EX-99.1 2 a5076216ex991.txt SONIC SOLUTIONS EXHIBIT 99.1 Exhibit 99.1 Sonic Solutions Reports Results for Third Quarter Ended December 31, 2005; Sonic Solutions Reports Record Revenues and Profits for its Fiscal Third Quarter NOVATO, Calif.--(BUSINESS WIRE)--Feb. 8, 2006--Sonic Solutions (NASDAQ:SNIC) today announced its financial results for the third quarter of fiscal 2006. Quarterly revenues were a record $40.8 million, up 28% from $31.9 million in the second fiscal quarter of the year, and up more than 100% from $19.7 million for the third quarter of fiscal 2005. Operating income for the third quarter of fiscal 2006 was $9.3 million or 22.8% of revenue compared to $3.2 million or 10.1% of revenue for the second quarter of fiscal 2006 and an operating loss of $0.7 million or 3.7% for the third quarter of fiscal 2005. Net income grew to $8.2 million or $0.30 per share in the third quarter of fiscal 2006 versus $3.1 million or $0.11 per share in the second quarter of fiscal 2006 and net loss of $419,000 or $0.02 per share in the third quarter of fiscal 2005. Dave Habiger, President and Chief Executive Officer of Sonic, stated, "We are pleased with the Company's results this quarter as we celebrated the one year anniversary of the Roxio acquisition. We have begun to reap the rewards of our investment and continue to see tremendous opportunity from the integration of Sonic and Roxio. We are well positioned as the leading digital media software provider for next-generation high definition formats and channels." Sonic will conduct a conference call at 1:30 p.m. PST, or 4:30 p.m. EST, today to discuss its financial results for the third quarter of fiscal 2006. Investors are invited to listen to Sonic's quarterly conference call on the investor section of the Company's website at www.sonic.com. A replay of the web cast will be available approximately two hours after the conclusion of the call. An audio replay of the conference call will also be made available approximately two hours after the conclusion of the call. The audio replay will remain available until February 15, 2006, at 9 p.m. PST and can be accessed by dialing 888-203-1113 and entering confirmation code 4639317. Sonic Solutions Condensed Consolidated Statements of Operations (in thousands, except per share amounts -- unaudited) Three Months Ended Nine Months Ended December 31, December 31, 2005 2004 2005(1) 2004 -------- -------- -------- -------- Net Revenue $ 40,774 $ 19,677 $108,241 $ 55,023 Cost of Revenue 9,435 3,008 26,353 6,980 -------- -------- -------- -------- Gross Profit 31,339 16,669 81,888 48,043 -------- -------- -------- -------- Operating expenses Marketing and sales 7,751 4,553 23,628 12,151 Research and development 10,133 6,992 30,826 20,175 General and administrative 4,158 1,673 12,421 4,260 Business integration --- 1,087 336 1,087 Acquired in-process technology --- 3,100 --- 3,100 -------- -------- -------- -------- Total operating expenses 22,042 17,405 67,211 40,773 -------- -------- -------- -------- Operating income (loss) 9,297 (736) 14,677 7,270 Other income (expense), net (445) 365 (793) 596 -------- -------- -------- -------- Income (loss) before income taxes 8,852 (371) 13,884 7,866 Provision (benefit) for income taxes 651 48 (3,323) 723 -------- -------- -------- -------- Net income (loss) $ 8,201 $ (419)$ 17,207 $ 7,143 ======== ======== ======== ======== Net income (loss) per share Basic $ 0.33 $ (0.02)$ 0.70 $ 0.31 ======== ======== ======== ======== Diluted $ 0.30 $ (0.02)$ 0.63 $ 0.27 ======== ======== ======== ======== Shares used in computing net income (loss) per share Basic 24,806 23,627 24,581 23,031 ======== ======== ======== ======== Diluted 27,117 23,627 27,531 26,383 ======== ======== ======== ======== (1) The condensed consolidated statement of operations for the nine months ended December 31, 2005, reflects the impact of the additional income tax benefit described below. Sonic Solutions Condensed Consolidated Balance Sheets (in thousands, except share amounts) 2005 ---------------------------- ASSETS March 31,(2) December 31,(3) ---------- ------------- --------------- (unaudited) Current Assets: Cash and cash equivalents $ 35,436 $ 15,726 Short term investments --- 33,925 Accounts receivable, net of allowance for returns and doubtful accounts of $10,068 and $8,799 at March 31, 2005 and December 31, 2005, respectively 12,839 23,664 Inventory 755 687 Unbilled receivables 121 --- Prepaid expenses and other current assets 2,153 3,735 ------------- ------------- Total current assets 51,304 77,737 Fixed assets, net 6,756 5,447 Purchased and internally developed software costs, net 1,595 1,347 Goodwill 54,664 54,159 Acquired intangibles, net 49,046 45,115 Other assets 2,583 6,322 ------------- ------------- Total assets $ 165,948 $ 190,127 ============= ============= LIABILITIES AND SHAREHOLDERS' EQUITY ----------------------------------------- Current Liabilities: Accounts payable $ 9,087 $ 6,123 Accrued liabilities 19,164 24,209 Deferred revenue 5,176 10,237 Obligations under capital leases, current portion 84 48 ------------- ------------- Total current liabilities 33,511 40,617 Bank note payable 30,000 30,000 Other long term liabilities, net of current portion 2,217 172 Deferred revenue, net of current portion 756 481 Obligations under capital leases, net of current portion 41 3 ------------- ------------- Total liabilities 66,525 71,273 ------------- ------------- Shareholders' Equity: Convertible preferred stock, no par value, 10,000,000 shares authorized; 0 shares issued and outstanding at March 31, 2005, and December 31, 2005, respectively --- --- Common stock, no par value, 100,000,000 shares authorized; 24,308,730 and 24,832,986 shares issued and outstanding at March 31, 2005 and December 31, 2005, respectively 106,410 109,256 Accumulated other comprehensive loss (274) (896) Accumulated earnings (deficit) (6,713) 10,494 ------------- ------------- Total shareholders' equity 99,423 118,854 ------------- ------------- Total liabilities and shareholders' equity $ 165,948 $ 190,127 ============= ============= (2) The consolidated balance sheet at March 31, 2005 has been derived from the Company's audited consolidated financial statements on Form 10-K at that date, but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. (3) The consolidated balance sheet at December 31, 2005 reflects the impact of the additional income tax benefit described below. Increase in Historical Earnings due to Tax Benefit As a result of the recent completion and filing of our fiscal 2005 federal and California income tax returns, we have revised the amount of our Research and Development tax credits. This revision increases our tax benefit and net income for our first quarter of fiscal 2006 by $1,891,000 and increases earnings per share for that quarter from the $0.15 previously reported to $0.21. The impact of this revision is reflected in the results for the nine months ended December 31, 2005 provided herewith. We plan to file amended Quarterly Reports on Form 10-Q for the first and second quarters ended June 30, 2005 and September 30, 2005, originally filed with the Securities and Exchange Commission on August 15, 2005 and November 9, 2005, respectively, to reflect this change and to restate the financial statements for those periods. About Sonic Solutions 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 premier 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 personal computers ("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, and Roxio are trademarks or registered trademarks of Sonic Solutions in the United States 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. Forward-Looking Statements This press release and Sonic's third quarter ended December 31, 2005 earnings conference call contain forward-looking statements that are based upon current expectations. Such forward-looking statements include revenue and earnings per share guidance for the fiscal quarter ending March 31, 2006, the fiscal year ending March 31, 2006 and the fiscal year ending March 31, 2007; the gross margin, operating margin, effective tax rate and cost of compliance with the Sarbanes-Oxley Act of 2002, as amended ("SOX"), assumed for the guidance; and views regarding the opportunities and benefits achieved through Sonic's integration of the Roxio Consumer Software Division, as well as by deepening OEM relationships, mobile entertainment developments, on-demand media business models and next-generation high definition formats. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results to differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements. Important factors that could cause such differences include, but are not limited to, Sonic's ability to successfully complete its integration of Roxio's Consumer Software Division and former employees into Sonic's business and realize the anticipated synergies and cost savings from the acquisition; the timely introduction and acceptance of new products, including but not limited to Sonic's high definition series products; the costs associated with new product introductions and the possible adverse effect on gross margin; any fluctuation in demand for Sonic products; the transition of products to new hardware configurations and platforms; unforeseen increases in operating expenses, new product introductions, cost of SOX compliance or business expansion; loss of significant customers or key suppliers; risks related to acquisitions and international operations; costs associated with the defense of litigation and intellectual property claims; and other factors, including those discussed in Sonic's annual and quarterly reports on file with the Securities and Exchange Commission. This press release should be read in conjunction with Sonic's most recent quarterly report on Form 10-Q and Sonic's other reports on file with the Securities and Exchange Commission, which contain a more detailed discussion of Sonic's business including risks and uncertainties that may affect future results. Sonic does not undertake to update any forward-looking statements. CONTACT: Sonic Solutions A. Clay Leighton, 415-893-8000 (Chief Financial Officer) Fax: 415-893-8008 clay_leighton@sonic.com or StreetSmart Investor Relations Brooke Deterline, 415-893-7824 Anne Leschin, 415-775-1788 investinsonic@sonic.com