8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): August 9, 2006

INTERVIDEO, INC.

(Exact Name of Registrant as Specified in its Charter)

Delaware	000-49809	94-3300070
(State or Other Jurisdiction of	(Commission File	(I.R.S. Employer Identification Number)
Incorporation or Organization)	Number)

46430 Fremont Boulevard

Fremont, California 94538

(Address of Principal Executive Offices)

(510) 651-0888

(Registrant’s Telephone Number, Including Area Code)

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

ITEM 2.02. Results of Operations and Financial Condition

The information in this Form 8-K and the Exhibit attached hereto shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, regardless of any general incorporation language in such filing.

On August 9, 2006, InterVideo issued a press release regarding its financial results for the fiscal quarter ended June 30, 2006. A copy of the press release is furnished as Exhibit 99.1 to this Form 8-K and is incorporated by reference herein.

Use of Non-GAAP Financial Information

In the press release, InterVideo provides, as supplemental information relating to its results of operations, an adjustment to the financial information calculated on the basis of GAAP. These non-GAAP financial measures are used in addition to and in conjunction with results presented in accordance with GAAP, and are intended to provide additional insight into our operations that, when viewed with our GAAP results and the accompanying reconciliations to corresponding GAAP financial measures, offer a more complete understanding of factors and trends affecting our business. These non-GAAP measures should be considered as a supplement to, and not as a substitute for or superior to, the corresponding measures calculated in accordance with GAAP.

These non-GAAP financial measures include adjustments impacting net revenue, net income, diluted earnings per share, gross profit and margins. Such adjustments are described below.

Non-GAAP acquisition-related adjustments including revenue associated with historical Ulead product sales and amortization of intangibles arising from prior acquisitions.

• In the case of the cash received by Ulead for historical products sales, we believe that this otherwise unrecognized income because of purchase accounting adjustments provides investors with important information on the actual performance of Ulead as well as InterVideo on a consolidated basis. Accordingly, this measure will allow investors to better compare our ongoing results from period to period and to more accurately measure our performance against competitors, whose consolidated operating results are not impacted by purchase accounting deductions.

• With respect to amortization of intangibles arising from prior acquisitions, we believe that these non-cash expenses are not reflective of ongoing operating results in the period incurred and are not directly related to the operation of our business. Moreover, management does not consider charges for the amortization of intangibles in its evaluation of the performance of the business.

Stock-based compensation adjustments.

• We believe that a deduction of compensation expenses resulting from application of SFAS 123R from the relevant GAAP measures is useful to investors in that such presentation provides insight into how management evaluates InterVideo’s

operating results. Additionally, we believe that the non-GAAP measure provides greater ease of comparison from quarter to quarter because financial statements from prior periods did not include the 123R-mandated compensation expense.

Other non-recurring charges.

• We presented our operating results net of certain non-recurring charges in order to provide investors with a clearer picture of InterVideo’s recurring operations and eliminate unusual or extraordinary charges that might skew our results and impair investors’ ability to compare results across reporting periods.

Investors should note, however, that the non-GAAP financial measures used by InterVideo may not be the same non-GAAP financial measures, and may not be calculated in the same manner, as that of other companies. InterVideo does not itself, nor does it suggest that investors should, consider such non-GAAP financial measures alone or as a substitute for financial information prepared in accordance with GAAP. A reconciliation of the GAAP financial measures to non-GAAP financial measures is provided at the end of the press release. Investors are encouraged to review the related GAAP financial measures and the reconciliation of non-GAAP financial measures to their most directly comparable GAAP financial measures.

ITEM 9.01. Financial Statements, Pro Forma Information and Exhibits

(d) Exhibits.

99.1 Press release of InterVideo, Inc. dated August 9, 2006.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	INTERVIDEO, INC.
	(Registrant)
Date: August 9, 2006	/s/ Randall Bambrough
	Randall Bambrough Chief Financial Officer

INDEX OF EXHIBITS:

Exhibit Number	Description
99.1	Press release of InterVideo, Inc. dated August 9, 2006

EX-99.1

Exhibit 99.1

Investor contacts:

Lisa Laukkanen

The Blueshirt Group for InterVideo

415-217-4967

lisa@blueshirtgroup.com

InterVideo Reports Results for Second Quarter 2006

Fremont, Calif., August 9, 2006 — InterVideo, Inc. (Nasdaq: IVII), a leading provider of DVD software, today reported financial results for the second quarter ended June 30, 2006.

For the second quarter of 2006, InterVideo reported GAAP revenue of $29.7 million and non-GAAP revenue of $31.0 million compared to $27.6 million reported in the second quarter of 2005. Net income for the second quarter of 2006 was $731,000, or $0.05 per diluted share, compared to net loss of $1.8 million, or $0.13 per diluted share, reported in the second quarter of 2005.

On a non-GAAP basis including certain Ulead revenue of $1.2 million and excluding acquisition related intangibles amortization of $420,000, $936,000 for stock-based compensation, the gain on sale of Ulead assets held for sale of $2.1 million and other items of $313,000, net of minority interest, and the overall tax effect on these excluded items, net income was $1.6 million, or $0.11 per diluted share.

Gross margins decreased to 51% for the three months ended June 30, 2006 from 61% for the three months ended June 30, 2005. The decrease is primarily attributable to the Microsoft royalty revenue which is sold at cost. This Microsoft royalty revenue will continue to have an effect on gross margins in the future.

Revenue from products, other than WinDVD, such as WinDVD Creator, InterVideo DVD Copy, InterVideo InstantON and Ulead products such as VideoStudio, PhotoImpact and Ulead DVD MovieFactory, represented 64% of total revenue in the second quarter of 2006, as compared to 55% of total revenue in the second quarter of 2005.

The company closed the quarter with $105 million in cash, cash equivalents and short-term investments.

“While our revenue growth was slightly below our expectations for the quarter, we continued to make progress on a number of initiatives,” commented President and CEO, Steve Ro. “We entered into an agreement to purchase the remainder of the outstanding shares of Ulead and, as planned, sold Ulead’s building in Taipei, Taiwan which added over $21 million cash to our balance sheet. All time Installations of our WinDVD playback software surpassed 175 million during the quarter, demonstrating the strength our market position. Importantly, the U.S. Patent and

Trademark Office concluded substantive reexamination of a patent for our InstantOn technology which we believe bolsters our overall technology position.”

Business Outlook

The following statements are based on current expectations and information available to us as of August 9, 2006; we do not undertake a duty to update them. Projected future results are inherently uncertain. These statements are “forward-looking” and actual results may differ materially as a result of risks outlined below.

InterVideo estimates its revenue for the third quarter of 2006 to be in the range of $25 to $27 million and loss per share on a GAAP basis to be in the range of $0.06 to $0.10. On a non-GAAP basis, InterVideo estimates earnings per share excluding amortization of intangible assets of $420,000 and quarterly stock-based compensation expense of approximately $900,000 to be $0.00 to $0.02 per share.

InterVideo was required to adopt FAS 123R during the first quarter of fiscal 2006. This has a significant impact on current and future reported results as the company continues to grant stock options and other stock based compensation awards to individuals. FAS 123R requires companies to estimate the value of stock options by using the Black Scholes or other option valuation techniques. These techniques require management to make certain assumptions regarding such matters as volatility, dividend yield rates, risk-free rates and expected option term.

Conference Call Details

The InterVideo second quarter teleconference and webcast are scheduled to begin at 4:30 p.m. Eastern Time (ET) on August 9, 2006. To participate on the live call, analysts and investors should dial (800) 240-2134 at least ten minutes prior to the call. InterVideo will also offer a live and archived webcast of the conference call, accessible from the “Investor Relations” section of the company’s Web site http://www.investor.intervideo.com. A telephonic replay of the conference call will also be available until 11:59 p.m. PT on Thursday, August 17, 2006 by dialing 800-405-2236 and entering the passcode: 11067977#.

Use of Non-GAAP Financial Information

In this press release, InterVideo provides, as supplemental information relating to its results of operations, an adjustment to the financial information calculated on the basis of GAAP. These non-GAAP financial measures are used in addition to and in conjunction with results presented in accordance with GAAP, and are intended to provide additional insight into our operations that, when viewed with our GAAP results and the accompanying reconciliations to corresponding GAAP financial measures, offer a more complete understanding of factors and trends affecting our business. These non-GAAP measures should be considered as a supplement to, and not as a substitute for or superior to, the corresponding measures calculated in accordance with GAAP.

These non-GAAP financial measures include adjustments impacting net revenue, net income, diluted earnings per share, gross profit and margins. Such adjustments are described below.

Non-GAAP acquisition-related adjustments including revenue associated with historical Ulead product sales and amortization of intangibles arising from prior acquisitions.

• In the case of the cash received by Ulead for historical products sales, we believe that this otherwise unrecognized income because of purchase accounting adjustments provides investors with important information on the actual performance of Ulead as well as InterVideo on a consolidated basis. Accordingly, this measure will allow investors to better compare our ongoing results from period to period and to more accurately measure our performance against competitors, whose consolidated operating results are not impacted by purchase accounting deductions.

• With respect to amortization of intangibles arising from prior acquisitions, we believe that these non-cash expenses are not reflective of ongoing operating results in the period incurred and are not directly related to the operation of our business. Moreover, management does not consider charges for the amortization of intangibles in its evaluation of the performance of the business.

Stock-based compensation adjustments.

• We believe that a deduction of compensation expenses resulting from application of SFAS 123R from the relevant GAAP measures is useful to investors in that such presentation provides insight into how management evaluates InterVideo’s operating results. Additionally, we believe that the non-GAAP measure provides greater ease of comparison from quarter to quarter because financial statements from prior periods did not include the 123R-mandated compensation expense.

Other non-recurring charges.

• We presented our operating results net of certain non-recurring charges in order to provide investors with a clearer picture of InterVideo’s recurring operations and eliminate unusual or extraordinary charges that might skew our results and impair investors’ ability to compare results across reporting periods.

Investors should note, however, that the non-GAAP financial measures used by InterVideo may not be the same non-GAAP financial measures, and may not be calculated in the same manner, as that of other companies. InterVideo does not itself, nor does it suggest that investors should, consider such non-GAAP financial measures alone or as a substitute for financial information prepared in accordance with GAAP. A

reconciliation of the GAAP financial measures to non-GAAP financial measures is provided at the end of this press release. Investors are encouraged to review the related GAAP financial measures and the reconciliation of non-GAAP financial measures to their most directly comparable GAAP financial measures.

About InterVideo, Inc.

InterVideo is a leading provider of DVD software and has developed a technology platform from which it has created a broad suite of integrated multimedia software products that allow users to capture, edit, author, burn, distribute, and play digital video. Ulead, a leading developer of innovative video, imaging and DVD authoring software for desktop, server, mobile and internet platforms, is majority owned by InterVideo. Ulead software empowers users of all levels with the tools to easily and affordably personalize, manage and share digital content. For more information on Ulead, visit www.ulead.com. InterVideo’s worldwide headquarters is at 46430 Fremont Blvd, Fremont, CA, 510-651-0888. InterVideo has major offices in Taiwan, Japan, Mainland China and around the globe. For more information, visit www.InterVideo.com.

Safe Harbor Statement

Except for the historical statements contained herein, the foregoing release contains forward-looking statements, including statements regarding, among other matters, our estimated revenues and estimated GAAP and non-GAAP earnings per share for the second quarter of 2006. These forward-looking statements are subject to risks and uncertainties, and actual results could differ materially due to several factors, including but not limited to unanticipated developments or events concerning the financial condition, assets, operations, business or prospects of Ulead; higher legal costs associated with enforcement of our intellectual property rights; adverse effects on existing business relationships with suppliers and customers; unsuccessful efforts or delays in new products development; customers’ acceptance of new technology or product offerings; increased competition and pricing pressure; slower than anticipated growth in the markets for new products; problems integrating the operations, personnel, technologies or products of Ulead; problems maintaining internal and disclosure controls and procedures with a company with significant presence in Taiwan; conflicts of interest issues that might arise between InterVideo and Ulead as a majority-owned subsidiary; potential loss of key management, engineers and other employees; litigation or claims regarding alleged infringement of third parties’ intellectual property rights; the ability to maintain or expand our relationship with our retail and OEM customers; Microsoft incorporating software DVD playback technology in its future operating systems and other risks and uncertainties. Please consult the various reports and documents filed by InterVideo with the U.S. Securities and Exchange Commission, including but not limited to InterVideo’s annual report on Form 10-K and quarterly reports on Form 10-Q for factors potentially affecting the Company’s future financial results. All forward-looking statements are made as of the date hereof and InterVideo disclaims any responsibility to update or revise any forward-looking statement provided in this news release. The results for the second quarter ended June 30, 2006 are not necessarily indicative of InterVideo’s operating results for any future periods.

InterVideo, WinDVD, WinDVD Creator, InterVideo InstantON are registered trademarks of InterVideo, Inc. VideoStudio, PhotoImpact and Ulead DVD MovieFactory are registered trademarks of Ulead Systems, Inc. All other trademarks are the property of their respective holders.

###

TABLES TO FOLLOW

INTERVIDEO, INC.

CONSOLIDATED STATEMENT OF OPERATIONS

(unaudited)

(in thousands, except per share amounts)

	Three months ended June 30,						Six months ended June 30,
	2006			2005			2006			2005
Revenue	$	29,721		$	27,606		$	61,043		$	49,510
Cost of revenue :		14,106			10,407			29,094			19,529
Amortization of intangible assets		420			287			743			337
Gross Profit		15,195			16,912			31,206			29,644
Operating Expenses :
Research and development		6,122			5,437			12,754			8,460
Sales and marketing		4,969			5,315			9,903			8,081
General and administrative		4,441			3,950			9,950			6,851
Acquired in-process research and development		—			2,574			—			2,574
Gain on disposal of asset		(2,078	)		(1	)		(2,006	)		(1	)
Total operating expenses		13,454			17,275			30,601			25,965
Income (loss) from operations		1,741			(363	)		605			3,679
Other income, net		1,156			(1,010	)		3,621			(712	)
Income before income taxes		2,897			(1,373	)		4,226			2,967
Provision for income taxes		1,190			761			1,803			2,432
Minority interest		(976	)		296			(607	)		296
Net income	$	731		$	(1,838	)	$	1,816		$	831
Net income per share :
Basic	$	0.05		$	(0.13	)	$	0.13		$	0.06
Diluted	$	0.05		$	(0.13	)	$	0.12		$	0.05
Number of shares used in net income per share calculation:
Basic		13,991			13,980			13,944			13,886
Diluted		14,995			13,980			14,985			15,406

INTERVIDEO, INC.

CONSOLIDATED BALANCE SHEETS

(unaudited)

(in thousands)

	June 30, 2006			December 31, 2005
Current assets :
Cash and cash equivalents	$	25,771		$	31,169
Short term investments		79,113			43,988
Accounts receivable (net of $658 and $746 allowance, respectively)		8,391			12,939
Deferred tax assets		1,039			1,034
Prepaid expenses and other current assets		5,221			6,470
Held for sale assets		—			19,611
Total current assets		119,535			115,211
Property and equipment, net		3,608			3,414
Goodwill		1,018			1,018
Other purchased intangible assets		9,161			7,130
Deferred tax assets		3,966			3,965
Other assets		3,225			3,507
Total assets	$	140,513		$	134,245
Current liabilities :
Accounts payable	$	2,214		$	2,219
Accrued liabilities		25,945			19,087
Income tax payable		115			1,566
Deferred revenue		4,736			3,938
Total current liabilities		33,010			26,810
Long term Liabilities:
Other long term liabilities		911			871
Minority interest		18,208			19,832
Stockholders’ equity :
Common stock, $0.001 par value, 150,000 shares authorized, 13,942 and 13,850 shares issued and outstanding respectively		14			14
Additional paid-in capital		76,907			74,123
Notes receivable from stockholders		(123	)		(456	)
Deferred stock compensation		—			(2	)
Accumulated other comprehensive income		(319	)		2,965
Retained earnings		11,905			10,088
Total stockholder’s equity		88,384			86,732
Total liabilities and stockholders’ equity	$	140,513		$	134,245

INTERVIDEO, INC.

Reconciliation of Reported Operating Results to Non-GAAP Operating Results

(unaudited)

(in thousands, except per share amounts)

	Three months ended June 30, 2006			Six months ended June 30, 2006
Reconciliation from GAAP to Non-GAAP Revenue
GAAP Revenue	$	29,721		$	61,043
Adjustments:
Ulead revenue		1,247			1,247
Non-GAAP Revenue	$	30,968		$	62,290
Reconciliation from GAAP to Non-GAAP Gross Profit
GAAP Gross Profit	$	15,195		$	31,206
Adjustments:
Ulead revenue		1,247			1,247
Amortization of intangibles		420			743
Non-GAAP Gross Profit	$	16,862		$	33,196
Reconciliation from GAAP to Non-GAAP Net Income
GAAP Net Income	$	731		$	1,816
GAAP income before income taxes		2,897			4,226
Non-GAAP adjustments:
Ulead revenue		1,247			1,247
Amortization of intangibles		420			743
FAS123R stock compensation expense		936			1,936
Ulead gain on sale of assets		(2,078	)		(2,078	)
Realized foreign currency gain - settlement of intercompany loan		—			(1,646	)
Ulead lawsuit award		—			300
Other adjustments		313			552
Adjusted minority interest on non-GAAP basis		(731	)		(504	)
Adjusted tax provision on non-GAAP basis		(1,428	)		(2,019	)
Non-GAAP Net Income	$	1,576		$	2,758
EPS (GAAP)	$	0.05		$	0.12
EPS (Non GAAP)	$	0.11		$	0.18
Shares Used		14,995			14,985