TiVo Inc. (
reported earnings of 10 cents per share in the third quarter of
fiscal 2014, which beat the Zacks Consensus Estimate by 4 cents.
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Earnings improved from 23 cents loss reported in the year-ago
quarter and 8 cents reported in the previous quarter.
TiVo third quarter revenues jumped 42.9% year over year and 24.8%
quarter over quarter to $117.3 million, which was well ahead of
the Zacks Consensus Estimate of $102.0 million.
The strong year-over-year growth was primarily driven by higher
service and technology revenues (69.6% of revenues), which rose
34.0% to $81.7 million and were in line with the higher end of
management's guided range of $80.0 million to $82.0 million.
Excluding revenues of $6.1 million from settlements with
, owner of Motorola, service and technology, in the previous
quarter, revenues were up 15.2% sequentially.
Hardware revenues (30.4% of revenues) surged 68.9% year over year
and 54.1% sequentially to $35.6 million in the last quarter.
Net additions to total subscriptions during the quarter were 274K
compared with 212K in the second quarter and 225K in the year-ago
Churn rate per month was a negative 1.8%, which improved from
negative 1.5% in the previous quarter and negative 1.4% in the
TiVo's total subscriber base was 3.89 million compared with 3.62
million in the previous quarter and 2.942 million in the year-ago
quarter. Of these 52% paid recurring fees in the last quarter
During the quarter, the company signed a deal with Blue Ridge
Communications and launched its first IPTV solution in
partnership with Com Hem.
TiVo's audience research & measurement business TRA recently
announced deals with
Proctor and Gamble (
, dunnhumbyUSA and Simulmedia.
Subscription acquisition costs (SAC) decreased to $160.0 from
$171.0 in the year-ago quarter and $278.0 in the second quarter.
This was primarily driven by robust performance from TiVo's
Roamio. The company recently launched out-of-home streaming on
Gross margin expanded 680 basis points (bps) to 57.5% on a
year-over-year basis. Sequentially, gross margin improved 560 bps
in the reported quarter.
Adjusted earnings before interest, taxes, depreciation and
amortization (EBITDA) excluding litigation expenses and proceeds
were $25.2 million compared with $18.0 million in the previous
quarter and $3.0 million in the year-ago quarter.
Operating expenses (excluding litigation proceeds) decreased 6.2%
year over year and 7.8% sequentially to $55.9 million. The
decline was primarily due to significant decline in general &
Operating income was $11.5 million compared with $60.4 million in
the year-ago quarter and $102.4 million in the previous quarter.
Both the year-ago quarter and the previous quarter included
litigation proceeds of approximately $78.4 million and $108.1
Excluding proceeds in both the quarters, operating income
improved from a loss of $18.0 million in the year-ago quarter and
$11.8 million in the previous quarter.
Net income (excluding litigation proceeds) was $13.7 million
compared with a loss of $18.0 million in the year-ago quarter and
$12.3 million in the previous quarter.
At the end of the third quarter, cash, cash equivalents and
short-term investments remained flat at $1.03 billion on a
For the fourth quarter of fiscal 2014, TiVo expects Service and
Technology revenues in the range of $83.0 - $85.0 million (up
30.0% at the mid-point compared with $65.7 million in the
year-ago quarter). Management expects deployments of multiple
system operators (MSO) to drive revenues.
TiVo anticipates net income in the range of $2.0-$5.0 million and
an adjusted EBITDA of $16.0-$19.0 million. However, additional
operating expenses related to higher sales & marketing is
likely to hurt EBITDA in the quarter.
Management expects accelerated year-over-year growth in
TiVo-owned gross additions in the forthcoming quarter due to
continued momentum particularly from the Roamio product and
increased marketing efforts.
The resolution of patent litigation issues removes a major
overhang on TiVo. The company continues to innovate and its
strong product pipeline is a major positive going forward. TiVo's
focus on forging deals with mid-tier operators (who will not
build their own offering) is a prudent move in our view.
We believe that TiVo has significant growth opportunities in
Western Europe and Latin America, given its partnerships with
local providers. TiVo's strong balance sheet will also enable the
company to pursue strategic acquisitions and its aggressive share
buyback program will boost growth in the near term.
However, increasing competition and higher operating expenses are
the primary headwinds in the near term.
Currently, TiVo has a Zacks Rank #3 (Hold).