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SAN DIEGO, Mar 11, 2008 (BUSINESS WIRE) -- DivX, Inc. (NASDAQ:DIVX), a digital media company, today announced results for the fourth quarter and fiscal year ended December 31, 2007.
The Company reported record revenue for the fourth quarter of $24.5 million, an increase of 47% compared to revenue of $16.7 million reported in the fourth quarter of last year. GAAP net income in the fourth quarter of 2007 was approximately $3.7 million, or $0.11 per diluted share. DivX generated non-GAAP net income of $5.6 million, or $0.16 per diluted share. Non-GAAP net income and EPS excludes (1) non-cash share-based compensation of approximately $6.4 million ($3.8 million, or $0.11 per diluted share, net of related taxes); (2) Stage6 operating costs of approximately $3.5 million ($2.1 million, or $0.06 per diluted share, net of related taxes); (3) impairment of acquired intangible assets attributable to the write-off of additional milestones related to Veatros of approximately $750,000 ($450,000, or $0.01 per diluted share, net of related taxes); and (4) amortization of purchased
intangible assets related to MainConcept of $271,000 ($163,000, net of related taxes). These four items were offset by an income tax benefit during the fourth quarter from the release of valuation allowances of approximately $4.6 million, or $0.13 per diluted share.
"During 2007, we experienced significant growth across all areas of our business and made real strides toward creating a global standard for high-quality digital video on any device or platform," said Kevin Hell, Chief Executive Officer of DivX. "Specifically, we extended our footprint into key emerging product categories including Blu-ray and mobile devices, launched DivX Connected, and secured format approval from a major Hollywood studio. In 2008, our focus will be on execution as we prudently invest to extend these exciting wins while closely managing profitability. DivX is emerging as the open alternative to Apple, giving consumers the freedom and control to enjoy digital video anywhere they choose."
"2007 was a solid year for DivX, highlighted by strong revenue growth and record operating cash flows," said Dan Halvorson, DivX's Chief Financial Officer. "The focus for 2008 will be our highly profitable core licensing business and other key growth strategies balanced with managing our investments for growth and delivering shareholder value."
For the fiscal year ended December 31, 2007, the Company reported record revenue of $84.9 million, an increase of 43% compared to revenue of $59.3 million reported in the 2006 fiscal year. GAAP net income for the 2007 fiscal year was approximately $9.2 million, or $0.26 per diluted share. DivX generated non-GAAP net income in the 2007 fiscal year of $20.1 million, or $0.57 per diluted share. Non-GAAP EPS excludes (1) non-cash share-based compensation of approximately $11.8 million ($7.1 million, or $0.20 per diluted share, net of related taxes); (2) Stage6 operating costs of approximately $10.9 million ($6.5 million, or $0.18 per diluted share, net of related taxes); (3) impairment of acquired intangible assets attributable to the write-off of additional milestones related to Veatros of approximately $3.0 million ($1.8 million, or $0.05 per diluted share, net of related taxes); and (4)
amortization of purchased intangible assets related to MainConcept of $271,000 ($163,000, net of related taxes). These four items were offset by an income tax benefit during the fourth quarter from the release of valuation allowances of approximately $4.6 million, or $0.13 per diluted share.
Q1 and 2008 Outlook
"Let me address guidance for the first quarter 2008, as well as guidance for the full year," said Halvorson. "We have less visibility in the back half of the year and therefore are taking a measured approach toward our annual guidance, but we do expect our non-GAAP projected EBITDA to be approximately 25 to 30 percent for the full year 2008."
The following table summarizes the Company's financial guidance for the first quarter and the full 2008 fiscal year. These estimates are based on the Company's current business outlook as of the date of this press release and are based on:
1. A projected effective tax rate of 40% for the first quarter and the
full 2008 fiscal year which is dependant on the effective tax
rates in various domestic and foreign jurisdictions;
2. Anticipated non-cash share-based compensation of approximately $2.5
million ($1.5 million, or $0.04 per diluted share, net of related
taxes) for the first quarter 2008; and approximately $10 million
($6 million, or $0.16 per diluted share, net of related taxes) for
the full 2008 fiscal year;
3. Stage6 operating costs and related accruals of approximately $4.0
million ($2.4 million, or $0.07 per diluted share, net of related
taxes) for the first quarter and the full 2008 fiscal year;
4. Impairment of acquired intangible assets attributable to the write-
off of additional milestones related to Veatros of approximately
$1.0 million ($0.6 million, or $0.02 per diluted share, net of
related taxes) for the first quarter 2008; and approximately
$300,000 ($180,000, or less than a penny per diluted share, net of
related taxes) for the balance of the 2008 fiscal year;
5. Amortization of purchased intangible assets related to MainConcept
of approximately $550,000 ($330,000, or $0.01 per diluted share,
net of related taxes) for the first quarter 2008; and
approximately $2.2 million ($1.3 million, or $0.04 per diluted
share, net of related taxes) for the full 2008 fiscal year;
6. Expected revenue for technology licensing of approximately 75% for
the first quarter and between 75% and 85% for the balance of the
2008 fiscal year; expected revenue for media and other
distribution and services of approximately 25% for the first
quarter and between 15% and 25% for the balance of the 2008 fiscal
year.
The full 2008 fiscal year guidance does not include any impact from the Company's recently announced stock repurchase program which allows for the Company to repurchase up to $20 million of its common stock.
Add to Briefcase
Q1 '08 FY '08
Guidance Guidance
-----------------------------
Revenue (in millions) $24.5 - $25.5 $95 - $100
-----------------------------
GAAP Earnings Per Share $(0.01) - $0.01 $0.14 - $0.22
Adjustments:
----------------------------------------
Non-cash share-based compensation, net
of income tax $0.04 $0.16
Stage6 related costs, net of income tax $0.07 $0.07
Impairment of intangible asset, net of
income tax $0.02 $0.03
Amortization of purchased intangibles,
net of income tax $0.01 $0.04
-----------------------------
DivX Core Non-GAAP EPS, Diluted $0.13 - $0.15 $0.44 - $0.52
=============================
Added Halvorson, "We anticipate that product development expenses in 2008 will increase as a percentage of revenue given our investment in new emerging product categories. In addition, we expect revenue and deferred revenue to fluctuate from quarter-to-quarter as we integrate and adjust the form of MainConcept's customer terms to traditional DivX terms and conditions."
DivX, Inc.
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands)
December 31, December 31,
------------ ------------
2006 2007
------------ ------------
(unaudited)
Assets
Current assets:
Cash and cash equivalents $ 86,310 $ 14,532
Restricted cash 270 -
Marketable securities 62,331 126,503
Accounts receivable, net 6,939 10,397
Deferred tax assets, net 937 2,699
Prepaid expenses and other current assets 2,034 5,317
------------ ------------
Total current assets 158,821 159,448
Property and equipment, net 3,488 5,402
Deferred tax assets, net 1,363 5,354
Acquired intangible assets - 14,261
Goodwill - 12,150
Other assets 714 5,423
------------ ------------
Total assets $ 164,386 $ 202,038
============ ============
Liabilities and stockholders'equity
Current liabilities:
Accounts payable $ 2,189 $ 2,808
Accrued expenses 4,959 11,061
Deferred revenue 4,654 7,170
Deferred tax liability - 4,269
------------ ------------
Total current liabilities 11,802 25,308
Long-term liabilities 1,673 1,290
------------ ------------
Total liabilities 13,475 26,598
Stockholders' equity 150,911 175,440
------------ ------------
Total liabilities and stockholders'
equity $ 164,386 $ 202,038
============ ============
DivX, Inc.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
Three months ended Year ended
December 31, December 31,
--------------------- ----------------------
2006 2007 2006 2007
-------- -------- -------- ---------
Net revenues:
Technology licensing $13,433 $18,344 $47,324 $ 66,345
Media and other
distribution and
services 3,224 6,126 12,001 18,517
-------- -------- -------- ---------
Total net revenues 16,657 24,470 59,325 84,862
Cost of revenue:
Cost of technology
licensing 757 1,236 2,995 3,778
Cost of media and other
distribution and
services (1) 316 149 993 701
-------- -------- -------- ---------
Total cost of
revenues 1,073 1,385 3,988 4,479
-------- -------- -------- ---------
Gross margin 15,584 23,085 55,337 80,383
Operating expenses:
Selling, general and
administrative (1) (2) 7,597 19,368 25,971 58,315
Product development (1)
(2) 4,321 5,647 15,353 18,738
Impairment of acquired
intangibles - 750 - 2,973
-------- -------- -------- ---------
Total operating
expenses 11,918 25,765 41,324 80,026
-------- -------- -------- ---------
Income (loss) from
operations 3,666 (2,680) 14,013 357
Interest income 1,911 1,927 3,060 7,883
Interest expense and
other (14) (5) (71) (6)
-------- -------- -------- ---------
Income before income
taxes 5,563 (758) 17,002 8,234
Income tax provision (1,832) (4,487) 562 (974)
-------- -------- -------- ---------
Net income $ 7,395 $ 3,729 $16,440 $ 9,208
======== ======== ======== =========
Basic net income per
share $ 0.22 $ 0.11 $ 0.70 $ 0.27
======== ======== ======== =========
Diluted net income per
share $ 0.21 $ 0.11 $ 0.61 $ 0.26
======== ======== ======== =========
Shares used to compute
basic net income per
share 32,967 34,587 15,231 33,939
======== ======== ======== =========
Shares used to compute
diluted net income per
share 35,419 35,476 17,653 35,415
======== ======== ======== =========
----------------------------------------------------------------------
(1) Includes stock-based
compensation as follows:
Cost of revenues $ 1 $ - $ 4 $ 2
Selling, general and
administrative 512 5,700 1,528 9,761
Product development 387 667 822 1,995
-------- -------- -------- ---------
Total stock-based
compensation $ 900 $ 6,367 $ 2,354 $ 11,758
======== ======== ======== =========
(2) Includes Stage6
operating costs as
follows:
Selling, general and (a) (a)
administrative $ - $ 3,007 $ - $ 9,824
Product development - (a) 476 - (a) 1,036
-------- -------- -------- ---------
Total Stage6 operating
costs $ - $ 3,483 $ - $ 10,860
======== ======== ======== =========
(a) Stage6 operating costs during the 2006 periods were not material.
DivX, Inc.
UNAUDITED RECONCILIATION OF NON-GAAP ADJUSTMENTS
(in thousands, except per share data)
Three months ended Year ended December
December 31, 31,
--------------------- ----------------------
2006 2007 2006 2007
-------- -------- -------- ---------
Net Income:
GAAP net income $ 7,395 $ 3,729 $16,440 $ 9,208
Share-based
compensation 900 6,367 2,354 11,758
Stage6 operating (a) (a)
costs - 3,482 - 10,859
Impairment of
acquired intangibles - 750 - 2,973
Amortization of
purchased intangible
assets - 271 - 271
Income tax benefit on
adjustments to tax
reserves and the
elimination of the
valuation allowance
on deferred tax
assets (4,099) (4,630) (7,652) (4,630)
Income tax effects of
pre-tax adjustments (351) (4,348) (918) (10,345)
-------- -------- -------- ---------
Non-GAAP net income $ 3,845 $ 5,621 $10,224 $ 20,095
======== ======== ======== =========
Diluted earnings per
share:
GAAP diluted earnings
per share $ 0.21 $ 0.11 $ 0.61 $ 0.26
Share-based
compensation 0.03 0.18 0.13 0.33
Stage6 operating (a) (a)
costs - 0.10 - 0.31
Impairment of
acquired intangibles - 0.02 - 0.08
Amortization of
puchased intangible
assets - 0.01 - 0.01
Income tax benefit on
adjustments to tax
reserves and the
elimination of the
valuation allowance
on deferred tax
assets (0.12) (0.13) (0.43) (0.13)
Income tax effects of
pre-tax adjustments (0.01) (0.12) (0.05) (0.29)
-------- -------- -------- ---------
Non-GAAP diluted
earnings per share $ 0.11 $ 0.16 $ 0.26 $ 0.57
======== ======== ======== =========
Non-GAAP shares used to
compute diluted net
income per share 35,419 35,476 17,653 35,415
======== ======== ======== =========
The following table sets forth the computation of Non-GAAP basic and
diluted net income per share:
Numerator:
Net income $ 3,845 $ 5,621 $10,224 $ 20,095
Income allocable to
preferred stockholders - - (5,704) -
-------- -------- -------- ---------
Net income allocable
common stockholders $ 3,845 $ 5,621 $ 4,520 $ 20,095
======== ======== ======== =========
Denominator:
Weighted-average common
shares outstanding
(basic) 32,967 34,587 15,231 33,939
-------- -------- -------- ---------
Weighted-average common
shares outstanding
(diluted) 35,419 35,476 17,653 35,415
-------- -------- -------- ---------
Basic net income per
share $ 0.12 $ 0.16 $ 0.30 $ 0.59
======== ======== ======== =========
Diluted net income per
share $ 0.11 $ 0.16 $ 0.26 $ 0.57
======== ======== ======== =========
-
(a) Stage6 operating costs during the 2006 periods were not material.
DivX, Inc.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(in thousands)
Three months ended Year ended
December 31, December 31,
------------------- -------------------
2006 2007 2006 2007
--------- --------- --------- ---------
(unaudited) (unaudited)
Net cash (used in) provided by
operating activities $ 4,353 $ (729) $ 16,775 $ 17,193
Net cash used in investing
activities (62,522) (24,381) (64,206) (91,928)
Net cash (used in) provided by
financing activities (1,914) 672 108,706 2,957
--------- --------- --------- ---------
Net increase (decrease) in
cash and cash equivalents (60,083) (24,438) 61,275 (71,778)
Cash and cash equivalents at
beginning of period 146,393 38,970 25,035 86,310
--------- --------- --------- ---------
Cash and cash equivalents at
end of period $ 86,310 $ 14,532 $ 86,310 $ 14,532
========= ========= ========= =========