Exhibit 99.1
Sonic Solutions Reports Results for First Quarter Ended June 30, 2005
NOVATO, Calif.--(BUSINESS WIRE)--Aug. 15, 2005--Sonic Solutions
(NASDAQ: SNIC) ("Sonic") announced today the financial results for its
first fiscal quarter ended June 30, 2005.
Summary Financial Results
(in thousands, except per share amounts)
Three Months Ended
June 30,
2005 (Non-GAAP) 2005 (GAAP) 2004 (GAAP)
----------------------------------------------
Net revenue $35,519 $35,519 $17,909
Net income $5,073 $4,013 $3,987
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Net income per
diluted share $0.18 $0.15 $0.16
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On the basis of generally accepted accounting principles ("GAAP"),
net revenue for the quarter was $35,519,000 compared to $17,909,000
for the same period in the prior fiscal year. Net income for the
quarter was $4,013,000, or $0.15 per diluted share, compared to net
income of $3,987,000, or $0.16 per diluted share, for the same period
in the prior fiscal year.
On a non-GAAP basis, net revenue for the quarter was $35,519,000,
net income was $5,073,000 and net income per diluted share was $0.18.
Non-GAAP Presentation
In this press release, Sonic provides certain adjustments to
financial information calculated on the basis of GAAP as supplemental
information relating to its results of operations. These non-GAAP
financial measures include non-GAAP net income, diluted earnings per
share, and gross profit and margin figures, which exclude certain
expense items associated with, among other things, the acquisition of
the assets and liabilities of the Consumer Software Division of Roxio,
Inc., each as more fully described below. The non-GAAP financial
measures also exclude the third party costs incurred by Sonic in the
first quarter in connection with Sonic's implementation of the
requirements of Section 404 of the Sarbanes-Oxley Act (see "SOX
Compliance" below). Management believes that this non-GAAP
presentation allows investors to better understand the operating
results of Sonic for the quarter ended June 30, 2005 because this
presentation excludes non-recurring acquisition-related charges and
other non-recurring expenses, and provides insight into how management
evaluates operating results. In addition, Sonic has reported similar
non-GAAP results in the past and believes the inclusion of this
non-GAAP presentation provides consistency in its financial reporting.
However, these non-GAAP measures should not be considered in isolation
from, or as a substitute for, financial information presented in
compliance with GAAP, and other companies may use different non-GAAP
measures and presentations of results.
The non-GAAP presentation adjusts the following items:
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 Patents. During the quarter ended on June 30, 2005, Sonic
sold certain patents that had been acquired as part of the Roxio
acquisition. In connection with that sale, the value ascribed to the
cost of the patents, in the amount of $1,169,000, was included in cost
of revenue in the GAAP presentation. This charge is eliminated in the
non-GAAP presentation, as it is a non-cash charge that obscures the
cash profit derived from the transactions.
Third-Party Expenses Related to Compliance with the Sarbanes-Oxley
Act of 2002 ("SOX"). Certain third-party expenses related to SOX
compliance work for the 2005 fiscal year, which were billed and
accrued for during the first quarter of the 2006 fiscal year, are
included in the GAAP presentation and excluded in the non-GAAP
presentation. The expenses excluded in the non-GAAP presentation are
primarily the fees paid to compliance consultants and to Sonic's
external auditors for work in connection with Sonic's SOX compliance.
Sonic management believes that SOX compliance efforts were
significantly complicated by the impact of the Roxio acquisition,
including management's decision to migrate Sonic's accounting into
systems that were acquired as part of the Roxio combination.
Sonic management believes the level of SOX expenses is extraordinary,
is unlikely to recur in future periods, and in any event relates
entirely to work performed relative to the fiscal 2005 audit. Hence,
it is excluded from the non-GAAP presentation.
Business Integration Expenses. Certain charges that occurred in
connection with the Roxio acquisition, and that are not expected to
recur, are considered to be non-recurring charges. The non-GAAP
presentation eliminates these charges included in operating expense.
Sonic will hold its first quarter ended June 30, 2005 earnings
conference call on Monday, August 15, 2005 at 1:30 p.m. (PDT)/4:30
p.m. (EDT). Investors are invited to listen to Sonic's conference call
on the investor section of the Sonic Web site at www.sonic.com. A
replay of the call also will be available via Webcast at
www.sonic.com.
Sonic Solutions
Condensed Consolidated Statements of Operations
(in thousands, except per share amounts -- unaudited)
Quarters Ended
June 30,
---------------
2005 2004
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Net revenue 35,519 $17,909
Cost of revenue 9,249 1,861
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Gross profit 26,270 16,048
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Operating expenses:
Marketing and sales 8,523 3,912
Research and development 10,390 6,548
General and administrative 4,909 1,200
Business integration 295 -
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Total operating expenses 24,117 11,660
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Operating income 2,153 4,388
Other income (expense), net (113) 60
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Income before income taxes 2,040 4,448
Provision (benefit) for income taxes (1,973) 461
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Net income 4,013 $3,987
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Net income per share
Basic 0.16 $0.18
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Diluted 0.15 $0.16
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Shares used in computing net income per share
Basic 24,350 22,044
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Diluted 27,499 25,461
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Sonic Solutions
Condensed Consolidated Balance Sheets
(in thousands, except share amounts)
2005
====================
ASSETS March 31(a) June 30
(unaudited)
Current Assets:
Cash and cash equivalents $35,436 42,853
Accounts receivable, net of allowance for
returns and doubtful accounts of $10,377
and $8,767 at March 31, 2005 and June 30,
2005, respectively 12,839 13,628
Inventory 755 715
Unbilled receivables 121 ---
Prepaid expenses and other current assets 2,153 2,334
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Total current assets 51,304 59,530
Fixed assets, net 6,756 6,569
Purchased and internally developed software, net 1,595 1,485
Goodwill 54,664 53,269
Acquired intangibles, net 49,046 47,731
Other assets 2,583 4,630
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Total assets $165,948 173,214
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $9,087 9,325
Accrued liabilities 19,164 20,389
Deferred revenue 5,176 6,919
Obligations under capital leases, current
portion 84 67
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Total current liabilities 33,511 36,700
Bank note payable 30,000 30,000
Other long term liabilities, net of current
portion 2,217 2,170
Deferred revenue, net of current portion 756 679
Obligations under capital leases, net of current
portion 41 21
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Total liabilities 66,525 69,570
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Shareholders' Equity:
Convertible preferred stock, no par value,
10,000,000 shares authorized; 0 shares issued
and outstanding at March 31, 2005, and June 30,
2005 --- ---
Common stock, no par value, 100,000,000 shares
authorized; 24,308,730 and 24,392,103 shares
issued and outstanding at March 31, 2005 and
June 30, 2005, respectively 106,410 106,669
Accumulated other comprehensive loss (274) (325)
Accumulated deficit (6,713) (2,700)
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Total shareholders' equity 99,423 103,644
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Total liabilities and shareholders' equity $165,948 173,214
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(a): 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.
Sonic Solutions
Reconciliation of Reported Operating Results to Non-GAAP
Operating Results
(in thousands, except per share amounts and percentages, unaudited)
Three Months Ended
June 30,
2005 2004
Reported revenue $35,519 $17,909
Non GAAP gross profit $28,866 $16,226
Non GAAP gross margin 81% 91%
GAAP Operating income $2,153 $4,388
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GAAP Net income 4,013 3,987
Adjustments:
Business integration expenses 295 ---
Patent cost 1,169 ---
SOX compliance expenses 1,145 ---
Amortization of intangible assets 1,427 178
Tax impact on non-GAAP adjustments ($2,976) ($18)
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Non GAAP net income $5,073 $4,147
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Net income per diluted share
Non-GAAP $0.18 $0.16
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GAAP $0.15 $0.16
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Shares used in computing per share amounts 27,499 25,461
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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 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, 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 first quarter ended June 30, 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
quarters ending September 30, 2005, December 31, 2005, March 31, 2006,
and the fiscal year ending March 31, 2006; the gross margin, operating
margin, effective tax rate and cost of SOX compliance assumed for the
guidance; the continuing effects of the increase in operating expenses
and headcount in connection with the Roxio acquisition; and favorable
expectations about Sonic's consumer electronics strategy and ability
to take advantage of the convergence of the PC and consumer
electronics industries. 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 integrate Roxio's Consumer Software Division and former
employees into Sonic's business and realize the anticipated synergies
and cost savings from the acquisition; general customer and market
reaction to the Roxio 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; the
transition of products to new hardware configurations and platforms;
unforeseen increases in operating expenses as a result of the Roxio
acquisition, new product introductions, cost of SOX compliance or
business expansion; loss of significant customers due to the Roxio
acquisition and other market conditions; risks related to acquisitions
and international operations; 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 (CFO)
clay_leighton@sonic.com
fax: 415-893-8008
or
Market Street Partners
Carolyn Bass, 415-445-3232
Susan Coss, 415-445-3237
investinsonic@sonic.com