SAN DIEGO, April 28 /PRNewswire-FirstCall/ -- DivX, Inc.
(Nasdaq: DIVX), a leading digital media company, today announced
results for the first quarter ended March
31, 2010.
(Logo:
http://www.newscom.com/cgi-bin/prnh/20081124/DIVXLOGO)
The Company reported revenues for the first quarter of
$23.3 million, comprised of
approximately $21.0 million of
technology licensing revenues and $2.3
million of media and other distribution and services
revenues. This compares to revenues of $18.7 million reported for the same period a year
ago, which included $18.6 million of
technology licensing revenues.
"We entered 2010 on a positive note with both solid financial
and operational performance in our first quarter," stated Kevin
Hell, Chief Executive Officer for DivX. "We have
significantly expanded our DivX ecosystem of devices and software,
diversified our core licensing business beyond DVD players, and
broadened our premium content offerings through partnerships with
Hollywood studios and online
storefronts."
GAAP net income in the first quarter of 2010 was approximately
$1.3 million, or $0.04 per diluted share. DivX generated
non-GAAP net income of approximately $3.2
million, or $0.10 per diluted
share. Non-GAAP net income and earnings per diluted share exclude
the following expenses:
- Non-cash share-based compensation of approximately $2.4 million ($1.5
million, or $0.04 per diluted
share, net of related taxes);
- The scheduled amortization of purchased intangible assets
related to the acquisition of MainConcept of $510,000 ($312,000,
or $0.01 per diluted share, net of
related taxes);
- The foreign exchange impact on our Euro-denominated
intercompany loan of $137,000
($84,000, or less than $0.01 per diluted share, net of related taxes);
- The impact of contingent consideration fair value adjustments
related to the acquisition of AnySource Media of $276,000 ($169,000,
or $0.01 per diluted share, net of
related taxes); and
- A non-cash benefit of $131,000,
or less than $0.01 per diluted share,
related to adjustments to our deferred tax assets primarily related
to certain California tax law
changes.
"Our seasonally strong Q1 results reflect strength in emerging
products, the positive in-quarter impact of certain key OEM license
renewals, and the continuing strength of Google Chrome distribution
and our MainConcept commercial licensing business," added
Dan Halvorson, Chief Financial
Officer and Executive Vice President, Operations. "As we look
toward the balance of the year, we will continue to invest as
appropriate while being mindful of the ongoing fragile
macro-economic recovery. Consistent with this investment
approach, we anticipate an investment in DivX TV of approximately
$1.5 million per quarter for the
remainder of 2010. Our current balance sheet is strong with
$139.2 million of cash and
investments, or $4.23 per share."
Second Quarter 2010 Fiscal Outlook
The following table summarizes the Company's financial guidance
for the second quarter of 2010, 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:
|
|
Q2'10 Guidance
|
|
Revenue (in millions)
|
$17.0 - $18.0
|
|
|
|
|
GAAP earnings (loss) per share, diluted
|
($0.08) - ($0.06)
|
|
|
|
|
|
Adjustments:
|
|
|
|
Non-cash share-based compensation expense, net of
related taxes
|
$0.05
|
|
|
|
|
|
|
Amortization of purchased intangibles and
contingent consideration adjustments, net of related
taxes
|
$0.01
|
|
|
|
|
|
Non-GAAP earnings (loss) per share,
diluted
|
($0.02) - $0.00
|
|
|
|
|
These estimates are based on:
- Expected revenues for technology licensing of approximately 85%
of total revenue for the second quarter of 2010; and revenues for
media and other distribution and services of approximately 15% of
total revenues for the second quarter of 2010;
- A projected effective tax rate of approximately 40% for the
second quarter of 2010 which is dependent on the effective tax
rates in our various domestic and foreign jurisdictions;
- Anticipated non-cash share-based compensation expense of
approximately $2.7 million
($1.6 million, or $0.05 per diluted share, net of related taxes)
for the second quarter of 2010; and
- The scheduled amortization of purchased intangible assets
related to the acquisition of MainConcept and contingent
consideration fair value adjustments related to the acquisition of
AnySource Media of approximately $600,000 ($360,000,
or $0.01 per diluted share, net of
related taxes) for the second quarter of 2010.
Quarterly Conference Call
DivX management will host a conference call and simultaneous
audio webcast to discuss its first quarter 2010 results on
April 28 at 1:30 p.m. Pacific Time or 4:30 p.m. Eastern Time. To participate in the
call, please dial 877-303-3149 or outside the U.S. 408-427-3857 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
April 28, 2010 and Midnight, Eastern
Time May 5, 2010 by calling
800-642-1687 or 706-645-9291, with conference ID 69865767.
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.
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, and anticipated
financial results for the second quarter 2010. 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®
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 risk that the Company's financial
performance for the second quarter 2010 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 (loss) and diluted earnings (loss) per
share, which excludes non-cash share-based compensation expense,
the amortization of purchased intangible assets, the foreign
exchange impact of our Euro-denominated intercompany loan, the
AnySource acquisition contingent consideration adjustments and the
non-cash benefit/expense 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 may not be
consistent from period-to-period. Also, we believe that the
exclusion of amortization of purchased intangible assets,
adjustments to 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 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,
|
|
|
|
|
2010
|
|
2009
|
|
|
|
|
(unaudited)
|
|
Assets
|
|
|
|
|
Current assets:
|
|
|
|
|
|
Cash and cash equivalents
|
$
8,589
|
|
$
14,883
|
|
|
Short-term investments
|
126,983
|
|
125,047
|
|
|
Accounts receivable, net
|
7,356
|
|
2,521
|
|
|
Deferred tax assets,
current
|
1,025
|
|
1,025
|
|
|
Prepaid expenses and other current
assets
|
9,967
|
|
6,080
|
|
|
|
Total current assets
|
153,920
|
|
149,556
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
1,895
|
|
2,143
|
|
Long-term investments
|
3,659
|
|
3,779
|
|
Deferred tax assets,
long-term
|
13,047
|
|
13,178
|
|
Purchased intangible assets,
net
|
12,335
|
|
13,340
|
|
Goodwill
|
17,940
|
|
18,528
|
|
Other assets
|
6,862
|
|
7,074
|
|
|
|
Total assets
|
$
209,658
|
|
$
207,598
|
|
|
|
|
|
|
|
|
Liabilities and stockholders'
equity
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
Accounts payable
|
$
968
|
|
$
1,853
|
|
|
Accrued expenses
|
10,274
|
|
8,399
|
|
|
Deferred revenue
|
4,228
|
|
5,350
|
|
|
|
Total current liabilities
|
15,470
|
|
15,602
|
|
|
|
|
|
|
|
|
Long-term liabilities
|
6,230
|
|
6,821
|
|
|
|
Total liabilities
|
21,700
|
|
22,423
|
|
|
|
|
|
|
|
|
Stockholders' equity
|
187,958
|
|
185,175
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders'
equity
|
$
209,658
|
|
$
207,598
|
|
|
|
|
|
|
|
DivX,
Inc.
|
|
CONSOLIDATED
CONDENSED STATEMENTS OF INCOME
|
|
(in thousands,
except per share data)
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
|
|
|
2010
|
|
2009
|
|
|
|
|
|
|
|
|
Net revenues:
|
|
|
|
|
|
Technology licensing
|
$
20,941
|
|
$
18,606
|
|
|
Media and other distribution and
services
|
2,314
|
|
71
|
|
|
|
Total net revenues
|
23,255
|
|
18,677
|
|
|
|
|
|
|
|
|
Cost of revenue:
|
|
|
|
|
|
Cost of technology licensing (excludes
amortization of purchased developed intangibles)
|
2,218
|
|
2,411
|
|
|
Cost of media and other distribution
and services
|
122
|
|
176
|
|
|
|
Total cost of revenues
|
2,340
|
|
2,587
|
|
|
|
|
|
|
|
|
Gross profit
|
20,915
|
|
16,090
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
Selling, general and administrative
(1)
|
12,765
|
|
12,709
|
|
|
Product development (1)
|
6,651
|
|
4,701
|
|
|
|
Total operating expenses
|
19,416
|
|
17,410
|
|
Income (loss) from
operations
|
1,499
|
|
(1,320)
|
|
|
|
|
|
|
|
|
Interest income (expense),
net
|
401
|
|
594
|
|
Other income (expense), net
|
(113)
|
|
(390)
|
|
Income (loss) before income
taxes
|
1,787
|
|
(1,116)
|
|
Income tax provision
|
531
|
|
316
|
|
Net income (loss)
|
$
1,256
|
|
$
(1,432)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net earnings (loss) per
share
|
$
0.04
|
|
$
(0.04)
|
|
Diluted net earnings (loss) per
share
|
$
0.04
|
|
$
(0.04)
|
|
|
|
|
|
|
|
|
Shares used to compute basic net
earnings (loss) per share
|
32,838
|
|
32,476
|
|
Shares used to compute diluted net
earnings (loss) per share
|
33,199
|
|
32,476
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Includes share-based compensation
as follows:
|
|
|
|
|
Selling, general
and administrative
|
$
1,791
|
|
$
1,882
|
|
Product
development
|
609
|
|
317
|
|
|
|
|
$
2,400
|
|
$
2,199
|
|
|
|
|
|
|
|
DivX,
Inc.
|
|
UNAUDITED
RECONCILIATION OF NON-GAAP ADJUSTMENTS
|
|
(in thousands,
except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
|
|
|
2010
|
|
2009
|
|
Net Income:
|
|
|
|
|
|
GAAP net income (loss)
|
$
1,256
|
|
$
(1,432)
|
|
|
|
Share-based compensation
|
2,400
|
|
2,199
|
|
|
|
Amortization of purchased intangible
assets
|
510
|
|
511
|
|
|
|
Foreign exchange impact on
Euro-denominated intercompany loan
|
137
|
|
313
|
|
|
|
Adjustments to the fair value of
AnySource acquisition contingent consideration
|
276
|
|
-
|
|
|
|
Valuation allowance / adjustments on
deferred tax assets
|
(131)
|
|
756
|
|
|
|
Income tax effects of pre-tax
adjustments
|
(1,291)
|
|
(1,193)
|
|
|
|
|
|
|
|
|
|
Non-GAAP net income
|
$
3,157
|
|
$
1,154
|
|
|
|
|
|
|
|
|
Diluted earnings per
share:
|
|
|
|
|
|
GAAP diluted earnings (loss) per
share
|
$
0.04
|
|
$
(0.04)
|
|
|
|
Share-based compensation
|
0.07
|
|
0.07
|
|
|
|
Amortization of purchased intangible
assets
|
0.02
|
|
0.02
|
|
|
|
Foreign exchange impact on
Euro-denominated intercompany loan
|
-
|
|
0.01
|
|
|
|
Adjustments to the fair value of
AnySource acquisition contingent consideration
|
0.01
|
|
-
|
|
|
|
Valuation allowance / adjustments on
deferred tax assets
|
-
|
|
0.02
|
|
|
|
Income tax effects of pre-tax
adjustments
|
(0.04)
|
|
(0.04)
|
|
|
|
|
|
|
|
|
|
Non-GAAP diluted earnings per
share
|
$
0.10
|
|
$
0.04
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP shares used to compute
diluted net earnings per share
|
33,199
|
|
32,818
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table sets forth the
computation of Non- GAAP basic and diluted net earnings per
share:
|
|
|
|
|
|
|
|
|
|
|
|
Numerator:
|
|
|
|
|
|
Net income
|
$
3,157
|
|
$
1,154
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
Weighted-average common shares
outstanding (basic)
|
32,838
|
|
32,476
|
|
|
|
|
|
|
|
|
|
Weighted-average common shares
outstanding (diluted)
|
33,199
|
|
32,818
|
|
|
|
|
|
|
|
|
Basic net earnings per
share
|
$
0.10
|
|
$
0.04
|
|
|
|
|
|
|
|
|
Diluted net earnings per
share
|
$
0.10
|
|
$
0.04
|
|
|
|
|
|
|
|
DivX,
Inc.
|
|
CONSOLIDATED
CONDENSED STATEMENTS OF CASH FLOW
|
|
(in
thousands)
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
|
2010
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in)
operating activities
|
$
(2,401)
|
|
$
2,532
|
|
|
|
|
|
|
Net cash used in investing
activities
|
(3,999)
|
|
(24,800)
|
|
|
|
|
|
|
Net cash provided by financing
activities
|
144
|
|
456
|
|
|
|
|
|
|
Effect of exchange rate changes on
cash
|
(38)
|
|
(108)
|
|
|
|
|
|
|
Net decrease in cash and cash
equivalents
|
(6,294)
|
|
(21,920)
|
|
Cash and cash equivalents at beginning
of period
|
14,883
|
|
43,442
|
|
|
|
|
|
|
Cash and cash equivalents at end of
period
|
$
8,589
|
|
$
21,522
|
|
|
|
|
|
SOURCE DivX, Inc.