InterVideo Reports Strong Fourth Quarter and Fiscal Year 2004 Results;

    Business Editors

    FREMONT, Calif.--(BUSINESS WIRE)--Feb. 17, 2005--InterVideo, Inc. (Nasdaq:IVII), a leading provider of DVD software, today reported financial results for the fourth quarter and fiscal year ended December 31, 2004.
    For the fourth quarter of 2004, InterVideo reported revenue of $20.4 million, an increase of 26% over $16.2 million reported in the fourth quarter of 2003, and an increase of 10% over $18.5 million reported in the third quarter of 2004. Net income for the fourth quarter of 2004 was $3.8 million, or $0.25 per diluted share, as compared to net income of $2.3 million, or $0.15 per diluted share, reported in the fourth quarter of 2003, and net income of $1.3 million, or $0.09 per diluted share, reported in the third quarter of 2004. Net income for the fourth quarter of 2004 included a benefit of $780,000, or $0.05 per diluted share from a deferred tax asset. For the fourth quarter of 2004, the effective tax rate was 10% compared to 21% in the fourth quarter of 2003 and 49% in the third quarter of 2004.
    Revenue from products other than WinDVD, including WinDVD Creator, WinDVD Cinema, and InstantON was 33% of total revenue in the fourth quarter of 2004, as compared to 19% of total revenue in the fourth quarter of 2003 and 34% of total revenue in the third quarter of 2004. Revenue from WinDVD represented 67% of total revenue in the fourth quarter of 2004, as compared to 81% of total revenue in the fourth quarter of 2003 and 66% of total revenue in the third quarter of 2004.
    Gross margins for the fourth quarter of 2004 increased to 56% from 55% in the prior quarter. The company closed the quarter with $74.6 million in cash, cash equivalents and short-term investments.
    For the fiscal year ended December 31, 2004, revenue was $74.5 million, an increase of 30% over $57.1 million reported during the prior year. Net income for 2004 was $8.8 million, or $0.58 per diluted share based on 15.3 million diluted shares as compared to net income of $7.8 million, or $0.57 per diluted share based on 13.7 million diluted shares for the same period in 2003.
    "Record revenue for the fourth quarter capped a year of significant achievement for InterVideo," commented President and CEO, Steve Ro. "During the year we continued to expand our product offerings and demonstrated our technology leadership with strong market acceptance of new products such as InstantON. While sales of our core product WinDVD remained solid, sales of our other products, including WinDVD Creator and WinDVD Cinema, experienced strong increases for the year and a significant increase as a portion of total revenue for the year.
    "As we move into 2005, we are encouraged by the interest level we are experiencing in our technology and are excited about the opportunities to broaden our relationships with our OEM partners. We look to continue our success in driving new product innovations for the convergence of the consumer electronic and PC markets," concluded Mr. Ro.

    Business Outlook

    The following statements are based on current expectations and information available to us as of February 17, 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.
    InterVideo estimates its revenue for the first quarter of 2005 to be in the range of $19.5 to $20.5 million and earnings per share in the range of $0.11-$0.13, assuming an estimated tax rate of 40%. For the full year of 2005, InterVideo estimates its revenue to be in the range of $85 to $95 million and earnings per share in the range of $0.59-$0.65.

    Conference Call Details

    The InterVideo Fourth Quarter and Fiscal Year 2004 teleconference and webcast is scheduled to begin at 4:30 p.m. Eastern Time, on Thursday, February 17, 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 February 24, 2005, by dialing (800) 405-2236 and entering the passcode 11021954. Callers outside the US and Canada may access the replay by dialing (303) 590-3000 and entering the passcode 11021954.

    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 and earnings per share for the first quarter and full year of 2005, our estimated tax rates for the first quarter of 2005, the anticipated strength of our business and opportunities with OEM partners, and any success in driving new product innovations. 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 fourth quarter and fiscal year ended December 31, 2004 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 STATEMENTS OF INCOME (in thousands, except per share amounts)

Three months ended Year ended December 31 December 31 -------------------- ------------------- 2004 2003 2004 2003 --------- --------- -------- ----------

Revenue $20,425 $16,248 $74,460 $57,078

Cost of revenue 8,930 7,588 32,878 23,849

--------- --------- -------- ---------- Gross Profit 11,495 8,660 41,582 33,229 ` Operating Expenses: Research and development 2,726 2,098 10,002 7,626 Sales and marketing 2,458 2,283 10,229 8,908 General and administrative 2,344 1,487 9,108 4,357 Stock-based compensation 45 172 271 912 --------- --------- -------- ---------- Total operating expenses 7,573 6,040 29,610 21,803 --------- --------- -------- ----------

Income from operations 3,922 2,620 11,972 11,426

Other income, net 265 249 910 563

--------- --------- -------- ---------- Income before income taxes 4,187 2,869 12,882 11,989

Provision for income taxes 404 612 4,056 4,196

--------- --------- -------- ---------- Net income $ 3,783 $ 2,257 $ 8,826 $ 7,793 ========= ========= ======== ==========

Net income per share: Basic $ 0.28 $ 0.18 $ 0.66 $ 1.07 Diluted $ 0.25 $ 0.15 $ 0.58 $ 0.57

Number of shares used in net income per share calculation: Basic 13,570 12,848 13,409 7,273 Diluted 15,307 15,419 15,337 13,723

INTERVIDEO, INC.

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

As of December 31 -------------------- 2004 2003 ---------- ---------

Current Assets: Cash and cash equivalents $ 27,410 $46,875 Short term investments 47,177 22,862 Accounts receivable 5,660 5,515 (net of $215 and $254 allowance, respectively) Deferred tax assets 256 1,543 Prepayments and other current assets 2,136 1,976 Inventory 444 492 ---------- --------- Total current assets 83,083 79,263

Property and equipment, net 2,606 2,241 Goodwill 1,018 1,018 Other purchased intangible assets 83 283 Deferred tax assets 5,446 4,685 Other assets 9,539 429 ---------- --------- Total assets $101,775 $87,919 ========== =========

Current liabilities: Accounts payable $ 1,098 $ 1,039 Accrued liabilities 13,129 9,503 Income tax payable 333 1,539 Deferred revenue 4,002 3,422 ---------- --------- Total current liabilities 18,562 15,503 ---------- ---------

Stockholders' equity: Common stock, $0.001 par value, 14 13 150,000 shares authorized, 13,661 and 12,970 shares issued and outstanding, respectively Additional paid-in capital 76,498 76,283 Notes receivable from stockholders (830) (905) Deferred stock compensation (95) (531) Accumulated other comprehensive income (loss) 1,121 (123) Retained earnings (accumulated deficit) 6,505 (2,321) ---------- --------- Total stockholders' equity 83,213 72,416 ---------- ---------

Total liabilities and stockholders' equity $101,775 $87,919 ========== =========

--30--AM/sf*

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

KEYWORD: CALIFORNIA INDUSTRY KEYWORD: HARDWARE COMPUTERS/ELECTRONICS ELECTRONIC GAMES/MULTIMEDIA SOFTWARE EARNINGS CONFERENCE CALLS SOURCE: InterVideo, Inc.

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