Macrovision Corporation Reports Results for the Second Quarter of 2005; Company Achieves Record Second Quarter Revenues

Macrovision Corporation (Nasdaq:MVSN) announced today second quarter 2005 net revenues of $44.4 million, an increase of 25% compared to $35.7 million in the second quarter of 2004. Pro forma earnings (before amortization of intangibles from acquisitions and adjustments for changes to our tax rate, as applicable) were $8.0 million, compared to $9.5 million in the second quarter of 2004. Pro forma diluted earnings per share for the quarter were $0.16, compared to $0.19 in the same quarter of 2004. The Company generated $16.8 million of cash from operations and its ending cash and cash equivalents, short-term investments and long term marketable securities were $268.3 million.

GAAP net income for the second quarter of 2005 was $6.1 million, compared to $8.8 million for the second quarter of 2004. Diluted GAAP earnings per share for the quarter were $0.12, compared with $0.18 for the year ago quarter.

"Our second quarter activities have been directed at building for the future," said Fred Amoroso, President and CEO at Macrovision. "With our acquisition of Zero G, we strengthened our multi-server, multi-operating system offering for complex software installation environments. Further, with our acquisition of Trymedia last week we expanded our PC games CD-ROM copy protection business into a more comprehensive full service online distribution business."

Amoroso continued, "During the quarter we made progress in gaining traction with our three new entertainment technologies' products -- Hawkeye for peer-to-peer anti-piracy; CDS-300 for music copy protection; and RipGuard for preventing PC ripping. We signed several new contracts and deployed the technologies in many of the major worldwide manufacturing facilities. However, the DVD industry appears to have hit a few road bumps and our customers are forecasting lower DVD growth in future quarters. This will naturally impact our copy protection business. Looking ahead, we are lowering our FY2005 guidance for revenues to be between $205 and $215 million, and for our pro forma EPS to be between $0.89 and $0.92. For Q3 2005, we are estimating that our business will be essentially flat compared to Q2 in the range of $46-$48 million and our pro forma EPS will be in the range of $0.15 to $0.17. However, for Q4, we are expecting our traditional seasonally strong performance."

Macrovision will hold an investor conference call on August 1, 2005, at 5:00 p.m. ET. Investors and analysts interested in participating in the conference are welcome to call 800-219-6110 (or international [phone]) 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 August 1, 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 September 1, 2005.

Investors and analysts interested in listening to a recorded replay of the conference are welcome to call 800-405-2236 (or international [phone]) and enter passcode 11035134#. Access to the replay is available through August 2, 2005.

About Macrovision

Macrovision develops and markets content value management and software value management technologies for the home video, PC games, music, cable/satellite, consumer software, and enterprise software industries,. Macrovision holds a total of 204 issued or pending United States patents and 1,172 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 other offices in Schaumburg, Illinois, San Francisco, California, the United Kingdom, Amsterdam, Frankfurt, Tel Aviv, Tokyo, Hong Kong, Taipei, Seoul and Alicante, Spain.

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

(C) 2005 Macrovision Corporation. Macrovision, FLEXnet, Hawkeye, InstallShield and RipGuard DVD 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. Amoroso, 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 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 uses pro forma 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, and adjustments for changes to the tax rate) are excluded from the pro forma earnings calculation. The Company believes this presentation is more indicative of its ongoing operational performance. The tables below present the differences between pro forma earnings and GAAP net income on an absolute and per share basis. -0- Macrovision Corporation and Subsidiaries Condensed Consolidated Statements of Income (Unaudited) (In thousands, except per share data) Three Months Six Months Ended June 30, Ended June 30, ----------------- ----------------- 2005 2004 2005 2004 ------- ------- ------- ------- Net Revenues $44,414 $35,670 $95,671 $73,652 Costs and expenses: Costs of revenues, including amortization of intangibles of $2,466 and $777 for the three months ended June 30, 2005 and 2004, respectively, and $4,882 and $1,556 for the six months ended June 30, 2005 and 2004, respectively 7,465 3,240 15,259 6,324 Research and development 7,925 5,708 16,622 11,295 Selling and marketing 13,027 8,770 25,948 17,326 General and administrative 7,461 5,120 15,888 10,633 Deferred compensation expense relating to Globetrotter -- -- -- 185 Impairment losses (gains) on investments -- -- 5,726 (1,040) ------- ------- ------- ------- Total costs and expenses 35,878 22,838 79,443 44,723 ------- ------- ------- ------- Income before interest and income taxes 8,536 12,832 16,228 28,929 Interest and other income, net 974 985 1,911 1,713 ------- ------- ------- ------- Income before income taxes 9,510 13,817 18,139 30,642 Income taxes 3,440 4,974 6,603 11,031 ------- ------- ------- ------- Net income $ 6,070 $ 8,843 11,536 19,611 ======= ======= ======= ======= Diluted earnings per share $ 0.12 $ 0.18 $ 0.22 $ 0.39 ======= ======= ======= ======= Shares used in computing diluted earnings per share 51,263 50,411 51,298 50,311 ======= ======= ======= ======= Macrovision Corporation and Subsidiaries Pro forma Reconciliation of Condensed Consolidated Statements of Income (Unaudited) (1) (In thousands, except per share data) Three Months Six Months Ended June 30, Ended June 30, ----------------- ----------------- 2005 2004 2005 2004 ------- ------- ------- ------- Net income $ 6,070 $ 8,843 $11,536 $19,611 Add: Amortization of intangibles from acquisitions (net of taxes) 1,767 643 3,504 1,290 Deferred compensation expense relating to Globetrotter -- -- -- 185 Adjustment to pro-forma tax rate 159 -- 345 -- Impairment losses (gains) on investments (net of taxes) -- -- 3,751 (670) ------- ------- ------- ------- Pro forma net income $ 7,996 $ 9,486 $19,136 $20,416 ======= ======= ======= ======= Diluted earnings per share reconciliation: Net income $ 0.12 $ 0.18 $ 0.22 $ 0.39 Add: Amortization of intangibles from acquisitions (net of taxes) 0.04 0.01 0.07 0.03 Deferred compensation expense relating to Globetrotter -- -- -- -- Adjustment to pro-forma tax rate -- -- 0.01 -- Impairment losses (gains) on investments (net of taxes) -- -- 0.07 (0.01) ------- ------- ------- ------- Pro forma diluted earnings per share $ 0.16 $ 0.19 $ 0.37 $ 0.41 ======= ======= ======= ======= Shares used in computing diluted earnings per share 51,263 50,411 51,298 50,311 ======= ======= ======= ======= Notes: (1) Pro forma results for the three and six months ended June 30, 2005 and 2004 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, adjustments to the pro forma tax rate, and impairment losses (gains) on investments. These costs were $1,926 for the three month period ended June 30, 2005, and $7,600 for the six month period ending June 30, 2005, net of taxes when applicable, using the Company's pro forma effective rate. The amortization expense for capitalized TTR patents included in cost of revenues was $231 and $467 for the three and six months ended June 30, 2005, respectively. The format presented above is not in accordance with Generally Accepted Accounting Principles. Macrovision Corporation and Subsidiaries Condensed Consolidated Balance Sheets (Unaudited) (In thousands) June 30, December 31, 2005 2004 ----------- ------------ ASSETS Cash and cash equivalents $ 132,427 $ 104,957 Restricted cash -- 859 Short-term investments 114,487 101,299 Accounts receivable, net 34,848 41,468 Prepaid expenses and other assets 14,370 12,643 ---------- ----------- Total Current Assets 296,132 261,226 Property and equipment, net 11,507 9,295 Long-term marketable investment securities 21,377 47,414 Goodwill 81,519 74,529 Other intangibles from acquisitions, net 29,629 31,185 Deferred tax assets 18,682 17,151 Patents and other assets 11,190 11,673 ---------- ----------- TOTAL ASSETS $ 470,036 $ 452,473 ========== =========== LIABILITIES Accounts payable $ 3,702 $ 5,907 Accrued expenses and income taxes payable 33,454 32,639 Deferred revenue 19,516 14,604 ---------- ----------- Total Current Liabilities 56,672 53,150 Other liabilities 1,354 979 ---------- ----------- TOTAL LIABILITIES 58,026 54,129 STOCKHOLDERS' EQUITY 412,010 398,344 ---------- ----------- TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 470,036 $ 452,473 ========== ===========