Macrovision Corporation Reports Record Revenues and Pro Forma Earnings

    Business Editors

    SANTA CLARA, Calif.--(BUSINESS WIRE)--Feb. 28, 2005--Macrovision Corporation (Nasdaq:MVSN) announced today that fourth quarter 2004 net revenues were a record $59.6 million, compared with $39.9 million in the fourth quarter of 2003, an increase of 49%. Pro forma earnings (before amortization of intangibles from acquisitions, non-cash deferred compensation expense, impairment gains and losses on investments, adjustments for changes to our tax rate, and in-process research and development write-offs) were $16.1 million, or 48% higher than last year's fourth quarter. Pro forma diluted earnings per share for the quarter were $0.31, or 41% higher than the comparable pro forma earnings per share in the fourth quarter a year ago.
    Net income for the fourth quarter of 2004 was $15.8 million. Diluted earnings per share for the quarter were $0.31.
    Cash and cash equivalents, short-term investments and long-term marketable securities were $254.5 million as of December 31, 2004.
    "We are very pleased with our fourth quarter results," said Bill Krepick, President and CEO at Macrovision. "Our revenues benefited from continued strong performance in our software value management business, and our DVD and pay-per-view (PPV) copy protection businesses. As we look forward to 2005, we are pleased with the progress we are making with our emerging products. We have seen strong growth in our prospect pipeline for our Update Service product for software publishers; we signed a major record label and a second movie studio to our Hawkeye peer-to-peer file sharing service, and our Ripguard DVD antipiracy product was applied to a major European DVD title release. Looking ahead, we are confirming our FY2005 guidance for revenues to be between $220 and $230 million, with pro forma EPS in the $1.03-$1.06 range, and GAAP earnings per share in the range of $0.90-$0.93. GAAP earnings do not reflect stock option expenses under accounting rules which are effective July 1, 2005, the impact of which is currently being estimated. For Q1 2005, we are estimating that our revenues will be in the range of $49-$51 million and our pro forma EPS will be in the range of $0.17-$0.18. This forecast takes into account the fact that we have a number of new products that we expect will slowly gain traction as the year progresses and will culminate in a strong Q4, which will reflect historical seasonality in both of our business units. These projections include the impact of the InstallShield(R) acquisition for the full year."

    Restatement of 2003 Effective Tax Rate

    In the course of preparing our 2004 financial statements, we became aware of an understatement of approximately $2.8 million of tax expense for the fourth quarter of 2003. The understatement resulted from a clerical error related to U.S. taxation on income earned outside the U.S. and is not expected to have a current cash impact on the Company. We plan to restate our previously issued financial statements for the fourth quarter and fiscal year 2003 to reflect the correction. Further details of this restatement are available in the related Form 8-K we filed today, which may be accessed through our website at www.macrovision.com. The adjustment remains subject to ongoing review and we expect to file our corrected financial statements covering the affected period(s) within the next few weeks.
    We continue to use pro forma reconciliation condensed consolidated statements of income in the presentation of financial results and earnings guidance. Management believes that this presentation may be more meaningful in analyzing the results of operations and income generation, as non-cash, non-operating or non-recurring items (such as amortization of intangibles from acquisitions, amortization of deferred stock-based compensation, impairment gains and losses on investments, adjustments for changes to our tax rate, and in-process research and development write-offs) are excluded from the pro forma earnings calculation. This presentation may be considered more indicative of our ongoing operational performance. The tables below present the differences between pro forma earnings and net income on an absolute and per share basis.
    Immediately following the Q4 2004 earnings release, Macrovision will hold an investor conference call on February 28, 2005, from 5:00 p.m. to 6:00 p.m. ET. Investors and analysts interested in participating in the conference are welcome to call 800-218-0713 (or international +1 303-262-2075) and reference the Macrovision call.
    The conference call can also be accessed via live Webcast at www.macrovision.com or www.fulldisclosure.com (or www.streetevents.com for subscribers) on February 28, 2005 at 5:00 p.m. ET. Approximately 1-2 hours after the live Webcast ends, the on-demand Webcast of Macrovision's earnings conference call can be accessed until March 14, 2005.
    Investors and analysts interested in listening to a recorded replay of the conference are welcome to call 800-405-2236 (or international +1 303-590-3000) and enter passcode 11024324#. Access to the replay is available through March 1, 2005.

    About Macrovision

    Macrovision develops and markets digital rights management ("DRM"), copy protection, and software value management technologies for the consumer software, enterprise software, home video and music industries. Macrovision holds a total of 134 issued or pending United States patents and 915 issued or pending international patents, and continues to increase its patent portfolio with new and innovative technologies in related fields. Macrovision has its corporate headquarters in Santa Clara, California, with international offices in the United Kingdom, Amsterdam, Frankfurt, Tel Aviv, Tokyo, Hong Kong, Taipei and Seoul.

    Note to Editors: For more information on Macrovision Corporation and its products, please visit www.macrovision.com.

    (C) 2005 Macrovision Corporation. Macrovision, FLEXnet, InstallShield and Hawkeye are registered trademarks or trademarks of Macrovision Corporation. 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. Krepick, as well as oral statements that may be made by the Company or by officers, directors or employees of the Company acting on the Company's behalf, 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 the Company's forecast of future revenues and earnings, the business strategies and product plans of the Company and the features and benefits of the products of the Company.
    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. Among the important factors that could cause results to differ materially are the following: the failure of markets for home video, audio CDs, consumer or enterprise software value management, or markets for the technological protection of copyrighted materials contained in such products, to continue, develop or expand, and the failure of the Company's products to achieve or sustain market acceptance or to meet, or continue to meet, the changing demands of content or software providers. Other factors include those outlined in the Company's Annual Report on Form 10-K for 2003, its latest Quarterly Report on Form 10-Q for the period ended September 30, 2004, and such other documents as are filed with the Securities and Exchange Commission from time to time. These factors may not constitute all factors that could cause actual results to differ materially from those discussed in any forward-looking statement. The Company operates in a continually changing business environment and new factors emerge from time to time. The Company cannot predict such factors, nor can it assess the impact, if any, of such factors on the Company or its results. Accordingly, forward-looking statements should not be relied upon as a prediction of actual results. The Company is not obligated to revise or update any forward-looking statements in order to reflect events or circumstances that may arise after the date of this release.
    Macrovision provides pro forma earnings and pro forma earnings per share data as additional information for its operating results. These measures are not in accordance with, or an alternative for, generally accepted accounting principles and may be different from pro forma measures used by other companies. Macrovision believes that this presentation of pro forma earnings and pro forma earnings per share provides useful information to management and investors regarding certain additional financial and business trends relating to its financial condition and results of operations. In addition, Macrovision's management uses these measures for reviewing the financial results of Macrovision and for budget planning purposes.

Macrovision Corporation and Subsidiaries Condensed Consolidated Statements of Income (Unaudited) (In thousands, except per share data)

Three Months Twelve Months Ended December 31, Ended December 31, ------------------- -------------------- 2004 2003 2004 2003 (as (as restated) restated) -------- ---------- --------- ---------- Net Revenues $59,588 $39,866 $182,099 $128,346 Costs and expenses: Costs of revenues, including amortization of intangibles of $2,411 and $752 for the three months ended December 31, 2004 and 2003, respectively, and $6,370 and $3,319 for the twelve months ended December 31, 2004 and 2003, respectively 7,858 3,720 22,660 11,447 Research and development 8,948 5,141 28,652 17,217 Selling and marketing 13,673 7,592 42,226 27,007 General and administrative 8,233 5,801 25,501 19,385 Deferred compensation expense relating to Globetrotter -- 527 185 2,656 In-process research and development -- -- 5,400 624 Impairment losses (gains) on investments -- 224 4,258 4,368 -------- ---------- --------- ---------- Total costs and expenses 38,712 23,005 128,882 82,704 -------- ---------- --------- ---------- Income before interest and income taxes 20,876 16,861 53,217 45,642 Interest and other income, net 1,705 957 4,173 3,852 -------- ---------- --------- ---------- Income before income taxes 22,581 17,818 57,390 49,494 Income taxes 6,786 9,882 20,660 22,553 -------- ---------- --------- ---------- Net income $15,795 $7,936 $36,730 $26,941 ======== ========== ========= ========== Diluted earnings per share $0.31 $0.16 $0.73 $0.54 ======== ========== ========= ========== Shares used in computing diluted earnings per share 51,282 50,003 50,619 49,518 ======== ========== ========= ==========

Macrovision Corporation and Subsidiaries Pro forma Reconciliation of Condensed Consolidated Statements of Income (Unaudited) (1) (2) (In thousands, except per share data)

Three Months Twelve Months Ended December 31, Ended December 31, ------------------- ------------------- 2004 2003 2004 2003 (as (as restated) restated) -------- ---------- -------- ---------- Net income $15,795 $7,936 $36,730 $26,941 Add: Adjustment to pro forma tax rate (1,343) 1,810 (67) (393) Amortization of intangibles from acquisitions (net of taxes) 1,690 538 4,655 2,125 Deferred compensation expense relating to Globetrotter -- 527 185 2,656 In-process research and development (net of taxes) -- -- 3,456 349 Impairment losses on investments (net of taxes) -- 125 2,725 2,446 -------- ---------- -------- ---------- Pro forma net income $16,142 $10,936 $47,684 $34,124 ======== ========== ======== ========== Diluted earnings per share reconciliation: Net income $0.31 $0.16 $0.73 $0.54 Add: Adjustment to pro forma tax rate (0.03) 0.04 -- (0.01) Amortization of intangibles from acquisitions (net of taxes) 0.03 0.01 0.09 0.04 Deferred compensation expense relating to Globetrotter -- 0.01 -- 0.06 In-process research and development (net of taxes) -- -- 0.07 0.01 Impairment losses on investments (net of taxes) -- -- 0.05 0.05 -------- ---------- -------- ---------- Pro forma diluted earnings per share $0.31 $0.22 $0.94 $0.69 ======== ========== ======== ========== Shares used in computing diluted earnings per share 51,282 50,003 50,619 49,518 ======== ========== ======== ==========

Notes: (1) Pro forma results for the three and twelve months ended December 31, 2004 and 2003 are presented for information purposes only. These results present the operating results of Macrovision Corporation, excluding costs associated with amortization of intangibles from acquisitions, amortization of capitalized patents from our acquisition of TTR's assets in the second quarter of 2003, deferred compensation expense, write-offs of in-process research and development, adjustments for changes to our tax rate, and impairment gains and losses on investments. These costs were $347 for the three month period ended December 31, 2004, and $10,954 for the twelve month period ending December 31, 2004, net of taxes when applicable, using the Company's effective rate. The amortization expense for capitalized TTR patents included in cost of revenues was $229 and $904 for the three and twelve months ended December 31, 2004, respectively. The format presented above is not in accordance with Generally Accepted Accounting Principles.

(2) While preparing our 2004 financial statements, we became aware of an understatement of tax expense in the fourth quarter of 2003 of approximately $2.8 million, for which we are voluntarily restating our previously issued financial statements for 2003.

Macrovision Corporation and Subsidiaries Condensed Consolidated Balance Sheets (Unaudited) (In thousands)

December 31, December 31, 2004 2003 (as restated) ------------ ------------- ASSETS Cash and cash equivalents $105,816 $27,918 Short-term investments 101,299 95,563 Accounts receivable, net 41,468 30,169 Prepaid expenses and other assets 12,643 15,079 ------------ -------------

Total Current Assets 261,226 168,729

Property and equipment, net 9,295 6,689 Patents and other intangibles, net 10,870 10,826 Long-term marketable investment securities 47,414 146,151 Goodwill 74,529 28,630 Other intangibles from acquisitions, net 31,185 8,512 Other assets 17,954 16,029 ------------ -------------

TOTAL ASSETS $452,473 $385,566 ============ =============

LIABILITIES Accounts payable $5,907 $4,457 Accrued expenses and income taxes payable 32,622 28,691 Deferred revenue 14,604 10,333 ------------ -------------

Total Current Liabilities 53,133 43,481

Other liabilities 979 874 ------------ -------------

TOTAL LIABILITIES 54,112 44,355

STOCKHOLDERS' EQUITY 398,361 341,211 ------------ -------------

TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $452,473 $385,566 ============ =============

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CONTACT: Macrovision Corporation George Monk, 408-743-8600 ir-info@macrovision.com

KEYWORD: CALIFORNIA INDUSTRY KEYWORD: HARDWARE COMPUTERS/ELECTRONICS TELECOMMUNICATIONS SOFTWARE EARNINGS CONFERENCE CALLS SOURCE: Macrovision Corporation

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