TiVo Inc (
reported mixed first quarter 2013 results, with loss per share of
17 cents deteriorating from the Zacks Consensus Estimate of a loss
of 15 cents as well as the year-ago earnings of $1.04 per
Revenues increased 48.1% year over year to $67.8 million in the
first quarter and surpassed the Zacks Consensus Estimate of $64.0
million. Revenues for the quarter were positively impacted by
Services and technology revenue, which jumped 40% to $54.5 million
and was within management's guided range of $53.0 million-$55.0
million. Moreover, hardware revenue also shot up 91.8% year over
year to $13.3 million.
Net subscription additions for the quarter were 206,000 compared
with 88,000 subscription loss in the year-ago quarter. Churn rate
was negative 1.6% in the quarter versus negative 2.3% posted in the
prior-year quarter. Subscription acquisition costs (SAC) increased
51.6% year over year to $232.
Gross profit increased 64.3% year over year to $34.6 million and
gross margin expanded to 51.1% in the reported quarter, primarily
due to lower, service and technology costs, which fully offset a
significant increase in hardware cost.
Operating expenses (excluding litigation proceeds) decreased
5.3% year over year to $54.2 million. Research & development
(R&D) expense surged 12.2% year over year. However, this was
fully offset by a lower general & administrative expense
(G&A) down 28.0% during the reported quarter.
In the year-ago quarter, TiVo earned $175.7 million as
litigation proceed from the settlement with DISH Network, which
significantly reduced expenses and increased profitability.
However, absence of any such proceed during the reported quarter
had a negative impact on TiVo's profitability.
The company reported an operating loss of $19.6 million compared
with an operating income of $139.5 million in the year-ago quarter.
Adjusted EBITDA was ($10.0) million compared with $149.4 million in
the year-ago quarter. Adjusted EBITDA was in line with the lower
end of management's guided range of ($10.0) million to ($21.0)
million. TiVo reported first quarter 2013 net loss of $20.8 million
compared with a net profit of $139.0 million in the year-ago
TiVo exited the first quarter with cash, cash equivalents and
short-term investments of $567.3 million versus $618.8 million in
the previous quarter.
For the second quarter of 2013, TiVo expects service and
technology revenues in the range of $53 million to $55 million.
TiVo expects net loss in the range of $28.0 million to $30.0
million and an adjusted EBITDA loss in the range of ($16.0) million
to ($18.0) million.
For the full year, TiVo expects R&D expenses to decline in
the second half as compared to the first half of 2013. TiVo expects
litigation expenses to increase in the second half of fiscal 2013.
However, TiVo expects to spend much less in litigation costs
compared with fiscal 2012.
TiVo expects adjusted EBITDA to significantly benefit from
higher licensing revenue and subscriber fees. Management expects
adjusted EBITDA to breakeven for full year 2013.
We remain optimistic about TiVo's long-term growth potential due
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,
Comcast Corp. (
, Suddenlink and DIRECTV going forward.
However, pending patent litigation issues (Verizon, Motorola and
Time Warner), rising subscription acquisition 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).
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