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Macrovision Corporation Reports Record First Quarter Revenue and Cash Performance


Macrovision Corporation (NASDAQ: MVSN) announced today record first quarter revenues of $65.2 million compared to $57.0 million for the first quarter of 2006. US GAAP net income was $5.7 million compared to $2.5 million for the first quarter of 2006. Diluted GAAP earnings per share for the quarter were $0.11, compared to $0.05 for the first quarter of 2006.

Non-GAAP net income was $14.3 million, compared to $13.2 million in the first quarter of 2006. Non-GAAP diluted earnings per share for the quarter were $0.27, compared to $0.25 in the same quarter of 2006. First quarter revenues, non-GAAP net income and non-GAAP diluted earnings per share were all record numbers for any first quarter. Non-GAAP net income excludes non-cash and one-time items such as amortization of intangibles from acquisitions, equity-based compensation charges, and restructuring charges, as applicable. A reconciliation between net income on a GAAP and non-GAAP basis is provided in tables below.

Macrovision generated $22 million of cash from operations in the first quarter and its liquid cash and investments at the end of the first quarter were $463 million.

“As we did throughout each quarter of 2006, we successfully executed Q1 of 2007 and are confident in our ability to deliver on our guidance for the balance of the year.” said Fred Amoroso, President and CEO of Macrovision.

“We are pleased with our record results in the first quarter. Our outlook for 2007 revenue remains at a range of $280 million to $290 million and we are increasing our diluted non-GAAP earnings per share to a range of between $1.25 and $1.35” added James Budge, Chief Financial Officer. “In the second quarter of 2007, we expect revenue between $65 million and $68 million and diluted non-GAAP earnings per share within the range of $0.24 and $0.27.”

GAAP to Non-GAAP Reconciliation
Macrovision provides non-GAAP financial information to assist investors in assessing its current and future operations in the way that Macrovision’s management evaluates those operations. Non-GAAP net income and non-GAAP diluted earnings per share are supplemental measures of Macrovision’s performance that are not required by, and are not presented in accordance with, GAAP. The non-GAAP information does not substitute for any performance measure derived in accordance with GAAP. Macrovision believes that this non-GAAP information provides useful information to investors by excluding the effect of some non-cash and one-time expenses that are required to be recorded under GAAP but that Macrovision believes are not indicative of Macrovision’s core operating results, or that are expected to be incurred over a limited period of time.

Macrovision’s management evaluates and makes operating decisions about its business operations primarily based on revenue and the core costs of those business operations. Management does not consider as “core costs” and therefore does not use the amortization of intangibles from acquisitions, restructuring and other costs, and equity-based compensation charges when making business decisions. Therefore, management presents non-GAAP financial measures, along with GAAP measures, in this earnings release by excluding these items and other significant unusual items from the period expenses. The income statement line items involved in the adjustment from GAAP to non-GAAP presentation in this earnings release are amortization of intangibles and restructuring and other charges; and the following items that include equity-based compensation charges: (1) cost of revenues; (2) operating expenses, research and development; (3) operating expenses, selling and marketing; and (4) operating expenses, general and administrative. These items in turn affect (1) total cost of revenues; (2) total costs and expenses; (3) operating income; (4) income before income taxes; (5) provision for income taxes; (6) net income; (7) diluted shares for EPS; (8) basic earnings per share and (9) diluted earnings per share. To determine its non-GAAP provision for income taxes, Macrovision recalculates tax based on non-GAAP income before income taxes and adjusts accordingly.

For each such non-GAAP financial measure, the adjustment provides management with information about Macrovision’s underlying operating performance that enables a more meaningful comparison of its financial results in different reporting periods. For example, since Macrovision does not acquire businesses on a predictable cycle, management excludes amortization of intangibles from acquisitions in order to make more consistent and meaningful evaluations of Macrovision’s operating expenses. Management also excludes the effect of restructuring and other charges for the same reason. Management excludes the impact of equity-based compensation to help it compare current period operating expenses against the operating expenses for prior periods and to eliminate the effects of this non-cash item, which, because it is based upon estimates on the grant dates may bear little resemblance to the actual values realized upon the future exercise, expiration, termination or forfeiture of the stock-based compensation, and which, as it relates to stock options and stock purchase plan shares, is required for GAAP purposes to be estimated under valuation models, including the Black-Scholes model used by Macrovision. Management uses these measures to help it make budgeting decisions between those expenses that affect operating expenses and operating margin (such as research and development, sales and marketing, and general and administrative expenses), and those expenses that affect cost of revenue and gross margin. Further, the availability of non-GAAP financial information helps management track actual performance relative to financial targets. Making this non-GAAP financial information available to investors, in addition to the GAAP information, also helps investors compare Macrovision’s performance with the performance of other companies in our industry, which use similar financial measures to supplement their GAAP financial information.

Management recognizes that the use of these non-GAAP measures has limitations, including the fact that management must exercise judgment in determining which types of charges should be excluded from the non-GAAP financial information. Because other companies, including companies similar to Macrovision, may calculate their non-GAAP earnings differently than Macrovision, non-GAAP measures may have limited usefulness in comparing companies. Management believes, however, that providing this non-GAAP financial information, in addition to the GAAP information, facilitates consistent comparison of Macrovision’s financial performance over time. Macrovision has provided non-GAAP results to the investment community, not as an alternative but as an important supplement to GAAP information, to enable investors to evaluate Macrovision’s core operating performance in the same way that management does. The tables below present the differences between non-GAAP earnings and GAAP net income on an absolute and per share basis.


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