EX-99.1 2 a4817985ex991.txt SONIC SOLUTIONS EXHIBIT 99.1 Exhibit 99.1 Sonic Solutions Reports Results for Third Quarter Ended December 31, 2004 NOVATO, Calif.--(BUSINESS WIRE)--Feb. 8, 2005--Sonic Solutions (Nasdaq:SNIC) Record Revenues and Strong Profitability (Non GAAP) Mark First Quarter Report Post Roxio Acquisition 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 Nine Months Ended December 31, December 31, 2004 2004 2003 2004 2003 (Non GAAP) (GAAP) (GAAP) (GAAP) (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 Nine Months Ended Ended December 31, 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 common Shareholders: 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 March 31, 31, 2004 2004(a) (unaudited) ------------------- 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 ========== ======== (a) 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: 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 ================ Net income (loss) per diluted share Non GAAP $0.18 $0.13 ================ GAAP $(0.02) $0.13 ================ Shares used in computing per share amounts 27,986 24,770 ================ 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. Sonic, the Sonic logo, Sonic Solutions are trademarks or registered trademarks of Sonic Solutions in the U.S. and/or other countries. All other company or product names are trademarks of their respective owners and, in some cases, are used by Sonic under license. CONTACT: Sonic Solutions A. Clay Leighton, 415-893-8000 clay_leighton@sonic.com or Market Street Partners Carolyn Bass or Rob Walker, 415-445-3234 carolyn@marketstreetpartners.com rwalker@marketstreetpartners.com