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Think Equity Conference Kevin Hell, CEO Dan Halvorson, CFO September 18, 2007
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©2007 DivX, Inc. Confidential 2 Safe Harbor Statements in this presentation that are not strictly historical in nature constitute "forward-looking statements." Such statements include, but are not limited to, statements regarding DivX’s expectations regarding future licensing growth, DivX’s ability to obtain content rights and establish distribution partners for DivX’s content solutions and DivX’s ability to expand its business into new product categories. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause DivX’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 may not materialize at expected levels, or at all, the risk that the Company's activities may not result in the growth of profitable revenue, risks and uncertainties related to the maintenance and strength of the DivX brand; DivX's ability to penetrate existing and new markets; the effects of competition; DivX's dependence on its licensees and partners; the effect of intellectual property rights claims; and other factors discussed in the "Risk Factors" section of DivX's quarterly report on Form 10-Q filed with the SEC on August 14, 2007. All forward-looking statements are qualified in their entirety by this cautionary statement. DivX is providing this information as of the date hereof and does not undertake any obligation to update any forward-looking statements contained in this presentation as a result of new information, future events or otherwise.
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©2007 DivX, Inc. Confidential 3 The DivX Consumer Digital Media Experience …to the living room…and on the go From the PC
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©2007 DivX, Inc. Confidential 4 DivX Company Snapshot Headquarters: Founded: IPO: Key Business Driver: Represented Customers: Employees: CY06 Revenue/3 year CAGR: Gross Margins: Revenue Breakdown: Key Products/Technologies: Footprint: San Diego, CA 2000 September 2006 IP licensing to consumer electronics OEMs ~300 as of June 30 th 2007 $59mm / 97% 90+% 68% licensing; 21% advertising; 10% software 100M+ DivX certified devices; 300M+ DivX player downloads
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©2007 DivX, Inc. Confidential 5 DivX Business Overview
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©2007 DivX, Inc. Confidential 6 DivX Business Model Revenue Model Software/Tools 300MM S/W Downloads 2+ billion video files ESD 3 rd Party Distribution (e.g. Google) Certified Devices 100+MM Devices Device Licensing Content & Services Revenue share Setup/maintenance
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©2007 DivX, Inc. Confidential 7 DivX Three Areas Of Focus 1. Licensing growth Continued DVD penetration New device categories – mobile, set-top box, HDTVs, digital still cameras, gaming consoles Emerging technologies and formats 2. Connected Access to all media in one interface Digital operating system of the future 3. Content Solutions Renewed focus on premium Content Investing in existing VOD system to enable distribution for 3 rd party distributors Powered by
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©2007 DivX, Inc. Confidential 8 1. Licensing Growth New TechnologiesMarket Penetration USA UK Japan Brazil China DVD Players Emerging Products Living Room Set Top Box Digital TV DVD Recorder On the Go Mobile Phone Digital Still Camera Personal Media Player
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©2007 DivX, Inc. Confidential 9 DivX DVD Player Penetration (%) Q1 06 Q1 07 Strong Worldwide DVD Penetration Penetration based on partner reported shipments as a % of worldwide market Worldwide market estimate - In-Stat, 2006 32% 21% 50% 50% Y/Y growth
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©2007 DivX, Inc. Confidential 10 AmericasWestern EuropeEastern EuropeAsia Source: Penetration US = NPD Q2, 2007 / Penetration others = GFK Q2, 2007 / Market size = InStat/ DivX est. Remaining DVD Opportunity by Market U.S.BrazilChileU.K. FranceGermanyItalySpainRussiaPoland Czech Republic HungaryJapan Korea Hong Kong 35 MalaysiaSingapore DivX units Non-DivX units DVD-P Units (MM)
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©2007 DivX, Inc. Confidential 11 Extending into New Product Categories Set-Top Box Mobile Phone Digital Still Camera DVD Recorder Digital TV Personal Media Players
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©2007 DivX, Inc. Confidential 12 Opportunities in Emerging Product Categories 20062007200820092010 341 452 534 596 652 Digital Still Camera, Digital Video Camera, Set-Top Box, Digital TV, Portable Media Player, Game Console 150158165 167 DVD 990 1,090 1,220 1,290 1,350 Mobile Handset Units Shipped (MM)
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©2007 DivX, Inc. Confidential 13 2. DivX Connected - Overview A simple and elegant interface for accessing digital media and information in the living room Hard Drive Internet
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©2007 DivX, Inc. Confidential 14 DivX Connected – Key Benefits Open and flexible Any device, any OEM brand Broad range of media formats (music, video, photos…) Rich 3rd party services and plug-ins Low cost Leverages existing devices Only requires DivX playback and connectivity D-Link announced as first OEM partner Available Q4 in Europe
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©2007 DivX, Inc. Confidential 15 3. DivX Content Solutions Powered by Leverage DivX device footprint to obtain content rights Power distribution partners with DivX video-on- demand platform 100M+ devices 300M+ downloads Consumers Content Providers Content Distributors
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©2007 DivX, Inc. Confidential 16 The DivX Consumer Digital Media Experience …to the living room…and on the goFrom the PC
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©2007 DivX, Inc. Confidential 17 Financials
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©2007 DivX, Inc. Confidential 18 Financial Highlights Rapid revenue growth ~40% Y/Y growth Strong and scaleable margin structure 90+% gross margins Profitable and cash-flow positive Clean balance sheet ~$150M in cash
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©2007 DivX, Inc. Confidential 19 Annual Revenues (in Millions) $59.3 $7.7 $2.7 $16.4 2002-2006 CAGR = 116% $33.0 $59.3 YTD $38.5
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©2007 DivX, Inc. Confidential 20 Quarterly Revenues 1 Per guidance presented on Q2 earnings call, 8/9/07 $13.2M $7.0M $20.2M $8.4M $10.6M $14.1M $M $15.4M $16.7M 200620052007 $18.3M 0 5 10 15 20 25 Q2Q3Q4Q1Q2Q3Q4Q1Q2
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©2007 DivX, Inc. Confidential 21 Customer and Industry Mix Q207 Total $18.3 M Google 21% SW 10% Advertising 21% Licensing 68% DMD 1% All others 79%
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©2007 DivX, Inc. Confidential 22 Quarterly Net Income Non-GAAP net income adjusted for stock-based comp and Stage6 costs, net of related tax effect 2 Q4 tax rate adjusted to the statutory rate to exclude the one time tax benefit $M
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©2007 DivX, Inc. Confidential 23 DivX Today Provider of critical technologies to enable digital entertainment Strong and globally recognized brand Blue-chip customer base – partner with all major CE OEMs Global footprint of 100M+ DivX certified devices and 300M+ DivX player downloads Substantial growth opportunities across multiple product categories Attractive IP licensing business model and strong financial performance Announced intention to separate Stage6 to focus on core licensing business
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©2007 DivX, Inc. Confidential 24 Recent Announcements and Momentum 1. Licensing Growth LG - Digital Television certified Qualcomm - partnership for DivX mobile chipsets Samsung - F500 mobile phone certified and available worldwide SanDisk - partnership for DivX certified devices 2. Connected D-Link - first DivX Connected OEM shipping in Q4 Accedo - first DivX Connected service provider for TV gaming content 3. Content Solutions DivX Mobile content portal beta launched
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