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Original Source: FD (FAIR DISCLOSURE) WIRE
. Bill Krepick, Macrovision Corporation, President & CEO . Ian Halifax, Macrovision Corporation, EVP, Secretary & CFO . Dan Stickle, Macrovision Corporation, EVP, Software Technologies Group . Steve Weinstein, Macrovision Corporation, EVP, Entertainment Technologies Group
MVSN reported that consolidated net revenues were $48.859m, up 57% from $31.216m in 3Q03. Pro forma earnings were a record $11.193m for diluted EPS of $0.22. Guidance for 4Q04 includes revenues of $50-53m and pro forma EPS of $0.25-0.27. FY04 guidance includes revenues of $172-175m and pro forma EPS of $0.88-0.90. Q&A Focus: DVD business, VoD trials, margins.
A. Key Data From Call 1. Consolidated Net Revenues: $48.859m. 2. GM: 88%. 3. Pro Forma Earnings: $11.193m. 4. Net Income: $1.324m.
5. Pro Forma Diluted EPS: $0.22. 6. Diluted EPS: $0.03. 7. 4Q04 Revenue Guidance: $50-53m. 8. 4Q04 Pro Forma EPS Guidance: $0.25-0.27.
9. FY04 Revenue Guidance: $172-175m. 10. FY04 Pro Forma EPS Guidance: $0.88-0.90.
S1. Quarter Highlights (B.K.) 1. Highlights: 1. Record revenues, pro forma operating income, and pro forma earnings. 2. Substantial progress with integration of Install Shield in all functional areas.
S2. Financial Review (I.H.) 1. Revenues: 1. Consolidated net revenues $48.859m, up 57% from $31.216m in 3Q03. 1. Revenues from video technologies up 19% to $23.954m from $20.106m in 3Q03.
2. DVD copy protection revenues $18.296m, up 15% from $15.926m
in 3Q03. 1. Recognized approx. $1.7m from studio volume replicated
during 1Q04 and 2Q04. 3. Videocassette copy protection revenues $794,000, down 41% from $1.335m in 3Q03. 4. Digital pay-per-view copy protection revenues $4.864m, up 71% from $2.845m in 3Q03.
5. Music copy protection revenues $2.011m, up 61% from 3Q03. 1. Included large up-front technology license to international music store operator and initial Hawkeye revenues. 6. SafeDisk revenues for PC games $1.307m, up 10% from 3Q03. 7. Software products $21.484m, up 148% from $8.678m. 8. Other revenues $103,000.
2. Gross Margin: 1. GM 88%, excluding amortization of intangibles from acquisitions. 1. Seven percentage point decline from 3Q03. 3. Pro Forma Results & Factors: 1. Pro forma operating income before amortization of intangibles from acquisitions, in-process R&D write-offs, amortization of deferred stock-based compensation, and gains on impairment losses on investments $16.737m, up 18% from $14.191m in 3Q03. 2. Pro forma earnings a record $11.193m, up 21% from $9.288m in 3Q03. 3. Net income $1.324m. 1. Includes non-cash, non-operating charges excluded from pro forma earnings calculations. 2. Amortization of intangibles from acquisitions $2.627m, including amortization of acquired patents from CTR. 3. In-process R&D write-offs $5.4m. 4. Impairment loss of Digimark equity investment $5.298m; related $1.343m one-time tax impact. 5. Pro forma operating margins 34% of revenues, down six percentage points from 2Q04. 1. Expect to rebound to approach 40% in 4Q04. 4. Pro forma diluted EPS $0.22, up 16% from $0.19 in 3Q03. 5. Diluted EPS $0.03. 4. Balance Sheet: 1. Interest and other income $755,000, down 10% due to lower cash position.
2. Cash, cash equivalents, restricted cash, short term investments, and long term marketable investment securities bonds $224.062m.
3. AR $31.105m. 4. DSO 58 days vs. 73 days in 3Q03. 5. Deferred revenue $15.437m, up 51% from $10.257m in 3Q03. 5. 4Q04 Guidance: 1. Revenues $50-53m. 2. Pro forma EPS $0.25-0.27.
6. FY04 Guidance: 1. Revenues $172-175m. 2. Pro forma EPS $0.88-0.90. 1. Projections include impact of Install Shield acquisition for 2H04 and view of trends in DVD copy protection.
S3. Business Markets (B.K.) 1. Entertainment Technologies Business:
1. Strong YoverY revenue growth of 21%. 2. DVD continues to be dominant business in sector. 1. Contributes over two-thirds of division's revenues. 2. DVD copy protection revenues up 15% YoverY. 1. Below industry shipments YoverY growth of 33%. 2. Results reflect impact of price discounting and loss of market penetration.
3. Strategy to bolster revenue growth in packaged media video
segment is to combine anti-piracy technologies into Active Reach suite of anti-piracy solutions. 1. Includes DVD Copy Protection, Hawkeye peer-to-peer content management services, and Ripguard. 4. Expect DVD business may increase 5-10% in 4Q04 above 3Q04. 1. Don't expect to see results of selling solutions as product suite until early 2005. 2. Signed multi-year renewal with HBO Home Video for copy
protection on 100% of DVDs and VHS cassettes. 2. Pay-per-View Business: 1. Copy protection business exceptionally strong with $4.9m in revenues. 1. Signed a number of new $100,000 plus international manufacturer licenses during quarter. 2. One North American cable operator activated MVSN's copy protection in VOD network with no adverse consumer reaction. 1. Believe two other US cable companies will activate MVSN technology by end of year.
3. Received first revenues from Hawkeye peer-to-peer file sharing content management service from independent record label and major Hollywood studio. 1. Expect Hawkeye revenue will be modest for balance of year. 4. Four major studios conducted further testing on Ripguard
anti-ripper solution for DVDs. 1. Completed Ripguard Replicator Production tool. 2. Prepared to support limited number of Replicator
production sites in 4Q04. 3. Assuming studio orders, full-scale production could commence in 1Q05. 2. Announced Tivo and Replay signed license agreements with …