EX-99.1 2 a5205680ex99-1.txt EXHIBIT 99.1 Exhibit 99.1 Sonic Solutions Reports Results for First Quarter Ended June 30, 2006 NOVATO, Calif.--(BUSINESS WIRE)--Aug. 8, 2006--Sonic Solutions(R) (NASDAQ:SNIC) today announced its financial results for the quarter ended June 30, 2006. Summary Financial Results (in thousands, except per share amounts) Three Months Ended June 30, 2006 (Non-GAAP) 2006 (GAAP) 2005 (GAAP) (unaudited) (unaudited) (unaudited) --------------- ------------ ------------ Net revenue $36,886 $36,886 $35,519 Net income $ 4,492 $ 4,090 $ 5,904 Net income per diluted share $ 0.16 $ 0.15 $ 0.21 For the quarter ended June 30, 2006, net revenue was $36.9 million, reflecting an increase of 4% from $35.5 million for the quarter ended June 30, 2005. Gross profit was $29.2 million compared to $25.8 million for the quarter ended June 30, 2005, representing an increase of 13%. Net income was $4.1 million or $0.15 per fully diluted share in the quarter ended June 30, 2006. The non-GAAP presentation below is calculated excluding the stock based compensation charge as a result of our adoption of Statement of Financial Accounting Standard 123R ("SFAS 123R") "Share-Based Payments." As a result, non-GAAP net income for the first quarter ended June 30, 2006 was $4.5 million and non-GAAP net income per diluted share was $0.16. Dave Habiger, President and Chief Executive Officer of Sonic, stated, "We are pleased with our first quarter performance and believe Sonic is well-positioned for strong future growth. We have made significant progress in key initiatives, including our partnership with Movielink and the continued success of our Roxio business, as we continued to establish and enhance relationships with our end-users. The industry is crossing the tipping point into HD and download and burn, and Sonic is positioned to benefit significantly from this development." Non-GAAP Presentation In this press release, Sonic provides an adjustment to financial information calculated on the basis of GAAP as supplemental information relating to its results of operations. The non-GAAP financial measure is used in addition to and in conjunction with results presented in accordance with GAAP, and is intended to provide additional insight into our operations that, when viewed with our GAAP results and the accompanying reconciliations to corresponding GAAP financial measure, offers a more complete understanding of factors and trends affecting our business. The non-GAAP measure should be considered as a supplement to, and not as a substitute for or superior to, the corresponding measure calculated in accordance with GAAP. The non-GAAP disclosure and the non-GAAP adjustment, including the basis for such adjustment and the impact on our operations, is outlined below: Stock Compensation Expense Adjustment. As of April 1, 2006, we adopted SFAS 123R. In our non-GAAP presentation, we have excluded the impact of the stock option expense pursuant to SFAS 123R recorded in the income statement in the amount of $669,000, or $0.01 per fully diluted share tax affected, for the quarter ended June 30, 2006. SFAS 123R stock compensation was recorded in the income statement as follows: $36,000 to cost of revenue; $410,000 to marketing and sales; $142,000 to research and development; and $81,000 to general and administrative. Given the significance and non-cash nature of this expense, and for the reasons set forth below, management has excluded such expense from the non-GAAP earnings presentation for the quarter ended June 30, 2006. Further, we believe the exclusion of stock compensation expenses recorded in the first quarter of fiscal 2007 improves the comparability to our results for the first quarter of fiscal 2006. There is no adjustment for the quarter ended June 30, 2005, as the adoption of SFAS 123R occurred during the current fiscal year. We believe our non-GAAP presentation that excludes stock compensation expense is useful to investors for the reasons described above and because results for the quarter ended June 30, 2005 did not include stock compensation expenses relating to SFAS 123R. Management uses this non-GAAP presentation to understand how the expenses associated with the application of SFAS 123R are reflected on our statements of income. The economic substance behind our decision to use this non-GAAP measure is an increase in net income of $0.01 per fully diluted share for the quarter ended June 30, 2006. Material limitations associated with the use of this measure versus the comparable GAAP earnings per share measure are (a) the non-GAAP measure provides a view of our earnings that does not include all of our expense obligations for the period in question, and (b) this may not enhance the comparability of our results to those of other companies undergoing similar transition as a result of the adoption of SFAS 123R. We compensate for these limitations by providing full disclosure of the effects of this non-GAAP measure, by presenting the corresponding treatment prepared in conformity with GAAP in this release and in our financial statements and by providing a reconciliation to the corresponding GAAP measure so that investors can use the information to perform their own analysis. Sonic will conduct a conference call at 1:30 p.m. PDT, or 4:30 p.m. EDT, today to discuss its financial results for the quarter ended June 30, 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 9:00 PM PDT, August 10, 2006, and can be accessed by dialing 719.457.0820 or 888.203.1112 and entering confirmation code 6841288. Sonic Solutions Condensed Consolidated Statements of Operations (in thousands, except per share amounts) Three Months Ended June 30, 2006 2005 ----------- ----------- (unaudited) (unaudited) Net revenue $36,886 $35,519 Cost of revenue 7,716 9,765 -------- -------- Gross profit 29,170 25,754 -------- -------- Operating expenses Marketing and sales 7,529 8,523 Research and development 10,732 9,874 General and administrative 4,264 4,909 Business integration --- 295 -------- -------- Total operating expenses 22,525 23,601 -------- -------- Operating income 6,645 2,153 Other income (expense), net 158 (113) -------- -------- Income before income taxes 6,803 2,040 Provision (benefit) for income taxes 2,713 (3,864) -------- -------- Net income $ 4,090 $ 5,904 ======== ======== Net income per share Basic $ 0.16 $ 0.24 ======== ======== Diluted $ 0.15 $ 0.21 ======== ======== Shares used in computing net income per share Basic 25,778 24,350 ======== ======== Diluted 27,413 27,499 ======== ======== Sonic Solutions Condensed Consolidated Balance Sheets (in thousands, except share amounts) June 30, March 31, 2006 2006(1) (unaudited) ---------- --------- ASSETS ------------------------------------------------ Current assets: Cash and cash equivalents $ 11,719 $ 18,731 Short term investments 53,375 42,350 Accounts receivable, net of allowance for returns and doubtful accounts of $5,235 and $4,329 at March 31, 2006 and June 30, 2006, respectively 23,760 23,141 Inventory 515 689 Deferred tax benefit 3,879 3,879 Prepaid expenses and other current assets 3,767 3,771 -------- -------- Total current assets 97,015 92,561 Fixed assets, net 4,145 4,833 Purchased and internally developed software costs, net 1,053 1,266 Goodwill 54,151 54,151 Acquired intangibles, net 42,745 43,914 Deferred tax benefit, net 11,391 11,391 Other assets 1,089 1,355 -------- -------- Total assets $211,589 $209,471 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY -------------------------------------------------- Current liabilities: Accounts payable $ 5,185 $ 7,727 Accrued liabilities 24,518 24,380 Deferred revenue 6,033 7,795 Obligations under capital leases, current portion 24 35 -------- -------- Total current liabilities 35,760 39,937 Bank note payable 30,000 30,000 Other long term liabilities, net of current portion 334 373 Deferred revenue, net of current portion 82 2 Obligations under capital leases, net of current portion 1 2 -------- -------- Total liabilities 66,177 70,314 -------- -------- Shareholders' equity: Convertible preferred stock, no par value, 10,000,000 shares authorized; 0 shares issued and outstanding at March 31, 2006, and June 30, 2006, respectively --- --- Common stock, no par value, 100,000,000 shares authorized; 25,685,953 and 25,870,642 shares issued and outstanding at March 31, 2006 and June 30, 2006, respectively 129,180 126,880 Accumulated other comprehensive loss (1,072) (937) Accumulated earnings 17,304 13,214 -------- -------- Total shareholders' equity 145,412 139,157 -------- -------- Total liabilities and shareholders' equity $211,589 $209,471 ======== ======== (1) March 31, 2006 balances are derived from the audited financial statements included in the Company's 2006 Annual Report on Form 10-K. Sonic Solutions Reconciliation of Reported Operating Results to Non-GAAP Operating Results (in thousands, except per share amounts) Three Months Ended June 30, 2006 2005 ------------ ----------- (unaudited) (unaudited) Reconciliation from GAAP to Non-GAAP Gross Profit ----------------------------------------- GAAP gross profit $29,170 $25,754 Non-GAAP adjustment: SFAS 123R stock compensation expense included in cost of revenue 36 --- -------- -------- Non-GAAP gross profit $29,206 $25,754 ======== ======== Reconciliation from GAAP to Non-GAAP Net Income ----------------------------------------- GAAP net income $ 4,090 $ 5,904 GAAP income before tax 6,803 2,040 Non-GAAP adjustment: SFAS 123R stock compensation expense 669 --- Tax impact of non-GAAP adjustment (267) --- -------- -------- Non-GAAP net income $ 4,492 $ 5,904 ======== ======== GAAP net income per share applicable to common Basic $ 0.16 $ 0.24 ======== ======== Diluted $ 0.15 $ 0.21 ======== ======== Non-GAAP net income per share applicable to common Basic $ 0.17 $ 0.24 ======== ======== Diluted $ 0.16 $ 0.21 ======== ======== Shares used in computing per share amounts Basic 25,778 24,350 ======== ======== Diluted 27,413 27,499 ======== ======== 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(R)-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 as well as 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, and Roxio are trademarks or registered trademarks of Sonic Solutions in the U.S. and/or other countries. All other company or product names are trademarks or registered trademarks of their respective owners and, in some cases, are used by Sonic under license. Forward-Looking Statements This press release and Sonic's quarter ended June 30, 2006 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 quarter ending September 30, 2006; and views regarding the potential benefits of our partnership with Movielink, opportunities presented by the "download and burn" business model, our ability to strengthen our relationships with end-users, the opportunities and benefits achieved through Sonic's integration of the Roxio Consumer Software Division, and the evolution of, and opportunities for Sonic arising from, next-generation high definition formats and channels. 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, 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 Sarbanes Oxley ("SOX") compliance or business expansion; loss of significant customers or key suppliers; risks related to acquisitions and international operations; costs associated with litigation or prosecution and intellectual property claims; changes in effective tax rates; 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 annual report on Form 10-K 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 clay_leighton@sonic.com fax: 415-893-8008 or StreetSmart Investor Relations Brooke Deterline, 415-893-7824 Anne Leschin, 415-775-1788 investinsonic@sonic.com