TiVO Beats on Q4 Earnings, Misses Rev - Analyst Blog

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TiVo Inc. ( TIVO ) reported earnings of 5 cents per share in the fourth quarter of fiscal 2014, which beat the Zacks Consensus Estimate by a penny. Earnings improved from 13 cents loss reported in the year-ago quarter.

Revenues

TiVo fourth quarter revenues jumped 19.7% year over year to $106.3 million but were well below the Zacks Consensus Estimate of $111.0 million.

The strong year-over-year growth was primarily driven by higher service and technology revenues (79.1% of revenues), which rose 27.9% to $84.0 million and were higher than management's guided range of $80.0 million to $82.0 million. Hardware revenues (21.0% of revenues) declined 3.6% year over year to $22.3 million in the reported quarter.

Total subscriptions grew 34.0% on a year over year basis and now stand at approximately $4.2 million. The quarter witnessed positive TiVo-Owned net additions for the first time in six years driven by 41% year-over-year growth in TiVo-Owned gross additions and lowest absolute churn in almost eight years.

During the quarter, the company completed the acquisition of cloud-based content discovery and recommendation service provider, Digitalsmiths. This acquisition will enable TiVo to sell its products and services to both operators who want to use TiVo's user interface as well as to those who are on the lookout to develop their own interfaces but require a strong content and discovery service powering it.

TiVo's audience research & measurement business, TRA delivered improved revenues in the fourth quarter compared to the prior quarter, underscoring the recent efforts to secure and expand customer relationships such as with Proctor & Gamble ( PG ).  

Operating Results

Gross margin expanded 830 basis points (bps) to 62.4% on a year-over-year basis.

Operating expenses declined 5.7% on a year-over-year basis to $59.2 million. Research and Development (R&D), Sales and Marketing (Sales and Marketing) and Structural Acquisitions Cost (SAC) registered increases of 1.1%, 25.9% and 74.0%, respectively whereas G&A declined 30.6% on a year-over-year basis.

Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) were $19.6 million, which exceeded management's guidance range of $16.0-$19.0 million.

Operating income was $7.3 million versus an operating loss of $14.7 million in the year-ago quarter. Net income (excluding litigation proceeds) was $5.5 million versus a loss of $15.8 million in the year-ago quarter.

At the end of the fourth quarter, cash, cash equivalents and short-term investments were $1.00 billion compared with $1.03 billion in the prior quarter.

Guidance

For the first quarter of fiscal 2015, TiVo expects Service and Technology revenues in the range of $85.0 - $87.0 million (up 40.0% at the mid-point compared with $61.8 million in the year-ago quarter).

TiVo anticipates net income in the range of $5.0-$8.0 million and an adjusted EBITDA of $22.0-$25.0 million. The year-over-year increase is expected to come from improvements in overall gross margin and lower operating expenses.

Owing to the gains from additional subscriptions, TiVo management believes that it is on track to exceed adjusted EBITDA of $100.0 million on an annual basis in 2015.  

The company believes that the highly efficient nature of Digitalsmiths software will drive margins going forward as well as contribute significantly to TiVo's overall adjusted EBITDA in fiscal 2016.

Our Take

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 from the likes of Dish Network ( DISH ) and Cablevision Systems Corporation ( CVC ) seems to be the primary headwind in the near term.

Currently, TiVo has a Zacks Rank #3 (Hold).



CABLEVISION SYS (CVC): Free Stock Analysis Report

DISH NETWORK CP (DISH): Free Stock Analysis Report

PROCTER & GAMBL (PG): Free Stock Analysis Report

TIVO INC (TIVO): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Earnings , Stocks

Referenced Stocks: CVC , DISH , PG , TIVO

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