InterVideo Reports Solid Third Quarter 2004 Financial Results; Posts Strong Growth in Revenue from WinDVD Creator and Recognizes First Revenue for InstantON

Business Wire, Oct 28, 2004

FREMONT, Calif. -- InterVideo, Inc. (Nasdaq:IVII), a leading provider of DVD software, today reported financial results for the three-month period ended September 30, 2004.

For the third quarter of 2004, InterVideo reported revenue of $18.5 million, an increase of 29% over $14.4 million reported in the third quarter of 2003, and an increase of 11% over $16.7 million reported in the second quarter of 2004.

Net income for the third quarter of 2004 was $1.3 million, or $0.09 per diluted share, including a charge of $451,000 after taxes, or $0.03 per diluted share, for legal and other administrative expenses related to the pursuit of strategic transactions. Excluding this expense, net income would have been $1.8 million, or $0.12 per diluted share. This compares to net income of $2.4 million, or $0.16 per diluted share, reported in the third quarter of 2003 and net income of $1.1 million, or $0.07 per diluted share, reported in the second quarter of 2004.

Revenue from other products, including WinDVD Creator, WinDVD Cinema, and InstantON increased to 34% of total revenue in the third quarter of 2004, up from 19% in the third quarter of 2003 and 27% in the prior quarter. Revenue from WinDVD represented 66% of total revenue in the third quarter of 2004, as compared to 81% of total revenue in the third quarter of 2003 and 73% of total revenue in the prior quarter.

Gross margins for the third quarter of 2004 improved to 55% from 54% in the prior quarter. The company closed the quarter with $71 million in cash, cash equivalents and short-term investments.

"Strong demand for our other and newer products drove better than expected results for the third quarter," commented Steve Ro, president and CEO of InterVideo. "Specifically, we experienced a robust increase in sales of WinDVD Creator as the result of our bundling strategy relationships with our major OEM partners. For the first time, we recognized revenue from InterVideo InstantON, our newest product, which gained traction during the quarter with our OEM partners, which now include five major companies.

"We remain encouraged by the current level of interest in our technology for a wide range of applications in both PCs and consumer electronics. We are confident in our ability to leverage our customer base to capture new opportunities in the trend toward PC/CE convergence," concluded Mr. Ro.

Business Outlook

The following statements are based on current expectations and information available to us as of October 28, 2004; we do not undertake a duty to update them. These statements are "forward-looking" and actual results may differ materially due to various risks and uncertainties, some of which are described below. The Company currently forecasts revenue for the fourth quarter of 2004 in the range of $17.5 -$18.5 million and earnings per share in the range of $0.08 to $0.10.

Conference Call Details

The InterVideo Third Quarter 2004 teleconference and webcast is scheduled to begin at 4:30 p.m. Eastern Time, on Thursday, October 28, 2004. To access the live Webcast, please visit http://www.investor.intervideo.com or the main page of the investor relations section of InterVideo's web site at least 30 minutes prior to the scheduled time to download any necessary audio or plug-in software. A replay will be available approximately two hours after the conference call ends and will be available through midnight November 4, 2004. The replay number is (800) 405-2236 or (303) 590-3000, with passcode 11011968. Separately, the archived Webcast will be available on our website through October 28, 2005.

About InterVideo, Inc.

InterVideo is a leading provider of DVD software. InterVideo has developed a technology platform from which it has created a broad suite of integrated multimedia software products that allow users to capture, edit, author, burn, distribute, and play digital video. InterVideo's software is bundled with products sold by the majority of the leading PC OEMs. The company is headquartered in Fremont, CA with regional offices in Europe, Taiwan, China and Japan. For more information, contact InterVideo at 510/651-0888 or visit the company's Web site at www.intervideo.com.

Safe Harbor Statement

Except for the historical statements contained herein, the foregoing release contains forward-looking statements, including statements regarding, among other matters, our future financial performance, including expected revenues and earnings per share for the fourth quarter of 2004, our expected sales of new products and our ability to leverage our customer base to capture new opportunities in both PCs and consumer electronics markets. These forward-looking statements are subject to risks and uncertainties, and actual results could differ materially due to several factors, including but not limited to the ability to forecast customer behavior and recognize or respond to emerging trends, changing preferences or competitive factors, the market acceptance of our new products and product enhancements, claims regarding alleged infringement of third parties' intellectual property rights, the ability to maintain or expand our relationship with our retail and OEM customers and other risks and uncertainties. Please consult the various reports and documents filed by InterVideo with the U.S. Securities and Exchange Commission, including but not limited to InterVideo's annual report on Form 10-K and quarterly reports on Form 10-Q for factors potentially affecting the Company's future financial results. All forward-looking statements are made as of the date hereof and InterVideo disclaims any responsibility to update or revise any forward-looking statement provided in this news release. The results for the third quarter of fiscal 2004 are not necessarily indicative of InterVideo's operating results for any future periods.