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Sonic Solutions Reports Results for Third Quarter Ended December 31, 2004
Record Revenues and Strong Profitability (Non GAAP) Mark First Quarter Report Post Roxio Acquisition
Novato, California (February 8, 2005) - — Sonic Solutions (NASDAQ: SNIC) announced today the financial results for the Company's third quarter ended December 31, 2004.
Summary Financial Results (in thousands, except per share amounts)
|
Three Months Ended December 31 |
Nine Months Ended December 31 |
|
2004 (Non GAAP) |
2004 (GAAP) |
2003 (GAAP) |
|
2004 (GAAP) |
2003 (GAAP) |
| Net revenue |
$20,615 |
$19,677 |
$14,834 |
|
$55,023 |
$39,551 |
| Net income (loss) |
$4,941 |
$(419) |
$3,208 |
|
$7,143 |
$6,748 |
| Net income (loss) per diluted share |
$0.18 |
$(0.02) |
$0.13 |
|
$0.25 |
$0.27 |
|
Summary
On a GAAP basis, net revenue for the quarter was $19,677,000 compared to $14,834,000 for the same period in the prior fiscal year.
Net loss for the quarter was $419,000 or $0.02 per diluted share compared to net income of $3,208,000 or $0.13 per diluted share for
the same period in the prior fiscal year.
On a GAAP basis, net revenue for the nine months was $55,023,000 compared to $39,551,000 for the same period in the prior fiscal year.
Net income for the nine months was $7,143,000 or $0.25 per diluted share compared to net income of $6,748,000 or $0.27 per diluted share
for the same period in the prior fiscal year.
On a Non GAAP basis, net revenue for the quarter was $20,615,000 and net income was $4,941,000 and net income per diluted share was $0.18.
Non GAAP Presentation
During the quarter ended December 31, 2004, and as previously announced, Sonic Solutions acquired substantially all of the assets
and liabilities of the Consumer Software Division of Roxio, Inc. This press release discloses Non GAAP financial measures, including
Non GAAP net revenue, net income (loss), diluted earnings per share, and gross profit and margin figures, which exclude certain expense
items associated with the acquisition and include certain royalty revenue associated with the sale of Roxio product, each as more fully
described below. Sonic Solutions believes that this Non GAAP presentation is useful to investors in analyzing the results for the
quarter ended December 31, 2004 because it includes certain items that management considers meaningful and excludes other items that
management does not consider meaningful for purposes of analyzing Sonic's operating results. Sonic Solutions plans to continue to
provide a Non GAAP presentation in future quarters for as long as such a presentation continues to be meaningful.
The Non GAAP presentation adjusts the following items:
Revenue - Under purchase accounting rules, OEM royalties received by Sonic on account of Roxio's business may only be included in revenue if they reflect OEM shipments occurring after the date of the acquisition (December 17, 2004). The Non GAAP presentation includes in revenue royalties for which Sonic received reports of shipments from OEM's after December 17, 2004 for shipments prior to December 17, 2004 and for which Sonic has invoiced the OEMs and expects to collect the amounts due in cash. Sonic has also excluded in the Non GAAP presentation an end of life reserve related to some of the Roxio products.
Acquisition Related Intangible Amortization - Under purchase accounting rules, some portion of the acquisition purchase price is allocated to intangibles, such as core and developed technology and customer contracts, which are then amortized over various periods of time. The GAAP presentation includes amortization on all acquired intangibles. These non-cash charges are eliminated in the Non GAAP presentation in calculating operating income.
Acquired in-process Technology - In the GAAP presentation, the write-off of acquired in-process technology is included in operating expenses. This expense has been eliminated in the Non GAAP presentation.
Business Integration Expenses - Certain charges that occur at or around the time of an acquisition, and that are not expected to recur, are considered to be non-recurring charges. The Non GAAP presentation eliminates any of these charges included in operating expense.
Sonic will hold its third quarter ended December 31, 2004 earnings conference call on Tuesday, February 8, 2005 at 1:30 p.m. (PT)/4:30 p.m. (ET). Investors are invited to listen to Sonic's quarterly conference call on the investor section of the Sonic Web site at www.sonic.com. A replay of the call will also be available via Webcast at www.sonic.com.
Sonic Solutions Condensed Statement of Operations
(in thousands, except per share amounts)
(unaudited)
|
Three Months Ended December 31
|
Nine Months Ended December 31 |
|
2004 |
2003 |
2004 |
2003 |
| Net Revenue |
$19,677 |
14,834 |
55,023 |
39,551 |
| Cost of Revenue |
2,497 |
1,734 |
5,997 |
5,135 |
| Gross Profit |
17,180 |
13,100 |
49,026 |
34,416 |
| Operating expenses |
|
|
|
|
| Marketing and sales |
4,553 |
3,304 |
12,151 |
9,286 |
| Research and development |
7,503 |
4,986 |
21,158 |
14,007 |
| General and administrative |
1,673 |
1,174 |
4,260 |
3,203 |
| Acquired in-process technology |
3,100 |
0 |
3,100 |
0 |
| Business integration |
1,087 |
0 |
1,087 |
0 |
| Total operating expenses |
17,916 |
9,464 |
41,756 |
26,496 |
| Operating income (loss) |
(736) |
3,636 |
7,270 |
7,920 |
| Other income, net |
365 |
101 |
596 |
102 |
| Income (loss) before income taxes |
(371) |
3,737 |
7,866 |
8,022 |
| Provision for income taxes |
48 |
529 |
723 |
1,274 |
| Net income (loss) |
$(419) |
3,208 |
7,143 |
6,748 |
| Net income (loss) per share applicable to commonShareholders |
|
|
|
|
| Basic |
($0.02) |
$0.15 |
$0.31 |
$0.34 |
| Diluted |
($0.02) |
$0.13 |
$0.25 |
$0.27 |
| Shares used in computing net income (loss) per share |
|
|
|
|
| Basic |
23,627 |
21,516 |
23,031 |
20,023 |
| Diluted |
23,627 |
24,770 |
28,408 |
24,829 |
|
Sonic Solutions
Condensed Balance Sheets
(in thousands)
|
December 31, 2004 (unaudited) |
March 31,2004 * |
| Assets |
|
|
| Current assets: |
|
|
| Cash, cash equivalents and investments |
$29,214 |
$36,182 |
Accounts receivable, net of allowance for returns and doubtful accounts of
$243 and $10,818, at March 31, 2004 and December 31, 2004, respectively
|
14,790 |
9,443 |
| Unbilled receivables |
397 |
0 |
| Inventory |
1,350 |
560 |
| Prepaid expenses and other current assets |
3,283 |
1,399 |
| Total current assets |
49,034 |
47,584 |
| Fixed assets, net |
6,857 |
3,610 |
| Purchased and internally developed software costs, net |
1,675 |
1,042 |
| Acquired intangibles |
50,065 |
2,898 |
| Goodwill |
54,236 |
15,533 |
| Other assets |
1,924 |
278 |
| Total assets |
$163,791 |
$70,945 |
| Liabilities and Shareholders' Equity |
|
|
| Current liabilities: |
|
|
| Accounts payable |
$5,204 |
$1,145 |
| Accrued liabilities |
21,768 |
8,977 |
| Deferred revenue and deposits |
7,123 |
4,965 |
| Capital leases |
57 |
60 |
| Total current liabilities |
34,152 |
15,147 |
| Bank note payable |
30,000 |
0 |
| Other long term liabilities |
2,068 |
0 |
| Capital lease, net of current portion |
101 |
75 |
| Total liabilities |
66,321 |
15,222 |
| Shareholders' equity: |
|
|
| Common stock |
105,596 |
70,994 |
| Cumulative foreign translation adjustment |
(14) |
(16) |
| Accumulated deficit |
(8,112) |
(15,255) |
| Total shareholders' equity |
97,470 |
55,723 |
| Total liabilities and shareholders' equity |
$163,791 |
$70,945 |
|
* March 31, 2004 balances are derived from the audited financial statements included in the Company's 2004 Annual Report on Form 10-K.
Sonic Solutions
Reconciliation of Reported Operating Results to Non GAAP Operating Results:
(in thousands, except per share amounts and percentages, unaudited)
|
Three Months Ended December 31 |
|
2004 |
2003 |
| Reported revenue |
19,677 |
14,834 |
| Adjustment: |
|
|
| CSD Royalty reports received after December 17, 2004 for OEM shipments prior to December 17, 2004 |
731 |
- |
| CSD end of life reserve |
207 |
- |
| Non GAAP revenue |
$ 20,615 |
$14,834 |
| Non GAAP gross profit |
18,444 |
13,100 |
| Non GAAP gross margin |
89.5% |
88.3% |
| GAAP Operating income (loss) |
(736) |
3,636 |
| GAAP Net income (loss) |
(419) |
3,208 |
| Adjustments: |
(419) |
3,208 |
| CSD royalty reports received after December 17, 2004 For OEM shipments prior to December 17, 2004 |
731 |
- |
| CSD end of life reserve |
207 |
- |
| Acquired in-process technology |
3,100 |
- |
| Business integration expenses |
1,087 |
- |
| Amortization of intangible assets |
326 |
134 |
| Tax impact on Non GAAP adjustments |
(91) |
(59) |
| Non GAAP operating income (loss) basis |
$ 4,715 |
$ 3,770 |
| Non GAAP net income (loss) basis |
$ 4,941 |
$ 3,283 |
| Non GAAP |
$ 0.18 |
$ 0.13 |
| GAAP |
$ (0.02) |
$ 0.13 |
| Shares used in computing per share amounts |
27,986 |
24,770 |
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About Sonic Solutions (NASDAQ: SNIC - News)
Based in Marin County, California, Sonic Solutions (NASDAQ: SNIC) (http://www.sonic.com/) is the leader in digital media
software, providing a broad range of interoperable, platform independent software tools and applications for creative
professionals, business and home users, and technology partners. Sonic's products range from advanced DVD authoring systems
and interactive content delivery technologies used to produce the majority of Hollywood DVD film releases, to the
award-winning Roxio- and Sonic-branded CD and DVD creation, playback and backup solutions that have become the premiere
choice for consumers, prosumers and business users worldwide.
Sonic products are globally available from major retailers, online at Sonic.com and Roxio.com, and are bundled with PCs,
after-market drives and consumer electronic devices. Sonic's digital media creation engine is the de facto standard and
has been licensed by major software and hardware manufacturers, including Adobe, Microsoft, Scientific-Atlanta, Sony, and
many others. Sonic Solutions is headquartered in Marin County, California.
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