Video compression software maker DivX Inc said it settled a litigation with Yahoo Inc related to a license and distribution agreement, and forecast a third-quarter profit to reflect an increase in operating income due to the settlement.

The company said it now expects third-quarter earnings of 10 cents to 12 cents a share, compared with its prior outlook of a loss of 6 cents to 8 cents a share.

DivX said it continues to expect revenue of $15 million to $16 million. Excluding items, the company still expects to report breakeven to a loss of 2 cents a share for the period.

Analysts on average expect a loss of 1 cent a share, excluding items, on revenue of $15.7 million, according to Reuters Estimates.

Shares of DivX were up 3 percent at $5.60 in trading after the bell. They closed at $5.43 Wednesday on Nasdaq. Yahoo shares were unchanged at $14.79.

(Reporting by Bijoy Koyitty in Bangalore; Editing by Vinu Pilakkott)