ROVI

Rovi Corporation (ROVI)

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Rovi Corporation (ROVI)

Q4 2012 Earnings Call

February 13, 2013 05:00 pm ET

Executives

Tom Carson – President & Chief Executive Officer

Peter Halt – Chief Financial Officer

Chris Keller – Investor Relations

Analysts

Sterling Auty – JP Morgan

Ralph Schackart – William Blair & Co.

Perry Huang – Goldman Sachs

Todd Mitchell – Brean Murray, Carret & Co.

Rob Stone – Cowen and Company

Jim Goss – Barrington Research

Presentation

Operator

Good day ladies and gentlemen, thank you for standing by. Welcome to the Rovi Q4 2012 Earnings Conference Call. (Operator instructions.) As a reminder this conference is being recorded today, Wednesday, February 13, 2013. And I would now like to turn the conference over to Chris Keller of Rovi Investor Relations. Please go ahead, sir.

Chris Keller

Good afternoon and thank you for joining us today. I’m joined today by Tom Carson, our President and CEO, and Peter Halt, our Chief Financial Officer. Before we discuss our Q4 results which were released earlier today I would like to start with some housekeeping items.

First, during our conference call we will be making forward-looking statements including statements regarding Rovi’s forecasted future revenues, expenses, and earnings, as well as business strategies and product plans. These forward-looking statements are subject to risks and uncertainties that may cause actual results to vary materially from today’s forward-looking statements.

Factors that could cause actual results to differ materially from those forward-looking statements are described in our Form 10(k) for the year ended December 31, 2012, and other SEC reports and filings made from time to time, and we encourage you to review the discussion of those factors in those reports and filings. All our statements are made as of today, February 13, 2013, based on information available to us as of today; and except as required by law we assume no obligation to update any such statements.

Second, this presentation includes non-GAAP financial measures. This presentation is not intended to be a substitute for our financial results presented in conformity with generally accepted accounting principles in the United States, and investors and potential investors are encouraged to review the reconciliation of adjusted pro forma financial measures included in our earnings release. The most directly comparable GAAP information and a reconciliation between the non-GAAP and GAAP figures are included in our Q4 2012 Earnings Press Release which has been furnished to the SEC on Form 8(k) and is available in the Investor Relations section of our webpage at www.rovicorp.com.

Finally, the live webcast of this conference call is available on the Investor Relations section of our webpage and a replay of the audio webcast will be available on the website shortly after this webcast ends and will remain on the website until our next quarterly earnings call. Now I would like to turn the call over to Peter.

Peter Halt

Thanks, Chris. Good afternoon, everyone. Hopefully you’ve had a chance to see the earnings release we issued today with our results for Q4. As we did last quarter, we have included a listing of the quarter’s business and operating highlights in our earnings release. In the past we’ve provided much of this detail during this call. Now, in response to feedback from many of you, we are providing this information in the release so we can focus this call on key events in the quarter and have plenty of time for Q&A.

Additionally, as previously introduced in our investor presentation last month we will be breaking out the way we report our CE revenue verticals. The new format consists of two verticals – CE Discovery and Advertising and CE Video Delivery and Display. We believe this new reporting format provides much greater detail and increased strength [clarity] about our business which CE manufactures.

Finally, I would like to remind everyone that as we disclosed on January 3, we are now actively pursuing the sale of the Rovi Entertainment Store business. We took this action as a part of our ongoing strategic efforts to focus the company on growth opportunities related to our core enabling technologies and services. As such, the results for the Rovi Entertainment Store for 2012 and 2011 have been reclassified into discontinued operations. This means our discussion of adjusted pro forma results excludes the Rovi Entertainment Store operations.

With that in mind I’ll give you the financial highlights and some context around our results. Then Tom will look back at our accomplishments in 2012, address some of the larger trends we’re seeing in our business for 2013 and assess the progress we are making on the operational initiatives we outlined at CES. Now, let me get on to the results.

Q4 revenues were $157 million, down $17.3 million or 10% from Q4 2011. The year-over-year change was driven by declines in revenue from our two CE revenue verticals – CE Discovery and Advertising and CE Video Delivery and Display. These declines were partially offset by an increase in service provider revenue. CE Discovery and Advertising was down $5.2 million or 13% from Q4 2011, while CE Video Delivery and Display was down $15 million or 37% from Q4 2011.

On the Discovery and Advertising front, 2011 benefited from a new deal with Toshiba and 2012 saw fewer units shipped by CE manufacturers that pay us on a per-device basis. On the CE Video Delivery and Display front we experienced DivX headwinds as projected last quarter and we continued to experience the ongoing decline in ACC revenues. The year-over-year decline was partially offset by increased revenues from service providers which were up 4% year-over-year, primarily the result of subscriber growth.

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