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