) reported dismal second quarter 2013 results. Although the loss
per share of 23 cents was in line with the Zacks Consensus
Estimate, revenue was slightly short of the consensus mark of $67.0
Revenues increased 6.7% year over year to $65.3 million in the
reported quarter. The strong growth was primarily driven by higher
Service and Technology revenue, which jumped 9.1% year over year to
$54.1 million. This fully offset a 3.9% decline in hardware revenue
in the quarter.
Net subscription additions for the quarter were 230,000 compared
with 33,000 subscription loss in the year-ago quarter. Churn rate
was negative 1.6% in the quarter versus negative 1.9% posted in the
prior-year quarter. Subscription acquisition costs (SAC) decreased
to $249 from $252 reported in the prior-year quarter.
Gross profit climbed 9.4% year over year to $38.2 million. Gross
margin expanded 150 basis points to 58.5% in the reported quarter,
primarily due to lower, service and technology costs, which fully
offset a significant increase in hardware cost.
Operating expenses jumped 21.6% year over year to $64.7 million
due to higher general & administrative expense ("G&A"),
which surged 42.7% on an annual basis. Research & development
("R&D") expense soared 13.9% year over year while sales &
marketing ("S&M") expense increased 4.9% in the reported
TiVo reported an operating loss of $26.5 million compared with a
loss of $18.3 million in the year-ago quarter. Adjusted EBITDA loss
was $15.8 million compared with $9.2 million in the year-ago
quarter, much better than management's guided range of a loss of
$16.0 million to $18.0 million.
TiVo reported net loss of $27.7 million or 23 cents compared
with a loss $19.6 million or 17 cents in the year-ago quarter.
TiVo exited the second quarter with cash, cash equivalents and
short-term investments of $542.8 million versus $567.3 million in
the previous quarter.
For the third quarter of 2013, TiVo expects service and
technology revenues in the range of $57 million to $59 million.
TiVo expects net loss in the range of $27.0 million to $29.0
million and an adjusted EBITDA loss in the range of ($14.0) million
to ($16.0) million. Litigation costs are expected to hurt EBITDA in
the upcoming quarter.
For the second half of the year, management expects strong
growth in license revenues, lower R&D cost, and higher
litigation costs. TiVo expects adjusted EBITDA to significantly
benefit from higher licensing revenue and subscriber fees.
Management expects adjusted EBITDA to breakeven for full year
We remain optimistic about TiVo's long-term growth potential
owing to new partnerships, product launches and international
expansion. We believe that TiVo will continue to witness strong
subscriber growth based on its partnerships with
Virgin Media Inc.
), RCN, ONO, Charter Communications,
), Suddenlink and DIRECTV going forward.
However, pending patent litigation issues, rising R&D costs,
higher hardware and sales & marketing costs are expected to
impact TiVo's profitability over the next few quarters. 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 (6-12 months).
Currently, TiVo has a Zacks #3 Rank, which implies a Hold rating
for the short term (1-3 months).
COMCAST CORP A (CMCSA): Free Stock Analysis
COMCAST CLA SPL (CMCSK): Free Stock Analysis
TIVO INC (TIVO): Free Stock Analysis Report
VIRGIN MEDIA (VMED): Free Stock Analysis Report
To read this article on Zacks.com click here.