
$39,982 $25,328 $39,982 ======= ======= ======= =======
http://www.newscom.com/cgi-bin/prnh/20081124/DIVXLOGO
http://photoarchive.ap.org/ DATASOURCE: DivX, Inc. CONTACT:
Investors, Karen Fisher of DivX, Inc., +1-858-882-6415, ; or Todd
Friedman, , or Stacie Bosinoff, , both of The Blueshirt Group,
+1-415-217-7722; or Media, Jennifer Baumgartner of DivX, Inc.,
+1-503-901-5371, Web Site: http://www.divx.com/
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