ROVI

Rovi Corporation (ROVI)

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Rovi (ROVI)

Q1 2013 Earnings Call

May 01, 2013 5:00 pm ET

Executives

Lori Barker

Peter C. Halt - Chief Financial Officer and Chief Accounting Officer

Thomas Carson - Chief Executive Officer, President and Director

Analysts

Michael J. Olson - Piper Jaffray Companies, Research Division

Robert W. Stone - Cowen and Company, LLC, Research Division

John F. Bright - Avondale Partners, LLC, Research Division

Todd T. Mitchell - Brean Capital LLC, Research Division

Andy Hargreaves - Pacific Crest Securities, Inc., Research Division

Perry Huang - Goldman Sachs Group Inc., Research Division

Francisco Ruiz - Exane BNP Paribas, Research Division

Saket Kalia - JP Morgan Chase & Co, Research Division

James C. Goss - Barrington Research Associates, Inc., Research Division

Presentation

Operator

Good day, ladies and gentlemen. Thank you for standing by. Welcome to the Rovi First Quarter 2013 Earnings Conference Call. [Operator Instructions] This conference is being recorded today, Wednesday, May 1, 2013. I would now like to turn the conference over to Lori Barker of Rovi Investor Relations. Please go ahead.

Lori Barker

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 first quarter 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 forecast of 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 these forward-looking statements are described in our Form 10-Q for the quarter ended March 31, 2013, and other SEC reports and filings made from time to time. And we encourage you to review the discussion of these factors in those reports and filings.

All of our statements are made as of today, May 1, 2013, based on information available to us as of today. And except as required by law, we assume no obligation to update any such statement.

Second, this presentation includes non-GAAP financial measures. This presentation is not intended to be a substitute for our financial release, 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 results, including in our earnings release. The most directly comparable GAAP information and a reconciliation between the non-GAAP and GAAP figures are included in our Q1 2013 earnings release, which has been furnished to the SEC on Form 8-K and is available in the Investor Relations section of our web page at www.rovicorp.com. Finally, the live webcast of this conference call is available in the Investor Relations section of our web page, 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 C. Halt

Thank you, Lori, and welcome aboard. For everyone joining us today, good afternoon, and I would like to introduce you, all, to Lori Barker, who has recently joined us as the Head of Investor Relations. I would also like to say thank you to Chris Keller for all his help this past year.

Hopefully, everyone has had a chance to see the earnings release we issued today, with our results for the first quarter, which included a listing of the quarter's business and our operating highlights. On today's call, I'll give you the financial highlights and some context around our results, then Tom will discuss strategic significance of some of our recent wins, and our confidence in the importance of Rovi's technology and product offerings enabling digital entertainment. Finally, we'll open the call up for Q&A.

In regards to this quarter, I am pleased with how we started out in 2013. As Tom will speak in greater detail, we entered into several key IP licensing agreements and also had a very important customer renewal for DivX. We believe these deals demonstrate the continued strength of our IP and the relevance of our products in the rapidly evolving digital entertainment space. Our first quarter results were in line with our internal expectations. Revenues were $154.7 million, down $17 million or 10% from the first quarter of 2012, almost entirely driven by declines we had anticipated in revenue from our CE video delivery and display sales vertical. CE video delivery and display revenues were down $16.5 million or 44% from the first quarter of 2012. This anticipated decline was a result of the continued DivX headwinds and the ongoing decline in ACP revenues.

In terms of our other sales verticals, both service provider and CE discovery and advertising revenues were up approximately 1%. However, our other revenue was down $1.2 million or 7%, largely due also to continued decline in ACP for entertainment revenue. The quarter included several key deals, including IP licensing agreements with LG Electronics and Hulu, and a DivX renewal agreement with LG Electronics. While Tom will discuss the strategic importance of these 2 IP licensing deals, I would like to remind everyone of the importance of the DivX renewal. As we discussed during our Investor Day at CES, we entered into 2013 with significantly less visibility on the DivX front than in other areas of our business. We also said that we had 6 major DivX deals coming up for renewal in 2013, one each in the first 3 quarters and 3 in Q4. We are very pleased that we successfully renewed our agreement with LG Electronics, which was the Q1 renewal to which we referred. Additionally, given progress to date, we anticipate announcing our Q2 DivX renewal later this month.

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