TiVo Inc. (TIVO)

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TiVo Inc. (TIVO)

F2Q10 Earnings Call

August 26, 2009 5:00 pm ET


Derrick Nueman - Investor Relations

Tom Rogers - Chief Executive Officer

Anna Brunelle - Chief Financial Officer

Matt Zinn - General Counsel


Alan Gould - Natexis Bleichroeder

David Miller - Caris & Company

Tony Wible - Janney Montgomery

Barton Crockett - Lazard Capital Markets

Daniel Ernst - Hudson Square Research

James Ratcliffe - Barclays Capital

Mark Argento - Craig-Hallum Capital

Tuna Amobi - Standard & Poors

Todd Mitchell - Kaufman Bros.



Hello and welcome to the TiVo second quarter fiscal year earnings conference call. Today's conference is being recorded.

The speakers for today's conference are going to be Tom Rogers, Anna Brunelle, and Derrick Nueman.

At this time I'd like to turn the conference over to Derrick Nueman. Please go ahead, sir.

Derrick Nueman

Thank you and good afternoon. I'm Derrick Nueman, TiVo's head of Investor Relations. With me today are Tom Rogers, CEO, Anna Brunelle, CFO, Naveen Chopra, VP of Business Development and Strategy, and Matt Zinn, General Counsel.

We are here today to discuss TiVo's second quarter results ending July 31, 2009. We have just distributed a press release and 8-K detailing our financial results. We have also released a financial and key metric summary, which is posted on our Investor Relations website.

Additionally, we will post a recording of this call later today on the Investor Relations website.

Our prepared remarks should take 30 minutes today and then we'll have a question-and-answer session after.

Our discussions today include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements relate to, among other things, TiVo's future subscriptions, advertising and research business, profitability, operations and financial performance, guidance and subscription growth, distribution of the TiVo service domestically with Comcast, DIRECTV, RCN and Best Buy, and internationally in Australia, New Zealand and other locations, TiVo's current and future service features and product releases, partner initiatives, the current U.S. PTO re-exam of the TiVo Time Warp patent, and TiVo's ongoing litigation with Echostar and others.

You can identify these statements by the use of terminology such as guidance, believe, expect will or similar forward-looking terms. We caution you not to put undue reliance on these forward-looking statements as they involve risks and uncertainties that may cause actual results to vary materially from the forward-looking statements.

Factors that may cause actual results to differ materially include delays in development, competitive service offerings, lack of market acceptance as well as other factors described in the risk factors in our public reports filed with the SEC in our latest 10-K and 10-Qs.

Any forward-looking statements made on this call reflect analysis as of today and we have no plans or duty to update them.

Additionally, some of the metrics and financial information provided on today's call are non-GAAP measures. Please see the second quarter fiscal year 2010 key measure trend sheet for a reconciliation of these items.

With that, I will now turn over the call to Tom Rogers.

Tom Rogers

Thanks, Derrick, and thanks, everybody, for joining us on a late summer afternoon.

TiVo continued its strong financial performance in the second quarter as we recorded our eighth straight quarter of adjusted EBITDA profitability and exceeded our earnings guidance. We made significant progress on developing partnerships that will enable us to access previously untapped distribution opportunities, announcing important deals with Best Buy and RCN.

Our audience research and measurement business continues to prove why it will be a model that supports the future of the television advertising world as we launch local market ratings and announce an important partnership with Comcast.

Finally, our intellectual property was validated yet again as Echostar was found to be in contempt in the United States District Court for the Eastern District of Texas.

All of this forward momentum, coupled with a balance sheet that remains very strong, with about $238 million in cash, positive operating cash flow in the second quarter and no debt, ensures that TiVo remains on solid financial footing as we enter the third quarter. Before I get into the specific highlights of the second quarter let me briefly touch on today's court filings versus AT&T and Verizon.

Our relationship with Best Buy, RCN, Comcast, DIRECTV are demonstrations of the significant strategic value that the TiVo experience, technology and brand brings to key players in the entertainment universe. Despite differences in implementation strategy, these partners have all found compelling commercial benefits in the distribution of TiVo to their customers.

Unfortunately, there are multi-channel operators who compete with us through the unauthorized use of our investment portfolio. Echostar has been a prime example of this, and we have recently found ourselves in a similar situation with AT&T and Verizon, where business agreements have not been reached yet we need to stop their continued use of our intellectual property. Today we filed complaints in the United States District Court for the Eastern District of Texas against AT&T and Verizon for infringement of several TiVo patents, including the Time Warp patent. We are confident in the court's ability to move quickly to stop the unauthorized use of our patents by AT&T and Verizon. As such, our complaint will seek damages for past infringement and a permanent injunction similar to that issued by the District Court and upheld by the federal circuit against Echostar.

While this action plays an important role in ensuring that our shareholders realize the full value of our intellectual property, it does not shift our focus from creation of strategic relationships where our partners profit due to lawful distribution of our core DVR technology and other technologies which include a fully integrated suite of services, including interactive advertising, audience measurement, universal search, next generation user experiences, broadband content delivery, etc., etc.

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