SAN DIEGO, March 3 /PRNewswire-FirstCall/ -- DivX, Inc. , a leading
digital media company, today announced results for the three months
and year ended December 31, 2009. (Logo:
http://www.newscom.com/cgi-bin/prnh/20081124/DIVXLOGO) The Company
reported revenues for the fourth quarter of $20.1 million,
comprised of $17.9 million of technology licensing revenues and
$2.1 million of media and other distribution and services revenues.
This compares to revenues of $23.2 million reported for the same
period a year ago, which included $20.5 million of technology
licensing revenues and $2.7 million of media and other distribution
and services revenues. "As we exit 2009, we closed the fourth
quarter with strong financial results well ahead of our guidance,"
stated Kevin Hell, Chief Executive Officer for DivX, Inc. "Key
areas of strength included technology licensing and online software
distribution. Looking forward, we continue to see solid
opportunities to grow and diversify our core technology licensing
business. In addition, with our DivX TV initiative, we are
positioned to enable a new streaming distribution model that will
transform the consumer experience and deliver on the promise of
digital entertainment for consumers, content providers and consumer
electronics manufacturers alike." GAAP net loss in the fourth
quarter of 2009 was $34,000, or $0.00 per diluted share. Non-GAAP
net income in the fourth quarter of 2009 was approximately $2.3
million, or $0.07 per diluted share. Non-GAAP net income and
earnings per diluted share exclude the following items: (1)
non-cash share-based compensation of approximately $2.4 million
($1.5 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 $577,000 ($347,000, or
$0.01 per diluted share, net of related taxes); (3) adjustments to
the fair value of the Company's contingent consideration liability
related to the acquisition of AnySource Media of $383,000
($230,000, or $0.01 per diluted share, net of related taxes); (4)
the foreign exchange loss on the Company's Euro-denominated
intercompany loan of $60,000 ($36,000, or less than $0.01 per
diluted share, net of related taxes); and (5) a non-cash charge of
$252,000, or $0.01 per diluted share, related to the write-off of
deferred tax assets associated with cancelled stock options. For
the twelve months ended December 31, 2009, the Company reported
$70.6 million in total revenues. GAAP net income for the twelve
months ended December 31, 2009 was $131,000, or $0.00 per diluted
share. DivX generated non-GAAP net income of $3.1 million, or $0.09
per diluted share for the twelve months ended December 31, 2009.
Non-GAAP net income and earnings per share for the twelve month
period excludes the following items: (1) non-cash share-based
compensation of approximately $9.3 million ($5.6 million, or $0.17
per diluted share, net of related taxes); (2) the scheduled
amortization of purchased intangible assets related to the
acquisition of MainConcept of approximately $2.2 million ($1.3
million, or $0.04 per diluted share, net of related taxes); (3) the
foreign exchange benefit on the Company's Euro-denominated
intercompany loan of $145,000 ($87,000, or less than $0.01 per
diluted share, net of related taxes); (4) a $9.5 million litigation
settlement gain ($5.7 million, or $0.17 per diluted share, net of
related taxes); (5) adjustments to the fair value of the Company's
contingent consideration liability related to the acquisition of
AnySource Media of $412,000 ($248,000, or $0.01 per diluted share,
net of related taxes); and (6) a non-cash charge of approximately
$1.6 million, or $0.05 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 2009, and the write-off of deferred
tax assets associated with cancelled stock options. Dan Halvorson,
Chief Financial Officer and Executive Vice President Operations,
added, "During our fourth quarter, revenue contribution from our
emerging product categories such as digital TVs, Blu-ray players
and mobile phones was over 25% of total technology licensing
revenues and a clear sign that our revenue streams are
diversifying. We will continue to manage expenses while investing
in technical innovation that we believe will drive growth in our
core and new businesses. We ended 2009 with approximately $144
million in cash and investments and a strong balance sheet." First
Quarter 2010 Fiscal Outlook The following table summarizes the
Company's financial guidance for the first quarter of 2010. The
following estimates are based on the Company's current business
outlook as of the date of this press release: Q1'10 Guidance
----------- Revenue (in millions) $20.5 - $21.5 GAAP earnings
(loss) per share, diluted ($0.02) - $0.00 Adjustments: Non-cash
share-based compensation expense, net of related taxes $0.04
Amortization of purchased intangibles, net of related taxes $0.01
Adjustments to fair value of AnySource acquisition contingent
consideration, net of related taxes $0.01 ------------- Non-GAAP
earnings per share, diluted $0.04 - $0.06 ============= These first
quarter 2010 estimates are based on: 1. Expected revenues from
technology licensing of approximately 90% of total revenues;
expected revenues for media and other distribution and services of
approximately 10% of total revenues; 2. A projected non-GAAP
effective tax rate of approximately 40% which is dependent on the
effective tax rates in various domestic and foreign jurisdictions;
3. Anticipated non-cash share-based compensation expense of
approximately $2.4 million ($1.4 million, or $0.04 per diluted
share, net of related taxes); 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); 5. The impact of contingent
consideration fair value true-ups related to the acquisition of
AnySource Media of approximately $300,000 ($180,000, or $0.01 per
diluted share, net of related taxes); and 6. 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 fourth quarter and full year 2009 results on March 3, 2010 at
1:30 p.m. Pacific Time or 4:30 p.m. Eastern Time. To participate in
the call, please dial (888) 452-4023 or outside the U.S. (719)
325-2494 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 March 3, 2010 and Midnight, Eastern Time
March 10, 2010 by calling (888) 203-1112 or (719) 457-0820, with
passcode 4803803. 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 250 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 DivX
TV, the anticipated growth of emerging products as a percentage of
the Company's total technology licensing revenues, the Company's
ability to manage expenses, the anticipated financial results for
the first quarter of 2010, and the anticipated impact of the
acquisition of AnySource Media to the Company, its customers and
partners. 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 DivX 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 revenues; risks related to
the implementation of the acquisition of AnySource Media; the risk
that the Company's financial performance for the first quarter of
2010 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 businesses
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,
litigation settlement gain, the amortization of purchased
intangible assets, the foreign exchange impact of our
Euro-denominated intercompany loan, the AnySource acquisition
contingent consideration, 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 AnySource acquisition contingent consideration, 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 provision. 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) December 31, -------------
2009 2008 ---- ---- Assets Current assets: Cash and cash
equivalents $14,883 $43,442 Short-term investments 125,047 73,897
Accounts receivable, net 2,521 7,263 Deferred tax assets, current
1,025 1,841 Prepaid expenses and other current assets 6,080 4,732
----- ----- Total current assets 149,556 131,175 Property and
equipment, net 2,143 3,811 Long-term investments 3,779 17,968
Deferred tax assets, long-term 13,178 10,547 Purchased intangible
assets, net 13,340 10,968 Goodwill 18,528 10,358 Other assets 7,074
8,574 ----- ----- Total assets $207,598 $193,401 ======== ========
Liabilities and stockholders' equity Current liabilities: Accounts
payable $1,853 $1,319 Accrued expenses 8,399 7,909 Deferred revenue
5,350 6,185 ----- ----- Total current liabilities 15,602 15,413
Long-term liabilities 6,821 3,888 ----- ----- Total liabilities
22,423 19,301 Stockholders' equity 185,175 174,100 --------
-------- Total liabilities and stockholders' equity $207,598
$193,401 ======== ======== DivX, Inc. CONSOLIDATED CONDENSED
STATEMENTS OF INCOME (in thousands, except per share data)
(unaudited) Three Months Ended Twelve Months Ended December 31,
December 31, ------------- ------------- 2009 2008 2009 2008 ----
---- ---- ---- Net revenues: Technology licensing $17,949 $20,476
$64,922 $75,072 Media and other distribution and services 2,111
2,679 5,684 18,833 ----- ----- ----- ------ Total net revenues
20,060 23,155 70,606 93,905 Cost of revenue: Cost of technology
licensing (excludes amortization of purchased developed
intangibles) 2,271 927 9,167 3,882 Cost of media and other
distribution and services 113 166 545 714 --- --- --- --- Total
cost of revenues 2,384 1,093 9,712 4,596 ----- ----- ----- -----
Gross profit 17,676 22,062 60,894 89,309 Operating expenses:
Selling, general and administrative (1) (2) 11,990 12,748 49,270
54,597 Product development (1) (2) 5,701 4,751 20,647 20,184
Litigation settlement gain - - (9,500) - Impairment of acquired
intangibles - 632 - 1,882 --- --- --- ----- Total operating
expenses 17,691 18,131 60,417 76,663 ------ ------ ------ ------
Income (loss) from operations (15) 3,931 477 12,646 Interest income
(expense), net 310 770 1,646 4,445 Other income (expense), net 5
(304) 301 (479) --- ---- --- ---- Income before income taxes 300
4,397 2,424 16,612 Income tax provision 334 1,828 2,293 6,604 ---
----- ----- ----- Net income (loss) $(34) $2,569 $131 $10,008 ====
====== ==== ======= Basic net earnings (loss) per share $0.00 $0.08
$0.00 $0.30 ===== ===== ===== ===== Diluted net earnings (loss) per
share $0.00 $0.08 $0.00 $0.30 ===== ===== ===== ===== Shares used
to compute basic net earnings (loss) per share 32,764 32,392 32,628
32,946 ====== ====== ====== ====== Shares used to compute diluted
net earnings (loss) per share 33,093 32,774 32,972 33,458 ======
====== ====== ====== (1) Includes share-based compensation as
follows: Selling, general and administrative $2,065 $1,518 $7,351
$6,739 Product development 365 680 1,938 2,282 --- --- ----- -----
$2,430 $2,198 $9,289 $9,021 ====== ====== ====== ====== (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 Twelve
Months Ended December 31, December 31, ------------- -------------
2009 2008 2009 2008 ---- ---- ---- ---- Net Income: GAAP net income
(loss) $(34) $2,569 $131 $10,008 Share-based compensation 2,430
2,198 9,289 9,021 Amortization of purchased intangible assets 577
476 2,178 2,128 Foreign exchange impact on intercompany loan 60 32
(145) 236 Litigation settlement gain - - (9,500) - Adjustments to
the fair value of Anysource acquisition contingent consideration
383 - 412 - Valuation allowance / adjustments on deferred tax
assets 252 - 1,590 - Stage6 operating costs and related accruals -
- - 3,333 Impairment of acquired intangibles - 632 - 1,882 Income
tax effects of pre-tax adjustments (1,375) (1,284) (889) (6,922)
------ ------ ------ ------- Non-GAAP net income $2,293 $4,623
$3,066 $19,686 ====== ====== ====== ======= Diluted earnings per
share: GAAP diluted earnings (loss) per share $0.00 $0.08 $0.00
$0.30 Share-based compensation 0.07 0.07 0.28 0.27 Amortization of
purchased intangible assets 0.02 0.01 0.07 0.06 Foreign exchange
impact on intercompany loan - - - 0.01 Litigation settlement gain -
- (0.29) - Adjustments to the fair value of Anysource acquisition
contingent consideration 0.01 - 0.01 - Valuation allowance /
adjustments on deferred tax assets 0.01 - 0.05 - Stage6 operating
costs and related accruals - - - 0.10 Impairment of acquired
intangibles - 0.02 - 0.06 Income tax effects of pre-tax adjustments
(0.04) (0.04) (0.03) (0.21) ----- ----- ----- ----- Non-GAAP
diluted earnings per share $0.07 $0.14 $0.09 $0.59 ===== =====
===== ===== Non-GAAP shares used to compute diluted net earnings
per share 33,093 32,774 32,972 33,458 ====== ====== ====== ======
The following table sets forth the computation of Non- GAAP basic
and diluted net earnings per share: Numerator: Net income $2,293
$4,623 $3,066 $19,686 Denominator: Weighted-average common shares
outstanding (basic) 32,764 32,392 32,628 32,946 ====== ======
====== ====== Weighted-average common shares outstanding (diluted)
33,093 32,774 32,972 33,458 ====== ====== ====== ====== Basic net
earnings per share $0.07 $0.14 $0.09 $0.60 ===== ===== ===== =====
Diluted net earnings per share $0.07 $0.14 $0.09 $0.59 ===== =====
===== ===== DivX, Inc. CONSOLIDATED CONDENSED STATEMENTS OF CASH
FLOW (in thousands) (unaudited) Three Months Ended Twelve Months
Ended December 31, December 31, ------------- ------------- 2009
2008 2009 2008 ---- ---- ---- ---- Net cash provided by operating
activities $2,678 $7,576 $18,137 $23,472 Net cash (used in)
provided by investing activities (13,342) (3,505) (48,000) 25,514
Net cash provided by (used in) financing activities 349 (481) 1,330
(19,939) Effect of exchange rate changes on cash (130) (130) (26)
(137) ------- ----- ------- ------ Net (decrease) increase in cash
and cash equivalents (10,445) 3,460 (28,559) 28,910 Cash and cash
equivalents at beginning of period 25,328 39,982 43,442 14,532
------ ------ ------ ------ Cash and cash equivalents at end of
period $14,883 $43,442 $14,883 $43,442 ======= ======= =======
======= DATASOURCE: DivX, Inc. CONTACT: Investor Relations, Todd
Friedman, todd@blueshirtgroup.com, orStacie Bosinoff,
stacie@blueshirtgroup.com, both of The Blueshirt Group, forDivX,
Inc., +1-415-217-7722; or Karen Fisher,
+1-858-882-6415,kfisher@divxcorp.com, or Media, Jennifer
Baumgartner, +1-503-901-5371,Jbaumgartner@divxcorp.com, both of
DivX, Inc. Web Site: http://www.divx.com/
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