Exhibit 99.1
Sonic Solutions Reports Results for Fourth Quarter and Fiscal Year
Ended March 31, 2006;
Sonic Reports Record Revenues and Profits for Its Full Fiscal Year
NOVATO, Calif.--(BUSINESS WIRE)--May 23, 2006--Sonic Solutions(R)
(Nasdaq:SNIC) today announced its financial results for the fourth
quarter and fiscal year ended March 31, 2006.
Summary Financial Results
(in thousands, except per share amounts)
Three Months Ended Twelve Months Ended
March 31, March 31,
2006 2006 2005 2006
(Non-GAAP) (GAAP) (GAAP) (GAAP) 2005
(unaudited) (unaudited) (unaudited) (unaudited) (GAAP)
------------ ------------ ------------ ------------ --------
Net revenue $40,436 $40,436 $35,604 $148,676 $90,627
Net income $8,501 $2,094 $1,399 $19,301 $8,542
Net income
per diluted
share $0.31 $0.08 $0.05 $0.70 $0.32
For the fiscal year, net revenue, gross profit and operating
profit all reached record levels. Net revenue grew 64% in fiscal 2006
to $148.7 million from $90.6 million in fiscal 2005. Gross profit
climbed 51% to $114.6 million compared to $75.9 million in fiscal
2005. Operating income rose 155% to $24.0 million, from $9.4 million
in fiscal 2005. Net income for fiscal 2006 was a record $19.3 million
or $0.70 per diluted share versus $8.5 million or $0.32 per diluted
share in fiscal 2005.
For the quarter, net revenue was $40.4 million, reflecting an
increase of more than 13% from $35.6 million for the fourth quarter of
fiscal 2005. Gross profit was $32.7 million compared to $27.8 million
for the fourth quarter of fiscal 2005, representing an increase of
18%. Operating income was $9.3 million or 23% of revenue compared to
$2.1 million or 6% of revenue for the fourth quarter of fiscal 2005.
Net income was $2.1 million or $0.08 per share in the fourth quarter
of fiscal 2006 including an unusually high provision for income taxes.
The non-GAAP presentation below is calculated based upon the same
effective income tax rate (7.4%) as we used in our fiscal fourth
quarter guidance. As a result, non-GAAP net income for the quarter was
$8.5 million and net income per diluted share on a non-GAAP basis was
$0.31.
Dave Habiger, President and Chief Executive Officer of Sonic,
stated, "We are very pleased with the Company's performance this
quarter and for the fiscal year, as we met or exceeded all of our
operating goals. We expanded our technology and OEM partnerships,
which continued to drive all areas of our business. As new formats and
channels such as HD and download and burn, emerge and develop, we
believe Sonic is well positioned to continue to lead the market for
digital media software."
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. 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. The
non-GAAP disclosures and the non-GAAP adjustments, including the basis
for such adjustments and the impact on our operations, are outlined
below:
Tax Adjustment. In our non-GAAP presentation, we have shown our
net income calculated based upon the same effective income tax rate
(7.4%) as we used in our fourth quarter guidance. As we have
previously noted and due to our recent history of profitability, Sonic
is in the process of transitioning from a company with substantial
valuation allowances on its deferred tax assets and a low effective
tax rate to a company with substantially reduced valuation allowances
and an effective tax rate close to statutory rates. Over the past year
and during this transition period, Sonic has experienced fluctuations
in its effective tax rate based upon changes in its net value of
deferred tax assets that it has accumulated over time. We believe that
these fluctuations are not indicative of the overall fundamentals of
our business and that they may have a disproportionate impact on our
operating results for the fourth quarter of fiscal 2006. In this case,
due to these transitional fluctuations and the results of a phase I
study of the estimated value of our deferred research tax credits
accumulated over time, our effective tax rate in March 2006 was 77.2%
rather than the 7.4% rate that we experienced in the third quarter and
that was the basis for our fourth quarter earnings per share ("EPS")
guidance.
Accordingly, and as set forth in more detail in the reconciliation
table below, we have provided a non-GAAP fully diluted EPS that
adjusts for the difference between the two rates. Although we do not
anticipate that the 7.4% will continue to be indicative of our tax
rate in the future, we believe our non-GAAP presentation provides
important and useful information to investors, as it enables them to
reconcile our results based upon our actual tax rate to those
forecasted based upon tax rate assumptions per our prior guidance. In
the absence of such information, we believe that investors may find it
difficult to evaluate our fiscal fourth quarter results apart from the
tax impact or compare them to our results in prior periods. We have
used this non-GAAP measure internally in order to evaluate the
operating results of our business on a consistent basis and to measure
our performance of business goals that we establish in advance. The
economic substance behind our decision to use this non-GAAP measure is
an increase of $0.23 per fully diluted share over the comparable GAAP
measure. Material limitations associated with the use of this measure
versus the comparable GAAP EPS measure are (a) the non-GAAP measure
provides a view of our earnings that does not include all of our tax
obligations for the period in question, and (b) this may not enhance
the comparability of our results to those of other companies
undergoing similar tax rate transitions. 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 fourth
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 May 30, 2006, at 9 p.m. PDT and can
be accessed by dialing 719-457-0820 or 888-203-1112 and entering
confirmation code 2948445.
Sonic Solutions
Condensed Consolidated Statements of Operations
(in thousands, except per share amounts)
Three Months Ended Twelve Months Ended
March 31, March 31,
2006 2005 2006 2005(1)
----------- ----------- ------------ --------
(unaudited) (unaudited) (unaudited)
Net revenue $40,436 $35,604 $148,676 $90,627
Cost of revenue 7,764 7,795 34,118 14,775
-------- -------- --------- --------
Gross profit 32,672 27,809 114,558 75,852
-------- -------- --------- --------
Operating expenses
Marketing and sales 7,977 8,966 31,605 21,117
Research and
development 9,734 10,041 40,560 30,216
General and
administrative 5,659 5,588 18,080 9,845
Business integration --- 1,100 336 2,190
Acquired in-process
technology --- --- --- 3,100
-------- -------- --------- --------
Total operating
expenses 23,370 25,695 90,581 66,468
-------- -------- --------- --------
Operating income 9,302 2,114 23,977 9,384
Other income (expense), net (122) (387) (914) 209
-------- -------- --------- --------
Income before income taxes 9,180 1,727 23,063 9,593
Provision for income taxes 7,086 328 3,762 1,051
-------- -------- --------- --------
Net income $ 2,094 $ 1,399 $ 19,301 $ 8,542
======== ======== ========= ========
Net income per share
Basic $ 0.08 $ 0.06 $ 0.78 $ 0.37
======== ======== ========= ========
Diluted $ 0.08 $ 0.05 $ 0.70 $ 0.32
======== ======== ========= ========
Shares used in computing
net income per share
Basic 25,259 24,292 24,750 23,347
======== ======== ========= ========
Diluted 27,043 26,963 27,421 26,529
======== ======== ========= ========
(1) March 31, 2005 balances are derived from the audited financial
statements included in the Company's 2005 Annual Report on Form
10-K.
Sonic Solutions
Condensed Consolidated Balance Sheets
(in thousands, except share amounts)
March 31, March 31,
ASSETS 2006 2005(2)
(unaudited)
- ----------------------------------------------- ------------ ---------
Current assets:
Cash and cash equivalents $ 18,731 $ 35,436
Short term investments 42,350 ---
Accounts receivable, net of allowance for
returns and doubtful accounts of $10,068 and
$6,296 at March 31, 2005 and 2006,
respectively 22,080 12,839
Inventory 689 755
Unbilled receivables --- 121
Prepaid expenses and other current assets 7,650 2,153
--------- ---------
Total current assets 91,500 51,304
Fixed assets, net 4,833 6,756
Purchased and internally developed software
costs, net 1,266 1,595
Goodwill 55,153 54,664
Acquired intangibles, net 43,914 49,046
Other assets 11,744 2,583
--------- ---------
Total assets $208,410 $165,948
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
- -------------------------------------------------
Current liabilities:
Accounts payable $ 7,727 $ 9,087
Accrued liabilities 23,945 19,164
Deferred revenue 7,795 5,176
Obligations under capital leases,
current portion 35 84
--------- ---------
Total current liabilities 39,502 33,511
Bank note payable 30,000 30,000
Other long term liabilities, net of current
portion 373 2,217
Deferred revenue, net of current portion 2 756
Obligations under capital leases, net of current
portion 2 41
--------- ---------
Total liabilities 69,879 66,525
--------- ---------
Shareholders' equity:
Convertible preferred stock, no par value,
10,000,000 shares authorized; 0 shares issued
and outstanding at March 31, 2005, and 2006,
respectively --- ---
Common stock, no par value, 100,000,000 shares
authorized; 24,308,730 and 25,685,953 shares
issued and outstanding at March 31, 2005 and
2006, respectively 126,880 106,410
Accumulated other comprehensive loss (937) (274)
Accumulated earnings (deficit) 12,588 (6,713)
--------- ---------
Total shareholders' equity 138,531 99,423
--------- ---------
Total liabilities and shareholders'
equity $208,410 $165,948
========= =========
(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.
Sonic Solutions
Reconciliation of Reported Operating Results
to Non-GAAP Operating Results
(in thousands, except per share amounts and percentages, unaudited)
Three Months Ended
March 31,
2006 2005
-------- --------
Net income $ 2,094 $ 1,399
Tax adjustment 6,407 ---
-------- --------
Non-GAAP net income $ 8,501 $ 1,399
======== ========
GAAP net income per share applicable to common
Basic $ 0.08 $ 0.06
======== ========
Diluted $ 0.08 $ 0.05
======== ========
Non-GAAP net income per share applicable to common
Basic $ 0.34 $ 0.06
======== ========
Diluted $ 0.31 $ 0.05
======== ========
Shares used in computing per share amounts
Basic 25,259 24,292
======== ========
Diluted 27,043 26,963
======== ========
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 fourth quarter and fiscal year
ended March 31, 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 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 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 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 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 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
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