Macrovision Solutions (MM) (NASDAQ:MVSND)
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Macrovision Solutions Corporation (NASDAQ:MVSND) announced today first
quarter 2008 revenues from continuing operations of $32.2 million,
compared to $36.6 million from continuing operations for the first
quarter of 2007. US GAAP income from continuing operations, net of tax
was $7.3 million compared to $7.6 million for the first quarter of 2007.
Diluted GAAP earnings per share from continuing operations, net of tax
for the quarter were $0.13, compared to $0.14 for the first quarter of
2007.
Non-GAAP income from continuing operations, net of tax was $7.8 million,
compared to $13.3 million in the first quarter of 2007. Non-GAAP diluted
earnings per share from continuing operations for the quarter were
$0.14, compared to $0.25 in the same quarter of 2007. Non-GAAP income
from continuing operations, net of tax excludes non-cash items such as
amortization of intangibles from acquisitions and equity-based
compensation charges, as well as items impacting comparability such as
gains on sale of strategic investments and restructuring and asset
impairment charges. A reconciliation between income from continuing
operations, net of tax on a GAAP and non-GAAP basis is provided in
tables below.
Macrovision Solutions Corporation’s results
for the first quarter of 2008 only include the results of Macrovision
Corporation, its predecessor registrant. Macrovision completed its
acquisition of Gemstar–TV Guide International,
Inc. on May 2, 2008. On a pro forma combined company basis, assuming the
Gemstar acquisition was consummated January 1, 2008, first quarter 2008
revenues were $151.7 million. Pro forma combined company results exclude
Macrovision’s recently sold software and games
businesses and Gemstar’s publishing business.
First quarter 2008 pro forma combined company Adjusted EBITDA was $38.7
million. Adjusted EBITDA is defined as EBITDA, adding back non-cash
items such as equity-based compensation and items which impact
comparability such as the benefit from litigation proceedings related to
a former Gemstar CEO, transaction costs, gain on sale of strategic
investments, restructuring and asset impairment charges. A
reconciliation between pro forma combined company income from continuing
operations, net of tax, and pro forma combined company Adjusted EBITDA
is provided in the tables below.
The pro forma combined company results do not reflect anticipated
synergies. By January 1, 2009, Macrovision Solutions expects to realize
annual cost savings in excess of $50 million from the pro forma combined
company by virtue of rationalizing head count, eliminating corporate
marketing initiatives that do not fit within the company’s
plans going forward, eliminating duplicate public company expenses, IT
and facilities consolidation and other cost efficiencies. To realize
these annual savings, Macrovision Solutions expects to incur, during the
remainder of 2008, approximately $31 million in restructuring related
costs to eliminate headcount and programs. Approximately 50% of the
synergies are expected to be realized, on an annualized basis, during
the second quarter and all of the synergies are expected to be realized,
on an annualized basis, by the end of 2008.
“Having completed the divestitures of our
software and games businesses and closed the Gemstar acquisition, on top
of last year’s BD+, AMG, and Mediabolic
acquisitions, we have fundamentally transformed Macrovision into a
digital media technology leader, now well-positioned to help enable the
shift to digital entertainment,” said Fred
Amoroso, President and CEO of Macrovision. “We
are executing against our integration plan and are exploring strategic
alternatives for Gemstar’s media assets.”
“I am pleased with our operational execution
amid our acquisition, divestiture and integration activities,”
added James Budge, Chief Financial Officer. “While
legacy analog solutions continued to decline as anticipated, this was
partially offset by strength in our digital solutions, which gives us
better visibility into our long term opportunity. We reiterate our
estimates of 2008 pro forma combined company revenues ranging between
$650 million and $700 million, assuming the Gemstar transaction was
completed on January 1, 2007, and 2008 pro forma Adjusted EBITDA within
a range of between $230 million and $270 million, compared to $607
million and $209 million in pro forma combined company 2007 revenue and
Adjusted EBITDA, respectively.”
GAAP to Non-GAAP Reconciliation
Macrovision Solutions Corporation provides non-GAAP financial
information to assist investors in assessing its current and future
operations in the way that its management evaluates those operations.
Non-GAAP income from continuing operations, net of tax and non-GAAP
diluted earnings per share from continuing operations are supplemental
measures of Macrovision Solutions Corporation’s
performance that are not required by, and are not presented in
accordance with, GAAP. The non-GAAP information does not substitute for
any performance measure derived in accordance with GAAP. Macrovision
Solutions Corporation believes that this non-GAAP information provides
useful information to investors by excluding the effect of some non-cash
and one-time expenses that are required to be recorded under GAAP but
that Macrovision Solutions Corporation believes are not indicative of
its core operating results, or that are expected to be incurred over a
limited period of time.
Macrovision Solution Corporation’s management
evaluates and makes operating decisions about its business operations
primarily based on revenue and the core costs of those business
operations. Management does not consider as “core
costs” and therefore does not use the
amortization of intangibles from acquisitions, restructuring and other
costs, gain on sale of strategic investments and equity-based
compensation charges when making business decisions. Therefore,
management presents non-GAAP financial measures, along with GAAP
measures, in this earnings release by excluding these items and other
significant unusual items from the period expenses. The income statement
line items involved in the adjustment from GAAP to non-GAAP presentation
in this earnings release are amortization of intangibles, restructuring
and asset impairment charges; gain on sale of strategic investments and
the following items that include equity-based compensation charges:
(1) cost of revenues; (2) research and development; (3) selling and
marketing; and (4) general and administrative. These items in turn
affect (1) total costs and expenses; (2) operating income from
continuing operations; (3) income from continuing operations before
income taxes; (4) provision for income taxes; (5) income from continuing
operations, net of tax; (6) basic earnings per share and (7) diluted
earnings per share. To determine its non-GAAP provision for income
taxes, Macrovision Solutions Corporation recalculates tax based on
non-GAAP income before income taxes.
For each such non-GAAP financial measure, the adjustment provides
management with information about Macrovision Solutions’
underlying operating performance that enables a more meaningful
comparison of its financial results in different reporting periods. For
example, since Macrovision owned and operated the Software and Games
businesses as of December 31, 2007, management continues to evaluate the
revenue and profit metrics of both businesses through their disposition.
And since Macrovision Solutions 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 Macrovision Solutions’ operating expenses.
Management also excludes the effect of restructuring, asset impairment
charges and gain on sale of strategic investments for the same reason.
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. Management uses these 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, the
availability of non-GAAP financial information helps management track
actual performance relative to financial targets. Making this non-GAAP
financial information available to investors, in addition to the GAAP
information, also helps investors compare Macrovision Solutions’
performance with the performance of other companies in our industry,
which use similar financial measures to supplement their GAAP financial
information.
Management recognizes that the use of these non-GAAP measures has
limitations, including the fact that management must exercise judgment
in determining which types of charges should be excluded from the
non-GAAP financial information. Because other companies, including
companies similar to Macrovision, may calculate their non-GAAP earnings
differently than Macrovision, non-GAAP measures may have limited
usefulness in comparing companies. Management believes, however, that
providing this non-GAAP financial information, in addition to the GAAP
information, facilitates consistent comparison of Macrovision’s
financial performance over time. Macrovision has provided non-GAAP
results to the investment community, not as an alternative but as an
important supplement to GAAP information, to enable investors to
evaluate Macrovision’s core operating
performance in the same way that management does. The tables below
present the differences between non-GAAP earnings and GAAP net income on
an absolute and per share basis.
Dial-in Information
Macrovision Solutions will hold an investor conference call on 2:00 p.m.
Pacific time on May 7, 2008. Investors and analysts interested in
participating in the conference are welcome to call 800-240-7305 (or
international +1 303-262-2175) 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 May 7, 2008 at 2:00 p.m. Pacific 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 May 10, 2008
and can be accessed by calling 800-405-2236 (or international +1
303-590-3000) and entering passcode 11112926#. 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 enables the digital home entertainment experience
by allowing businesses to protect, enhance and distribute digital goods
to consumers across multiple channels. The Macrovision Solutions
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 to their
customers. The result of deploying Macrovision’s
solutions is a simple end user experience to discover, acquire, manage
and enjoy digital content. Today, the company provides connected
middleware, metadata on music, games, movies and television programming,
media recognition, interactive programming guides, and copyright
protection and operates entertainment portals www.tvguide.com
and www.allmusic.com. Macrovision
Solutions holds over 3500 issued or pending patents and patent
applications worldwide. Macrovision Solutions is headquartered in Santa
Clara, California, with approximately 13 offices across the United
States and around the world. More information about Macrovision
Solutions can be found at www.macrovision.com.
©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, and integration plans of the
Company 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, and customer demand for the technologies and integrated
offerings. Such factors are further addressed in the Company's Annual
Report on Form 10-K/A for the year ended December 31, 2007 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 to update any forward-looking
statements in order to reflect events or circumstances that may arise
after the date of this release, except as required by law.
MACROVISION SOLUTIONS CORPORATION
GAAP CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
Three Months Ended
March 31
2008
2007
Net revenues
$
32,238
$
36,635
Costs and expenses:
Cost of revenues
5,847
5,200
Amortization of intangibles from acquisitions
3,055
1,226
Research and development
6,130
4,634
Selling and marketing
7,319
8,042
General and administrative
9,024
8,356
Restructuring and asset impairment charges
-
2,056
Total operating expenses
31,375
29,514
Operating income from continuing operations
863
7,121
Interest expense
(1,962
)
(1,976
)
Interest income and other, net
5,606
4,878
Gain on sale of strategic investments
5,238
-
Income from continuing operations before income taxes
9,745
10,023
Income taxes
2,469
2,419
Income from continuing operations, net of tax
7,276
7,604
Loss from discontinued operations, net of tax
(981
)
(1,896
)
Net income
$
6,295
$
5,708
Basic income per share from continuing operations
$
0.13
$
0.15
Basic loss per share from discontinued operations
(0.01
)
(0.04
)
Basic net earnings per share
$
0.12
$
0.11
Shares used in computing basic net earnings per share
54,030
52,111
Diluted income per share from continuing operations
$
0.13
$
0.14
Diluted loss per share from discontinued operations
(0.01
)
(0.03
)
Diluted net earnings per share
$
0.12
$
0.11
Shares used in computing diluted net earnings per share
54,078
53,249
MACROVISION SOLUTIONS CORPORATION
RECONCILIATION OF GAAP to NON-GAAP FINANCIAL MEASURES
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
Three Months Ended
March 31
2008
2007
GAAP Operating income from continuing operations
$
863
$
7,121
Non-GAAP adjustments for continuing operations
Amortization of intangibles from acquisitions
3,314
1,476
Equity-based compensation
2,590
2,790
Restructuring and asset impairment charges
-
2,056
Non-GAAP Operating income from continuing operations
$
6,767
$
13,443
GAAP income from continuing operations, net of tax
$
7,276
$
7,604
Non-GAAP adjustments for continuing operations
Amortization of intangibles from acquisitions
3,314
1,476
Equity-based compensation
2,590
2,790
Restructuring and asset impairment charges
-
2,056
Gain on sale of strategic investments
(5,238
)
-
Income tax effect of Non-GAAP adjustments
(113
)
(610
)
Non-GAAP Net income from continuing operations
$
7,829
$
13,316
GAAP Diluted EPS from continuing operations
$
0.13
$
0.14
Non-GAAP adjustments for continuing operations
Amortization of intangibles from acquisitions
0.06
0.03
Equity-based compensation
0.05
0.05
Restructuring and asset impairment charges
-
0.04
Gain on sale of strategic investments
(0.10
)
-
Income tax effect of Non-GAAP adjustments
-
(0.01
)
Non-GAAP Diluted EPS from continuing operations
$
0.14
$
0.25
Shares used in calculating diluted net earnings per share
54,078
53,249
MACROVISION SOLUTIONS CORPORATION
BUSINESS UNIT SUMMARY
(IN THOUSANDS)
(UNAUDITED)
Three Months Ended
March 31
2008
2007
Net Revenues from continuing operations
Embedded Solutions
$
17,176
$
19,629
Entertainment
9,327
14,280
Distribution and Commerce
5,735
2,726
$
32,238
$
36,635
Segment operating income from continuing operations(1)
Embedded Solutions
$
11,693
$
15,864
Entertainment
6,413
9,176
Distribution and Commerce
(1,328
)
(2,973
)
Total segment operating income from continuing operations
16,778
22,067
Unallocated Costs
(15,915
)
(12,890
)
Restructuring and asset impairment charges
-
(2,056
)
Operating Income from continuing operations
$
863
$
7,121
(1) Macrovision Solutions Corporation does not allocate to its
segments certain operating expenses, which it manages separately
at the corporate level. These unallocated costs include charges
for equity-based compensation, corporate marketing and
administrative functions. Restructuring and asset impairment
charges are not allocated to segments.
MACROVISION SOLUTIONS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
(UNAUDITED)
March 31,
December 31,
2008
2007
ASSETS
Cash and cash equivalents
$
295,529
$
134,070
Short-term investments
66,711
248,194
Accounts receivable, net
33,386
44,327
Deferred tax assets
6,028
4,563
Prepaid expenses and other current assets
11,615
12,135
Assets held for sale
75,316
79,503
Total Current Assets
488,585
522,792
Long-term marketable investment securities
83,302
57,025
Deferred tax assets
59,983
57,850
Property and equipment, net
8,031
10,011
Other intangibles from acquisitions, net
66,519
69,574
Patents and other assets
19,979
20,697
Goodwill
199,164
199,209
TOTAL ASSETS
$
925,563
$
937,158
LIABILITIES
Accounts payable
$
3,762
$
6,157
Accrued expenses
22,944
42,468
Deferred revenue
8,251
7,494
Liabilities held for sale
26,462
27,959
Total Current Liabilities
61,419
84,078
Taxes payable, non-current
58,727
57,026
Convertible senior notes
240,000
240,000
Other non-current liabilities
-
436
TOTAL LIABILITIES
360,146
381,540
STOCKHOLDERS’ EQUITY
565,417
555,618
TOTAL LIABILITIES & STOCKHOLDERS’
EQUITY
$
925,563
$
937,158
MACROVISION SOLUTIONS CORPORATION
RECONCILIATION OF PRO FORMA COMBINED COMPANY INCOME FROM
CONTINUING
OPERATIONS, NET OF TAX, TO PRO FORMA ADJUSTED EBITDA
(IN THOUSANDS)
(UNAUDITED)
Three Months Ended
March 31,
2008
Pro forma combined company income from continuing operations, net of
tax
$
22,081
Income taxes
7,758
Interest expense, net
7,018
Depreciation
7,842
Amortization
27,641
EBITDA
72,340
Equity-based compensation
3,425
Gemstar deal related expenses
675
Insurance settlement
(32,500
)
Gain on sale of strategic investments
(5,238
)
Adjusted EBITDA
$
38,702