) reported better-than-expected third quarter 2013 results as the
company's loss per share of 13 cents was narrower than the Zacks
Consensus Estimate of a loss of 23 cents. Including
litigation proceed of $78.4 million related to Verizon
settlement, TiVo reported earnings of 44 cents per share compared
with loss of 21 cents in the year-ago quarter.
Revenue for the reported quarter increased 26.6% from the
year-ago quarter to $82.0 million and was ahead of the Zacks
Consensus Estimate of $71.0 million. Growth was primarily driven
by higher Service and Technology revenue, which jumped 17.6% year
over year to $60.9 million and exceeded management's guidance of
$57 million to $59 million. Moreover, a 62.5% jump in hardware
revenue led to revenue growth.
Net addition to the total subscriptions during the quarter was
225K, while the churn rate was a negative 1.4%. TiVo's total
subscriber base jumped 43.7% from the year-ago quarter to 2.94
million. In the quarter under review, Subscription acquisition
costs ("SAC") decreased to $171.0 from $296.0 in the year-ago
quarter due to lower hardware subsidy.
Gross profit climbed 34.2% year over year to $41.6 million.
Gross margin expanded 290 basis points to 50.7% in the reported
quarter, primarily due to higher revenue base.
Operating results were primarily boosted by $78.4 million in
litigation proceeds. This helped TiVo report an operating income
of $60.5 million, which was significantly higher than the loss of
$23.5 million in the year-ago quarter. However, excluding the
litigation proceeds the company reported operating loss of $17.9
Adjusted EBITDA excluding litigation expenses and proceeds was
$2.97 million compared with a loss of $5.7 million in the
The company reported net income of $60.9 million or 44 cents
per share compared to a loss of $24.5 million or 21 cents per
share in the year-ago quarter.
TiVo exited the reported quarter with cash, cash equivalents
and short-term investments of $623.6 million versus $542.8
million in the previous quarter. Cash flow from operations was
$52.0 million in the nine months ended October 31, 2012.
For the fourth quarter of 2013, TiVo expects service and
technology revenues in the range of $63.0 million to $65.0
million. It expects net loss in the range of $15.0 million to
$17.0 million and an adjusted EBITDA loss between ($2.0) million
and ($4.0) million.
Management expects the fourth quarter revenue to gain from the
MSO revenue and Verizon licensing revenue. Moreover, management
expects subscription acquisition costs to be lower on a
year-over-year basis, primarily due to higher subscription
additions and a shift in mix to higher SKU's. Pertaining to the
ongoing litigation cases, TiVo expects expenses related to legal
matters to remain high in the fourth quarter as well. However, it
could decline marginally on a sequential basis.
TiVo reported better-than-expected results based on the
litigation proceeds from the
) settlement and the expansion of total subscriber base. We
remain optimistic about TiVo's growth potential owing to new
partnerships, product launches and international expansion
We believe that TiVo will continue to witness subscriber
growth based on its partnerships with
Virgin Media Inc.
) and Suddenlink, to name a few. Moreover, the successful
monetization of patents also ensures a recurring revenue stream
for the company.
However, pending patent litigation issues, rising R&D
costs, and higher hardware and sales & marketing costs are
expected to impact TiVo's profitability in the short term.
Increasing competition from cable and satellite providers could
also hurt profitability over the long term.
Thus, we have a Neutral recommendation on TiVo over the long
term. Currently, TiVo has a Zacks #3 Rank, which implies a 'Hold'
rating for the short term.
COMCAST CORP A (CMCSA): Free Stock Analysis
TIVO INC (TIVO): Free Stock Analysis Report
VIRGIN MEDIA (VMED): Free Stock Analysis
VERIZON COMM (VZ): Free Stock Analysis Report
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