DivX, Inc. Reports Third Quarter 2009 Financial Results

DivX Fast Forwards Its Growth in New Product Categories

SAN DIEGO, Nov. 9 /PRNewswire-FirstCall/ -- DivX, Inc. (Nasdaq: DIVX), a
leading digital media company, today announced results for the three and nine
months ended September 30, 2009.

(Logo: http://www.newscom.com/cgi-bin/prnh/20081124/DIVXLOGO)

The Company reported revenues for the third quarter of $16.6 million,
comprised of $14.6 million of technology licensing revenues and $2.0 million
of media and other distribution and services revenues. This compares to
revenues of $24.4 million reported for the same period a year ago, which
included $19.1 million of technology licensing revenues and $5.3 million of
media and other distribution and services revenues.

"DivX is undergoing an exciting transition in its business," stated Kevin
Hell, Chief Executive Officer for DivX, Inc. "We are moving beyond our core
DVD licensing business into new categories such as Blu-ray players, digital
televisions, mobile phones and set-top-boxes, driven by our substantial
progress with premium Hollywood content initiatives and our DivX Plus(TM) high
definition software and hardware solutions. Additionally and perhaps even
more notably, through our acquisition of AnySource Media in August, we believe
we are well positioned to define the next big evolutionary step in the
television experience - Internet TV. We believe the opportunity in front of
us is transformational, and will drive the business to the next stage."

As part of the broader transition of its business, DivX today promoted Matt
Milne to the position of Senior Vice President and General Manager, DivX
Licensing. Prior to joining DivX in July 2009, Matt was Senior Vice President
of Sales and Marketing for MediaFLO USA, a wholly owned subsidiary of Qualcomm
Incorporated. Matt will assume the CE licensing responsibilities of Eric
Rodli who has left the Company to pursue other interests. Added Hell, "We
want to thank Eric for his contributions to DivX and wish him well in future
endeavors."

The Company also announced that it plans to demo its Internet TV solution at
the Consumer Electronics Show (CES) in Las Vegas on January 7-9, 2010.

GAAP net income in the third quarter of 2009 was approximately $4.0 million,
or $0.12 per diluted share. DivX incurred a non-GAAP net loss of $319,000, or
a loss of $0.01 per diluted share. Non-GAAP net loss and loss per diluted
share exclude the following items: (1) a $9.5 million litigation settlement
gain ($6.1 million, or $0.19 per diluted share, net of related taxes); (2)
non-cash share-based compensation of approximately $2.3 million ($1.5 million,
or $0.05 per diluted share, net of related taxes); (3) the scheduled
amortization of purchased intangible assets related to the acquisition of
MainConcept of $558,000 ($357,000, or $0.01 per diluted share, net of related
taxes); (4) the foreign exchange benefit on the Company's Euro-denominated
intercompany loan of $231,000 ($148,000, or less than $0.01 per diluted share,
net of related taxes); and (5) a non-cash charge of approximately $120,000, or
less than $0.01 per diluted share, related to the write-off of deferred tax
assets associated with cancelled stock options.

Dan Halvorson, Chief Financial Officer and Executive Vice President
Operations, added, "As reported by many partners and CE vendors, consumer
spending continues to be weak but we once again delivered a solid quarter. We
believe our focus on managing expenses keeps us on course while maximizing our
ability to invest in the future growth of the business. We anticipate emerging
products as a percentage of total technology licensing revenues will continue
to grow and is projected to increase from approximately 16% for the third
quarter to approximately 25% by the end of the fourth quarter of 2009. Our
balance sheet remains strong with $143 million in cash and investments, or
$4.38 per share, and we are focused on investing in technical innovation that
drives growth in our core and new businesses."

Fourth Quarter 2009 Fiscal Outlook
The following table summarizes the Company's financial guidance for the fourth
quarter of 2009. The following estimates are based on the Company's current
business outlook as of the date of this press release:

Q4'09 Guidance
-----------------
Revenue (in millions) $17.5 - $18.5

GAAP earnings (loss) per share, diluted ($0.05) - ($0.03)

Adjustments:
Non-cash share-based compensation
expense, net of income taxes $0.05

Amortization of purchased intangibles,
net of income taxes $0.01

-----------------
Non-GAAP earnings per share, diluted $0.01 - $0.03
-----------------

These estimates are based on:
1. Expected revenues for technology licensing of approximately 85% to 90%
of
total revenue for the fourth quarter of 2009; and revenues for media
and
other distribution and services of approximately 10% to 15% of total
revenues for the fourth quarter of 2009;
2. A projected non-GAAP effective tax rate of approximately 40% for the
fourth quarter of 2009 which is dependent on the effective tax rates in
our various domestic and foreign jurisdictions;
3. Anticipated non-cash share-based compensation expense of approximately
$2.4 million ($1.4 million, or $0.05 per diluted share, net of related
taxes) for the fourth quarter of 2009;
4. The scheduled amortization of purchased intangible assets related to
the
acquisition of MainConcept and the impact of contingent consideration
fair value true-ups related to the acquisition of AnySource Media of
approximately $650,000 ($390,000, or $0.01 per diluted share, net of
related taxes) for the fourth quarter of 2009; and

5. No significant foreign exchange benefit or expense on the Company's
Euro-denominated intercompany loan.

Quarterly Conference Call
DivX management will host a conference call and simultaneous audio webcast to
discuss its third quarter 2009 results on November 9, 2009 at 1:30 p.m.
Pacific Time or 4:30 p.m. Eastern Time. To participate in the call, please
dial (888) 857-6932 or outside the U.S. (719) 457-2734 to access the
conference call at least five minutes prior to the start time. A live audio
webcast will be available on the Events and Presentations page at
http://investors.divx.com.

In addition, an audio replay of the call will be available between 7:30 p.m.
Eastern Time November 9, 2009 and Midnight, Eastern Time November 16, 2009 by
calling (888) 203-1112 or (719) 457-0820, with passcode 4032925.

About DivX, Inc.
DivX, Inc. is a leading digital media company that enables consumers to enjoy
a high-quality video experience across any kind of device. DivX creates,
distributes and licenses digital video technologies that span the "three
screens" comprising today's consumer media environment -- the PC, the
television and mobile devices. Over 200 million DivX devices have shipped into
the market from leading consumer electronics manufacturers. DivX also offers
content providers and publishers a complete solution for the distribution of
secure, high-quality digital video content. Driven by a globally recognized
brand and a passionate community of hundreds of millions of consumers, DivX is
simplifying the video experience to enable the digital home. For more
information, visit www.divx.com.

Forward-Looking Statements
Statements in this press release that are not strictly historical in nature
constitute "forward-looking statements." Such statements include, but are not
limited to, references to the expected growth and earnings potential of the
Company's business, the Company's position in the digital media space,
including Internet TV, the Company's plans to participate in CES, the
anticipated growth of emerging products as a percentage of the Company's total
technology licensing revenues, the anticipated financial results for the
fourth quarter of 2009, and the anticipated benefits of the acquisition of
AnySource Media LLC to the Company, its customers and partners, including the
ability of AnySource Media products and technology to increase the Company's
market opportunity and accelerate penetration of key emerging products. Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors which may cause the Company's actual results to be materially
different from historical results or from any results expressed or implied by
such forward-looking statements. These factors include, but are not limited
to: the risk that customer use of DivX technology may not grow as anticipated;
the risk that anticipated market opportunities, including Internet TV, may not
materialize at expected levels, or at all; uncertainties related to the
current macroeconomic climate; the risk that the Company's activities may not
result in the growth of profitable revenue; risks related to the
implementation of the acquisition of AnySource Media; the risk that the
Company's financial performance for the fourth quarter of 2009 may not meet
expectations; risks and uncertainties related to the maintenance and strength
of the DivX brand; the Company's ability to penetrate existing and new
markets; the effects of competition; the Company's dependence on its licensees
and partners; the effect of intellectual property rights claims; risks
relating to the Company's ability to integrate acquired business and
technologies into its existing infrastructure; and other factors discussed in
the "Risk Factors" section of the Company's most recent reports filed with the
SEC. All forward-looking statements are qualified in their entirety by this
cautionary statement. DivX is providing this information as of the date of
this release and does not undertake any obligation to update any
forward-looking statements contained in this release as a result of new
information, future events or otherwise, other than as required under
applicable securities laws.

Non-GAAP Financial Measures; GAAP EPS
DivX has provided in this release financial information that has not been
prepared in accordance with GAAP. This information includes non-GAAP net
income (loss) and earnings (loss) per diluted share, which excludes non-cash
share-based compensation expense, the litigation settlement gain, the
amortization of purchased intangible assets, the foreign exchange impact of
our Euro-denominated intercompany loan, and the non-cash charge related to the
change in value of certain deferred tax assets. This non-GAAP information is
provided to enhance the reader's overall understanding of our current
financial performance and prospects for the future. Specifically, we believe
this information provides useful comparative data by excluding non-cash
share-based compensation expense, which is not consistent from
period-to-period. Also, we believe that the exclusion of the litigation
settlement gain, amortization of purchased intangible assets, the foreign
exchange impact of our Euro-denominated intercompany loan, and the change in
value of certain tax deferred assets provides useful comparative data by
reflecting our business operations in a manner that is consistent with
expected future operations. Management has historically used non-GAAP net
income (loss) and non-GAAP earnings (loss) per diluted share when evaluating
operating performance because we believe the exclusion of the items described
above provides an additional measure of our core operating results and
facilitates comparisons of our core operating performance against prior
periods and our business model objectives. The presentation of this additional
information should not be considered in isolation or as a substitute for
results prepared in accordance with GAAP. The non-GAAP financial measures used
by the Company may be calculated differently from, and therefore may not be
comparable to, similarly titled measures used by other companies.

We will continue to evaluate the factors that might impact non-cash
share-based compensation expense and accruals for income tax expense. The
non-cash share-based compensation expense is expected to vary depending on the
number of new grants issued to both current and new employees, and changes in
the Company's stock price, stock market volatility, expected option life, and
risk-free interest rates (all of which are difficult to estimate). In
addition, the factors that impact our deferred tax assets are expected to vary
from period-to-period, also making our effective tax rate difficult to
estimate.

DivX, Inc.
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands)

September 30, December 31,
2009 2008
------------- ------------
(unaudited)
Assets
Current assets:
Cash and cash equivalents $25,328 $43,442
Short-term investments 113,820 73,897
Accounts receivable, net 2,800 7,263
Deferred tax assets, current 3,062 1,841
Prepaid expenses and other
current assets 6,220 4,732
-------- --------
Total current assets 151,230 131,175

Property and equipment, net 2,426 3,811
Long-term investments 4,070 17,968
Deferred tax assets, long-term 10,150 10,547
Purchased intangible assets, net 14,107 10,968
Goodwill 18,921 10,358
Other assets 7,855 8,574
-------- --------
Total assets $208,759 $193,401
======== ========

Liabilities and stockholders' equity
Current liabilities:
Accounts payable $1,143 $1,319
Accrued expenses 10,830 7,909
Deferred revenue 5,471 6,185
-------- --------
Total current liabilities 17,444 15,413

Long-term liabilities 8,185 3,888
-------- --------
Total liabilities 25,629 19,301

Stockholders' equity 183,130 174,100
-------- --------
Total liabilities and
stockholders' equity $208,759 $193,401
======== ========

DivX, Inc.
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(in thousands, except per share data)
(unaudited)

Three Months Ended Nine Months Ended
September 30, September 30,
---------------- ----------------
2009 2008 2009 2008
------- ------ ------- ------
Net revenues:
Technology licensing $14,642 $19,108 $46,973 $54,596
Media and other distribution and
services 1,993 5,301 3,573 16,154
------ ------ ------ ------
Total net revenues 16,635 24,409 50,546 70,750

Cost of revenue:
Cost of technology licensing 2,320 963 6,896 2,955
Cost of media and other
distribution and services 120 190 432 548
------ ------ ------ ------
Total cost of revenues 2,440 1,153 7,328 3,503
------ ------ ------ ------

Gross margin 14,195 23,256 43,218 67,247

Operating expenses:
Selling, general and
administrative (1) (2) 12,696 13,300 37,280 41,849
Product development (1) (2) 5,612 4,642 14,946 15,433
Litigation settlement gain (9,500) - (9,500) -
Impairment of acquired intangibles - - - 1,250
------ ------ ------ ------
Total operating expenses 8,808 17,942 42,726 58,532
------ ------ ------ ------
Income from operations 5,387 5,314 492 8,715

Interest income (expense), net 310 908 1,336 3,675
Other income (expense) 157 (677) 296 (175)
------ ------ ------ ------
Income before income taxes 5,854 5,545 2,124 12,215
Income tax provision 1,898 2,265 1,959 4,776
------ ------ ------ ------
Net income $3,956 $3,280 $165 $7,439
====== ====== ====== ======

Basic net earnings per share $0.12 $0.10 $0.01 $0.22
====== ====== ====== ======
Diluted net earnings per share $0.12 $0.10 $0.01 $0.22
====== ====== ====== ======

Shares used to compute basic net
earnings per share 32,681 32,312 32,582 33,133
====== ====== ====== ======
Shares used to compute diluted net
earnings per share 33,031 32,818 32,931 33,688
====== ====== ====== ======

(1) Includes share-based compensation
as follows:
Selling, general and
administrative $1,573 $1,851 $5,286 $5,221
Product development 732 539 1,573 1,602
------ ------ ------ ------
$2,305 $2,390 $6,859 $6,823
====== ====== ====== ======

(2) Includes Stage6 operating costs
and related accruals as follows:
Selling, general and
administrative $- $- $- $3,103
Product development - - - 230
------ ------ ------ ------
$- $- $- $3,333
====== ====== ====== ======

DivX, Inc.
UNAUDITED RECONCILIATION OF NON-GAAP ADJUSTMENTS
(in thousands, except per share data)

Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
2009 2008 2009 2008
------- ------ ------- -------
Net Income:
GAAP net income $3,956 $3,280 $165 $7,439
Share-based compensation 2,305 2,390 6,859 6,823
Amortization of purchased
intangible assets 558 594 1,601 1,652
Fx impact on intercompany loan (231) 662 (205) 204
Litigation settlement gain (9,500) - (9,500) -
Valuation allowance / adjustments
on deferred tax assets 120 - 1,338 -
Stage6 operating costs and
related accruals - - - 3,333
Impairment of acquired intangibles - - - 1,250
Income tax effects of pre-tax
adjustments 2,473 (1,556) 486 (5,638)
------ ------ ------ -------
Non-GAAP net income (loss) $(319) $5,370 $744 $15,063
====== ====== ====== =======

Diluted earnings per share:
GAAP diluted earnings per share $0.12 $0.10 $0.01 $0.22
Share-based compensation 0.07 0.07 0.21 0.20
Amortization of purchased
intangible assets 0.02 0.02 0.05 0.05
Fx impact on intercompany loan (0.01) 0.02 (0.01) 0.01
Litigation settlement gain (0.29) - (0.29) -
Valuation allowance / adjustments
on deferred tax assets - - 0.04 -
Stage6 operating costs and
related accruals - - - 0.10
Impairment of acquired intangibles - - - 0.04
Income tax effects of pre-tax
adjustments 0.08 (0.05) 0.01 (0.17)
------ ------ ------ -------
Non-GAAP diluted earnings (loss)
per share $(0.01) $0.16 $0.02 $0.45
====== ====== ====== =======

Non-GAAP shares used to compute
diluted net earnings (loss) per
share 32,681 32,818 32,931 33,688
====== ====== ====== =======

The following table sets forth the
computation of Non-GAAP basic and
diluted net earnings (loss) per share:

Numerator:
Net income (loss) $(319) $5,370 $744 $15,063

Denominator:
Weighted-average common shares
outstanding (basic) 32,681 32,312 32,582 33,133
====== ====== ====== =======

Weighted-average common shares
outstanding (diluted) 32,681 32,818 32,931 33,688
====== ====== ====== =======

Basic net earnings (loss) per share $(0.01) $0.17 $0.02 $0.45
====== ====== ====== =======

Diluted net earnings (loss) per
share $(0.01) $0.16 $0.02 $0.45
====== ====== ====== =======

DivX, Inc.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOW
(in thousands)
(unaudited)

Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
2009 2008 2009 2008
-------- ------- ------- -------
Net cash provided by operating
activities $11,409 $14,504 $15,459 $16,896

Net cash (used in) provided by
investing activities (9,293) (3,169) (34,658) 28,019

Net cash (used in) provided by
financing activities 21 (76) 981 (19,458)

Effect of exchange rate changes on
cash (15) (62) 104 (7)
------- ------- ------- -------
Net increase (decrease) in cash
and cash equivalents 2,122 11,197 (18,114) 25,450
Cash and cash equivalents at
beginning of period 23,206 28,785 43,442 14,532
------- ------- ------- -------

Cash and cash equivalents at end
of period $25,328 $39,982 $25,328 $39,982
======= ======= ======= =======

SOURCE DivX, Inc.

Investors, Karen Fisher of DivX, Inc., +1-858-882-6415, kfisher@divxcorp.com;
or Todd Friedman, todd@blueshirtgroup.com, or Stacie Bosinoff,
stacie@blueshirtgroup.com, both of The Blueshirt Group, +1-415-217-7722; or
Media, Jennifer Baumgartner of DivX, Inc., +1-503-901-5371,
Jbaumgartner@divxcorp.com