InterVideo Reports Strong Financial Results for First Quarter 2005; Co

    Business Editors/High-Tech Writers

    FREMONT, Calif.--(BUSINESS WIRE)--May 4, 2005--InterVideo, Inc. (Nasdaq:IVII), a leading provider of DVD software, today reported financial results for the three-month period ended March 31, 2005.
    For the first quarter of 2005, InterVideo reported revenue of $21.9 million, an increase of 16% over $18.8 million reported in the first quarter of 2004. Net income for the first quarter of 2005 was $2.7 million, or $0.17 per diluted share, as compared to net income of $2.6 million, or $0.17 per diluted share reported in the first quarter of 2004.
    Revenue from products such as WinDVD Creator, WinDVD Cinema and InstantON was 37% of total revenue in the first quarter of 2005, as compared to 22% of total revenue in the first quarter of 2004. Revenue from WinDVD represented 63% of total revenue in the first quarter of 2005 compared to 78% of total revenue in the first quarter of 2004.
    Gross margins for the first quarter of 2005 were 58%. The company closed the quarter with $74.4 million in cash, cash equivalents and short-term investments.
    "We are pleased to report another quarter of increased revenue and our third consecutive quarter of exceeding both revenue and earnings expectations," commented President and CEO, Steve Ro. "In particular, we are proud of the continued success of our newest product, InstantON, which experienced record sales during the quarter.
    "Shortly after the quarter closed, we executed on our plans to purchase a controlling interest in Ulead Systems, Inc., a leading developer of innovative video, imaging and DVD authoring software based in Taiwan, and closed our tender offer. We are excited about the opportunities for strengthening our engineering resources through Ulead, which should enable us to accelerate our product development activities for next generation standards," concluded Ro. This purchase will be accounted for as a step acquisition.

    Business Outlook

    The following statements are based on current expectations and information available to us as of May 4, 2005; we do not undertake a duty to update them. Our ability to project future results is inherently uncertain. These statements are "forward-looking" and actual results may differ materially as a result of risks outlined below.
    Beginning in the second quarter of 2005, InterVideo will report with Ulead on a consolidated basis. InterVideo estimates its revenue for the second quarter of 2005 to be in the range of $27 to $30 million and earnings per share in the range of $0.16 to $0.18, assuming an estimated tax rate of 25%. As a result of this transaction, for the full year of 2005, InterVideo is raising its guidance and expects revenue in the range of $115 to $125 million and earnings per share in the range of $0.77-$0.83, assuming an estimated tax rate of 35%.
    InterVideo will be conducting an Analyst Meeting at the Nasdaq MarketSite in New York on Monday, May 9, 2005. Steve Ro, President and CEO, Randy Bambrough, CFO, and other members of the senior management team will give a business overview and discuss emerging opportunities in the convergence of consumer electronics and PC markets. The analyst meeting and webcast is scheduled to begin at 10:00 a.m. Eastern Time. To access the live Webcast, please visit http://www.investor.intervideo.com or the main page of the investor relations section of InterVideo's website at least 30 minutes prior to the scheduled time to download any necessary audio or plug-in software.

    Conference Call Details

    The InterVideo First Quarter teleconference and webcast is scheduled to begin at 5:00 p.m. Eastern Time, on Wednesday, May 4, 2005. To access the live Webcast, please visit http://www.investor.intervideo.com or the main page of the investor relations section of InterVideo's website at least 30 minutes prior to the scheduled time to download any necessary audio or plug-in software. This press release and the Webcast will also be posted to the website at that location. A replay of the call will be available to investors through May 11, 2005, by dialing (800) 405-2236 and entering the passcode 11028617. Callers outside the US and Canada may access the replay by dialing (303) 590-3000 and entering the passcode 11028617.

    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 estimated revenues, earnings per share and effective tax rate for the second quarter and full year of 2005, the anticipated benefits of the Ulead transaction, including the strengthening of engineering resources and accelerated product development. 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 unanticipated developments or events concerning the financial condition, assets, operations, business or prospects of Ulead; adverse effects on existing business relationships with suppliers and customers; customers acceptance of new technology or product offerings; the markets for new products do not grow as rapidly as anticipated; problems integrating the operations, personnel, technologies or products of the two companies; problems maintaining internal controls and procedures with a company with significant presence in Taiwan; conflicts of interest issues that might arise between InterVideo and Ulead as a majority-owned subsidiary; potential loss of key management, engineers and other employees; litigation or 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 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 first quarter ended March 31, 2005 are not necessarily indicative of InterVideo's operating results for any future periods.

    InterVideo is a registered trademark of InterVideo, Inc. All other trademarks are the property of their respective holders.

INTERVIDEO, INC.

CONSOLIDATED STATEMENT OF INCOME (in thousands, except per share amounts) (unaudited)

Three months ended March 31 ------------------------------ 2005 2004 -------------- --------------

Revenue $21,904 $18,821

Cost of revenue: 9,172 7,935

-------------- -------------- Gross Profit 12,732 10,886

Operating Expenses: Research and development 3,010 2,288 Sales and marketing 2,751 2,759 General and administrative 2,889 1,704 Stock-based compensation 40 75 -------------- -------------- Total operating expenses 8,690 6,826 -------------- --------------

Income from operations 4,042 4,060

Other income, net 298 173

-------------- -------------- Income before income taxes 4,340 4,233

Provision for income taxes 1,671 1,630

-------------- -------------- Net income $2,669 $2,603 ============== ==============

Net income per share: Basic $0.19 $0.20 ============== ============== Diluted $0.17 $0.17 ============== ==============

Number of shares used in net income per share calculation: Basic 13,791 13,217 -------------- -------------- Diluted 15,352 15,354 -------------- --------------

INTERVIDEO, INC.

CONSOLIDATED BALANCE SHEETS (in thousands, except per share amounts) (unaudited)

March 31, December 31, 2005 2004 -------------- --------------

Current Assets: Cash and cash equivalents $34,508 $27,410 Short term investments 39,939 47,177 Accounts receivable 5,002 5,660 (net of $218 and $215 allowance, respectively) Deferred tax assets - 256 Prepayments and other current assets 1,739 2,136 Inventory 574 444 -------------- -------------- Total current assets 81,762 83,083

Property and equipment, net 2,757 2,606 Goodwill 1,018 1,018 Other purchased intangible assets 33 83 Deferred tax assets 5,446 5,446 Other assets 15,887 9,539

-------------- -------------- Total assets $106,903 $101,775 ============== ==============

Current liabilities: Accounts payable $1,186 $1,098 Accrued liabilities 13,105 13,129 Income tax payable 1,632 333 Deferred revenue 3,099 4,002 Deferred tax liabilities 1,269 - -------------- -------------- Total current liabilities 20,291 18,562 -------------- --------------

Stockholders' equity: Common stock, $0.001 par value, 14 14 150,000 shares authorized, 13,787 and 13,661 shares issued and outstanding respectively Additional paid-in capital 76,026 76,498 Notes receivable from stockholders (767) (830) Deferred stock compensation (54) (95) Accumulated other comprehensive income 2,219 1,121 Retained earnings 9,174 6,505 -------------- -------------- Total stockholder's equity 86,612 83,213 -------------- --------------

Total liabilities and stockholders' equity $106,903 $101,775 ============== ==============

--30--JC/sf*

CONTACT: The Blueshirt Group (for InterVideo) Lisa Laukkanen, 415-217-4967 (Investors) lisa@blueshirtgroup.com

KEYWORD: CALIFORNIA INDUSTRY KEYWORD: COMPUTERS/ELECTRONICS MOTION PICTURES SOFTWARE EARNINGS CONFERENCE CALLS SOURCE: InterVideo, Inc.

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