DivX, Inc. Reports Record Revenue for Third Quarter 2007

Revenue Increased 42% Over Prior Year, GAAP EPS is $0.02, Non-GAAP EPS is $0.17

SAN DIEGO, Nov 05, 2007 (BUSINESS WIRE) — DivX, Inc. (NASDAQ:DIVX) today announced results for the third quarter ended September 30, 2007.
The Company reported record revenue for the third quarter of $21.9 million, an increase of 42% compared to revenue of $15.4 million reported in the third quarter of last year. GAAP net income in the third quarter of 2007 was approximately $800,000, or $0.02 per diluted share. DivX generated non-GAAP net income of $5.9 million, or $0.17 per diluted share. Non-GAAP EPS excludes (1) non-cash share-based compensation of approximately $2.4 million, ($1.4 million, or $0.04 per diluted share, net of related taxes), (2) operating costs directly attributable to Stage6 of approximately $4.0 million ($2.4 million, or $0.07 per diluted share, net of related taxes), and (3) an asset impairment charge of approximately $2.2 million ($1.3 million, or $0.04 per diluted share, net of related taxes).

“This quarter DivX made outstanding progress toward its vision to transform the digital media experience for consumers,” commented Kevin Hell, Chief Executive Officer for DivX. “We strengthened relationships with our major OEM partners, added key partners to support our move into new product categories, and continued to grow consumer adoption and overall penetration in our core licensing business. We launched DivX Connected and are looking forward to the rollout of the first DivX Connected devices in the fourth quarter in Europe. In our new mobile initiative, we announced an exciting new agreement with Qualcomm and extended an existing relationship with Samsung. We also signed a multi-year renewal license with LG Electronics covering a broad portfolio of digital media products, including DVD Players, digital televisions, and mobile handsets. Overall, we are very confident that our strategy is gaining momentum and we are well-positioned to execute successfully.”

“We generated strong cash from operations in the quarter, further strengthening our balance sheet that has more than $4.70 per share in cash and investments,” said Dan Halvorson, Executive Vice President and Chief Financial Officer of DivX. “Our third quarter results demonstrate the earnings power of the DivX core business that will continue to support our growth strategy in the future. Our commitment to profitable growth is evidenced by our increased DivX core EPS guidance in the fourth quarter.”

Halvorson added, “As we shared with you in our second quarter earnings call, we continue to believe that Stage6 has value to DivX and we are exploring a number of alternatives for this asset. We will keep investors informed of our progress in the coming months.”

Q4 and 2007 Outlook

The following table summarizes the Company’s financial guidance for the fourth quarter and fiscal 2007. These estimates are based on the Company’s current business outlook as of the date of this press release and are based on a projected tax rate of 40%, anticipated non-cash share-based compensation of approximately $5.6 million ($3.4 million, or $0.10 per diluted share, net of related taxes, refer to (1) in the table below), and anticipated operating costs directly attributable to Stage6 of approximately $6.0 million ($3.6 million, or $0.10 per diluted share, net of related taxes).