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Q1 2014 Earnings Call
April 30, 2014 5:00 pm ET
Peter C. Halt - Chief Financial Officer and Chief Accounting Officer
Thomas Carson - Chief Executive Officer, President and Director
Sterling P. Auty - JP Morgan Chase & Co, Research Division
John F. Bright - Avondale Partners, LLC, Research Division
Heather Bellini - Goldman Sachs Group Inc., Research Division
Robert W. Stone - Cowen and Company, LLC, Research Division
Michael J. Olson - Piper Jaffray Companies, Research Division
Todd T. Mitchell - Brean Capital LLC, Research Division
James C. Goss - Barrington Research Associates, Inc., Research Division
Previous Statements by ROVI
» Rovi's CEO Discusses Q4 2013 Results - Earnings Call Transcript
» Rovi Corporation Discusses Q4 2013 Results (Webcast)
» Rovi Management Discusses Q3 2013 Results - Earnings Call Transcript
Good afternoon, and thank you for joining us today. I'm joined 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 forecasts of future revenues, expenses and earnings, as well as possible outcomes and timing of contract negotiations, litigation, business strategies, deployment plans 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. Some of the 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, 2014, 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 of our statements are made as of today, April 30, 2014, 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 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 Q1 2014 earnings press 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 it 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. Good afternoon, everyone, and thanks for joining our call. Hopefully, everyone's had a chance to see the earnings release we issued today with our results for the first quarter.
I'll give you our financial highlights, some context around our first quarter results and our 2014 financial expectations. Tom will speak in more detail about our patent portfolio, the progress we are making in the product front including with -- the Veveo acquisition and our continuing efforts to reduce cost, improve organization efficiency.
We had a solid quarter with a couple of key developments that reflect where we are going as an organization, namely, we acquired Veveo, a leading provider of contextual and personalized search and recommendation tools, and we successfully completed the sale of the DivX and MainConcept businesses. Tom will speak more about both of these in his remarks.
But I want to highlight the Veveo acquisition meets our commitment to stay focused on driving growth within our core DNA, discovery, and provides us an opportunity to be the market leader in a key element of discovery, search and recommendation.
I'd also like to highlight that the sale of the DivX and MainConcept businesses was the last of a number significant steps we've taken to realign the organization around our core discovery business. We now have a dedicated focus on our core competencies, execution and profitable revenue growth.
Turning to the financial results. First quarter revenues of $142.5 million were up $9.7 million or 7% from the first quarter of 2013. The increase was due to strong growth in our service provider vertical and an ACP perpetual deal in the other vertical, partially offset by a hard comparer, our CE vertical with same quarter last year, which benefited from relicensing LG Electronics.
Our service provider vertical grew $10.4 million or 12% when compared to the same quarter in the prior year. The quarter benefited from strong growth in licensing subscribers, as well as sales of our guide for Digital Television Adapters, or DTAs. Additionally, our in-guide advertising business benefited from the addition of the Verizon guide footprint.
CE revenues in the first quarter declined $8.9 million or 23% compared to the same quarter in the prior year. This is the result of a hard comparer with the first quarter of 2013, which benefited from catch-up revenues from the successful resolution of our patent dispute with LG Electronics. In Q1 2013, we resolved our dispute with LG Electronics and entered into a multi-year license for the use of Rovi's patent portfolio across all of LG's products, including its mobile products. This agreement included a catch-up payment for the period out of contract. There was no comparative deal in 2014.