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Macrovision Solutions Corporation Reports Third Quarter Financial Performance

Company Release - 11/6/2008 4:05 PM ET

SANTA CLARA, Calif.--(BUSINESS WIRE)--

Macrovision Solutions Corporation (NASDAQ:MVSN) announced today, on a GAAP basis, third quarter 2008 revenues of $112.2 million, compared to $45.6 million for the third quarter of 2007. Third quarter 2008 GAAP net income was $8.8 million compared to net income of $14.1 million for the third quarter of 2007. GAAP diluted earnings per share for the quarter was $0.09, compared to $0.26 for the third quarter of 2007.

As management believes including Gemstar's operating results only for the period since its acquisition on May 2, 2008, diminishes the comparative value of results from the prior year, management believes it is useful to measure the results on a non-GAAP Adjusted Pro Forma basis, assuming the Gemstar acquisition was consummated January 1, 2007. The Adjusted Pro Forma results also exclude Macrovision's Software and Games businesses that were sold April 1, 2008, discontinued Hawkeye product line, as well as the results of the TV Guide Magazine, TV Guide Network, TVG Network and eMeta businesses, all of which are classified as discontinued operations. On this basis, third quarter 2008 Adjusted Pro Forma Revenues were $112.2 million, compared to $108.8 million for the third quarter of 2007. Third quarter 2008 Adjusted Pro Forma EBITDA was $43.0 million, compared to $36.2 million for the third quarter of 2007. Adjusted Pro Forma EBITDA is defined as pro forma operating income from continuing operations, adding back non-cash items such as equity-based compensation, depreciation and amortization and items which impact comparability such as transaction, transition and integration costs, restructuring and asset impairment charges, insurance settlements and accrual reversals related to a former Gemstar CEO. Reconciliations between pro forma revenues and Adjusted Pro Forma Revenues and between pro forma operating income from continuing operations and Adjusted Pro Forma EBITDA are provided in the tables below. Cash and investment balances from continuing operations increased from $332.3 million at the end of June 30, 2008 to $368.9 million at the end of September 30, 2008.

The Adjusted Pro Forma combined company year-to-date results reflect five months of synergies. By January 1, 2009, the Company expects to have realized annualized cost savings in excess of $50 million by rationalizing head count, eliminating corporate marketing initiatives that do not fit within the Company's plans going forward, eliminating duplicate public company and IT expenses, consolidating facilities and capturing other cost efficiencies. As of September 30, 2008, the Company had taken expense reduction actions that will lead to approximately $44 million in savings on an annualized basis. Additionally, actions already taken after September 30, 2008 will result in the remaining $6 million of annualized cost savings.

"I am pleased with our third quarter financial results, especially the performance in our core market segments -- consumer electronics and service providers," said Fred Amoroso, President and CEO of Macrovision. "I am also delighted that we were able to enter into an agreement to sell TV Guide Magazine. This pending sale enables us to streamline our business and demonstrates an additional proof point in our ability to execute against our business plan."

"We have narrowed our current 2008 Adjusted Pro Forma Revenue expectations within the range previously provided to between $435 million and $455 million," added James Budge, Chief Financial Officer. "For comparative purposes, this 2008 Adjusted Pro Forma revenue estimate assumes that our acquisition of Gemstar, as well as our various dispositions, were completed on January 1, 2007. We will provide our revenue and earnings estimates for 2009 during our annual Investor Day, which will be held this coming Monday, November 10, 2008 at the NASDAQ market site in New York."

GAAP to Adjusted Pro Forma Reconciliation

Macrovision Solutions Corporation provides non-GAAP or Adjusted Pro Forma information. References to Adjusted Pro Forma information are to non-GAAP pro forma measures. The Company provides Adjusted Pro Forma financial information to assist investors in assessing its current and future operations in the way that its management evaluates those operations. Adjusted Pro Forma Revenue and Adjusted Pro Forma EBITDA are supplemental measures of the Company's performance that are not required by, and are not presented in accordance with, GAAP. The Adjusted Pro Forma information does not substitute for any performance measure derived in accordance with GAAP, including, but not limited to, GAAP basis pro forma information. Macrovision Solutions Corporation believes that providing Adjusted Pro Forma financial information is useful to investors. Adjusted Pro Forma financial information assumes the Gemstar and other acquisitions, divestures, and discontinued operations and product lines were effective on January 1, 2007. Further, Adjusted Pro Forma EBITDA excludes the effect of non-cash items and items which impact comparability that are required to be recorded under GAAP, but that the Company believes are not indicative of its core operating results, or that the Company expects to be incurred over a limited period of time.

As a result of the Gemstar acquisition, the Company's management now evaluates and makes operating decisions about its business operations primarily based upon Adjusted Pro Forma Revenue and Adjusted Pro Forma EBITDA. Management uses Adjusted Pro Forma EBITDA as a measure as it excludes depreciation, amortization, equity-based compensation, transaction costs, transition and integration costs, insurance settlements and discontinued product lines; items management does not consider to be "core costs" when making business decisions. Therefore, management presents these Adjusted Pro Forma financial measures along with GAAP measures. The income statement line items impacted in the adjustment from GAAP to the Adjusted Pro Forma presentation in this earnings release are revenue, cost of revenues, research and development, selling and marketing, general and administration, depreciation and amortization, restructuring and asset impairment charges.

For each such Adjusted Pro Forma financial measure, the adjustment provides management with information about the Company's underlying operating performance that enables a more meaningful comparison of its financial results in different reporting periods. For example, since Macrovision Solutions Corporation does not acquire businesses on a predictable cycle, management excludes amortization of intangibles from acquisitions in order to make more consistent and meaningful evaluations of the Company's operating expenses. Management also excludes the effect of restructuring, asset impairment charges, gains or losses on sales of strategic investments, insurance settlements and accrual reversals related to a former Gemstar CEO for the same reason. Management excludes discontinued product lines as it believes this exclusion is as meaningful for comparability purposes as excluding the results from a business that meets the criteria to be classified as discontinued operations on a GAAP basis. Management excludes the impact of equity-based compensation to help it compare current period operating expenses against the operating expenses for prior periods and to eliminate the effects of this non-cash item, which, because it is based upon estimates on the grant dates may bear little resemblance to the actual values realized upon the future exercise, expiration, termination or forfeiture of the stock-based compensation, and which, as it relates to stock options and stock purchase plan shares, is required for GAAP purposes to be estimated under valuation models, including the Black-Scholes model used by Macrovision Solutions Corporation.

Management uses these Adjusted Pro Forma measures to help it make budgeting decisions between those expenses that affect operating expenses and operating margin (such as research and development, sales and marketing, and general and administrative expenses), and those expenses that affect cost of revenue and gross margin. Further, Adjusted Pro Forma financial information helps management track actual performance relative to financial targets. Making Adjusted Pro Forma financial information available to investors, in addition to GAAP financial information, may also help investors compare the Company's performance with the performance of other companies in our industry, which may use similar financial measures to supplement their GAAP financial information.

Management recognizes that the use of Adjusted Pro Forma measures has limitations, including the fact that management must exercise judgment in determining which types of charges should be excluded from the Adjusted Pro Forma financial information. Because other companies, including companies similar to Macrovision Solutions Corporation, may calculate their non-GAAP financial measures differently than the Company calculates its Adjusted Pro Forma measures, these Adjusted Pro Forma measures may have limited usefulness in comparing companies. Management believes, however, that providing this Adjusted Pro Forma financial information, in addition to the GAAP financial information, facilitates consistent comparison of the Company's financial performance over time. The Company has provided Adjusted Pro Forma financial information to the investment community, not as an alternative, but as an important supplement to GAAP financial information; to enable investors to evaluate the Company's core operating performance in the same way that management does. Reconciliations between pro forma revenues and Adjusted Pro Forma Revenues and between pro forma combined company operating income from continuing operations and Adjusted Pro Forma EBITDA are provided in the tables below.

Dial-in Information

Macrovision Solutions Corporation will hold an investor conference call at 5:00 p.m. Eastern time on November 6, 2008. Investors and analysts interested in participating in the conference are welcome to call 800-240-7305 (or international +1 303-275-2170) and reference the Macrovision call.

The conference call can also be accessed via live webcast at www.macrovision.com or www.earnings.com (or www.streetevents.com for subscribers) on November 6, 2008 at 5:00 p.m. Eastern time. The on-demand audio webcast of the earnings conference call will be made available as soon as practicable after the live webcast ends.

A replay of the conference call will be available through November 8, 2008 and can be accessed by calling 800-405-2236 (or international +1 303-590-3000) and entering passcode 11120578#. A replay of the audio webcast will be available on Macrovision's website approximately 1-2 hours after the live webcast ends and will remain on Macrovision's website until our next quarterly earnings call.

About Macrovision Solutions Corporation

Macrovision Solutions Corporation is focused on providing a simple digital home entertainment experience by delivering solutions to businesses to protect, enhance and distribute digital goods to consumers across multiple channels. Macrovision Solutions Corporation's technologies are deployed by companies in the entertainment, consumer electronics, cable and satellite, and online distribution markets to solve industry-specific challenges and bring greater value and a more robust user experience to their customers. The result of deploying Macrovision Solutions Corporation's solutions is a simple end user experience for discovering, acquiring, managing and enjoying digital content. Today, Macrovision Solutions Corporation provides connected middleware, metadata on music, games, movies and television programming, media recognition, interactive programming guides, and copy protection. The Company also operates an entertainment portal which can be found at http://www.allmusic.com. Macrovision Solutions Corporation holds over 4,000 issued or pending patents and patent applications worldwide. Macrovision Solutions Corporation is headquartered in Santa Clara, California, with numerous offices across the United States and around the world including Canada, Japan, Hong Kong, Luxembourg, and the United Kingdom. More information about Macrovision Solutions Corporation can be found at http://www.macrovision.com/.

(C)Macrovision 2008. Macrovision is a registered trademark of Macrovision Solutions Corporation and its subsidiaries. All other brands and product names and trademarks are the registered property of their respective companies.

All statements contained herein, including the quotations attributed to Mr. Amoroso and Mr. Budge, that are not statements of historical fact, including statements that use the words "will," "believes," "anticipates," "estimates," "expects," "intends" or "looking to the future" or similar words that describe the Company's or its management's future plans, objectives, or goals, are "forward-looking statements" and are made pursuant to the Safe-Harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to, the Company's estimates of future revenues and earnings, business strategies, closings of the sale transaction and statements regarding the financial impact of, expected synergies and expected cost savings from, the transactions described herein.

Such forward-looking statements involve known and unknown risks, uncertainties and other factors that could cause the actual results of the Company to be materially different from the historical results and/or from any future results or outcomes expressed or implied by such forward-looking statements. Such factors included, among others, the Company's ability to successfully integrate the merged businesses and technologies, the Company's ability to realize the anticipated synergies and cost savings, the Company's ability to execute on its plans to rationalize head count, eliminate corporate marketing initiatives and duplicate public company expenses, and consolidate IT and facilities expenditures, failure to close the sale transaction, and customer demand for the technologies and integrated offerings. Such factors are further addressed in the Company's Quarterly Report on Form 10-Q for the period ended September 30, 2008 and such other documents as are filed with the Securities and Exchange Commission from time to time (available at www.sec.gov). The Company assumes no obligation, except as required by law, to update any forward-looking statements in order to reflect events or circumstances that may arise after the date of this release.

MACROVISION SOLUTIONS CORPORATION
GAAP CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)

                               Three Months Ended   Nine Months Ended
                                  September 30,       September 30,
                               ------------------- -------------------
                                 2008      2007      2008      2007
                               --------- --------- --------- ---------

Revenues                       $112,200  $ 45,605  $218,209  $103,079

Costs and expenses:
    Cost of revenues             16,347     1,694    33,761     7,177
    Research and development     22,314     3,292    45,172     9,805
    Selling and marketing        19,920     4,716    43,777    18,456
    General and administrative   18,092     8,657    41,297    22,501
    Depreciation                  5,281     1,256    10,215     4,014
    Amortization                 21,020     1,382    39,382     4,077
    Restructuring and asset
     impairment charges               -       163         -     3,244
                               --------- --------- --------- ---------
    Total costs and expenses    102,974    21,160   213,604    69,274
                               --------- --------- --------- ---------

Operating (loss) income from
 continuing operations            9,226    24,445     4,605    33,805
    Interest expense            (16,124)   (1,969)  (29,417)   (5,798)
    Interest income and other,
     net                          2,397     6,859    10,496    16,903
    Gain on sale of strategic
     investments                      -         -     5,238         -
                               --------- --------- --------- ---------
(Loss) income from continuing
 operations before income
 taxes                           (4,501)   29,335    (9,078)   44,910
Income tax (benefit) expense    (14,453)    1,316   (17,140)    7,786
                               --------- --------- --------- ---------
Income from continuing
 operations, net of tax           9,952    28,019     8,062    37,124
Discontinued operations, net
 of tax                          (1,162)  (13,927)   92,964   (14,832)
                               --------- --------- --------- ---------
Net income                     $  8,790  $ 14,092  $101,026  $ 22,292
                               ========= ========= ========= =========

Basic earnings per share:
    Basic income per share
     from continuing
     operations                $   0.10  $   0.52  $   0.10  $   0.70
    Basic income (loss) per
     share from discontinued
     operations                $  (0.01) $  (0.26) $   1.15  $  (0.28)
                               --------- --------- --------- ---------
    Basic net earnings per
     share                     $   0.09  $   0.26  $   1.25  $   0.42
                               ========= ========= ========= =========

Shares used in computing basic
 net earnings per share         102,912    54,401    81,104    53,342
                               ========= ========= ========= =========

Diluted earnings per share:
    Diluted income per share
     from continuing
     operations                $   0.10  $   0.51  $   0.10  $   0.68
    Diluted income (loss) per
     share from discontinued
     operations                $  (0.01) $  (0.25) $   1.14  $  (0.27)
                               --------- --------- --------- ---------
    Diluted net earnings per
     share                     $   0.09  $   0.26  $   1.24  $   0.41
                               ========= ========= ========= =========

Shares used in computing
 diluted net earnings per
 share                          103,027    55,060    81,203    54,344
                               ========= ========= ========= =========
MACROVISION SOLUTIONS CORPORATION
GAAP CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
(UNAUDITED)

                                            September 30, December 31,
                                                 2008         2007
                                            ------------- ------------
ASSETS
   Cash and cash equivalents                $     268,734 $    134,070
   Short-term investments                          21,494      248,194
   Trade accounts receivable, net                  77,804       44,327
   Deferred tax assets                              6,734        4,563
   Prepaid expenses and other current
    assets                                         15,460       12,135
   Assets held for sale                           582,690       79,503
                                            ------------- ------------
   Total Current Assets                           972,916      522,792

Long-term marketable investment securities         78,676       57,025
Deferred tax assets                                     -       57,850
Property and equipment, net                        51,507       10,011
Finite-lived intangible assets, net               938,309       78,801
Other assets                                       63,191       11,470
Goodwill                                        1,183,839      199,209
                                            ------------- ------------
TOTAL ASSETS                                $   3,288,438 $    937,158
                                            ============= ============

LIABILITIES
   Accounts payable                         $      10,845 $      6,157
   Accrued expenses                                77,794       39,625
   Taxes payable                                    8,100        1,355
   Deferred revenue                                18,096        7,494
   Current portion of debt and capital
    lease obligations                               6,179        1,488
   Liabilities held for sale                      210,948       27,959
                                            ------------- ------------
   Total Current Liabilities                      331,962       84,078

   Taxes payable, non-current                      76,366       57,026
   Long-term debt and capital lease
    obligations, less current portion             883,125      240,400
   Deferred revenue, less current portion           5,484            -
   Deferred tax liabilities, long-term, net       256,328            -
   Other non-current liabilities                    5,264           36
                                            ------------- ------------
TOTAL LIABILITIES                               1,558,529      381,540
                                            ------------- ------------

STOCKHOLDERS' EQUITY                            1,729,909      555,618
                                            ------------- ------------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY    $   3,288,438 $    937,158
                                            ============= ============
MACROVISION SOLUTIONS CORPORATION
COMBINED COMPANY REVENUE SUMMARY
(IN THOUSANDS)
(UNAUDITED)


                           Three Months Ended Nine Months Ended
                              September 30       September 30
                           ------------------ ------------------
                             2008     2007      2008     2007
                           -------- --------- -------- ---------

Adjusted Pro Forma
 Revenues
   Consumer Electronics    $ 50,549 $ 50,300  $139,718 $137,319
   Service Providers         46,013   39,200   137,389  109,340
   All Other                 15,638   19,340    48,820   54,879
                           -------- --------- -------- ---------
                           $112,200 $108,840  $325,927 $301,538
                           ======== ========= ======== =========


Pro forma revenues from
 continuing operations     $112,200 $109,245  $325,927 $303,389
     Discontinued product
      line (Hawkeye)              -     (405)        -   (1,851)
                           -------- --------- -------- ---------
Adjusted Pro Forma
 Revenues                  $112,200 $108,840  $325,927 $301,538
                           ======== ========= ======== =========


GAAP Revenues from
 continuing operations
   Consumer Electronics    $ 50,549 $ 33,352  $101,317 $ 67,251
   Service Providers         46,013    1,615    75,447    3,023
   All Other                 15,638   10,638    41,445   32,805
                           -------- --------- -------- ---------
                           $112,200 $ 45,605  $218,209 $103,079
                           ======== ========= ======== =========



                                   Q1 2007 Q2 2007   Q3 2007  Q4 2007
                                  -------- -------- -------- ---------
Seven Quarters of Adjusted Pro
 Forma Revenues
   Consumer Electronics             48,709  38,310    50,300   44,200
   Service Providers                37,179  32,961    39,200   40,700
   All Other                        19,562  15,977    19,340   22,260
                                  -------- -------- -------- ---------
Adjusted Pro Forma Revenues        105,450  87,248   108,840  107,160
     Discontinued product line
      (Hawkeye)                        877     569       405      990
                                  -------- -------- -------- ---------
Pro forma revenues from
 continuing operations            $106,327 $87,817  $109,245 $108,150
                                  ======== ======== ======== =========


                                             Q1 2008  Q2 2008  Q3 2008
                                            -------- -------- --------
Seven Quarters of Adjusted Pro Forma
 Revenues
   Consumer Electronics                       45,145   44,024   50,549
   Service Providers                          45,753   45,623   46,013
   All Other                                  16,899   16,283   15,638
                                            -------- -------- --------
Adjusted Pro Forma Revenues                  107,797  105,930  112,200
     Discontinued product line (Hawkeye)           -        -        -
                                            -------- -------- --------
Pro forma revenues from continuing
 operations                                 $107,797 $105,930 $112,200
                                            ======== ======== ========
MACROVISION SOLUTIONS CORPORATION
RECONCILIATION OF ADJUSTED PRO FORMA EBITDA TO PRO FORMA OPERATING
 INCOME FROM CONTINUING OPERATIONS
(IN THOUSANDS)
(UNAUDITED)

                                 Three Months Ended Nine Months Ended
                                 September 30, 2008 September 30, 2008
                                 ------------------ ------------------
                                       Total              Total
                                 ------------------ ------------------

Adjusted Pro Forma EBITDA                   43,004            107,210
   Depreciation                             (5,281)           (16,312)
   Amortization                            (21,020)           (63,029)
   Equity-based compensation                (4,323)           (10,337)
   Transaction costs                             -               (681)
   Transition and integration
    costs                                   (3,154)            (6,181)
   Insurance settlement                          -             32,500
                                 ------------------ ------------------
Pro forma operating income from
 continuing operations           $           9,226  $          43,170
                                 ================== ==================


                                 Three Months Ended Nine Months Ended
                                 September 30, 2007 September 30, 2007
                                 ------------------ ------------------
                                       Total              Total
                                 ------------------ ------------------

Adjusted Pro Forma EBITDA                   36,178             97,086
   Depreciation                             (3,971)           (11,997)
   Amortization                            (21,166)           (63,429)
   Equity-based compensation                (3,486)            (8,747)
   Transaction costs                        (2,090)            (2,790)
   Restructuring and asset
    impairment charges                        (163)            (3,244)
   Discontinued product line
    (Hawkeye)                                 (939)            (4,314)
   Accrual reversal related to
    former Gemstar CEO                           -             10,700
                                 ------------------ ------------------
Pro forma operating income from
 continuing operations           $           4,363  $          13,265
                                 ================== ==================

Source: Macrovision Solutions Corporation

Contact: Macrovision Solutions Corporation James Budge, +1-408-562-8400 Lauren Landfield, +1-408-562-8400