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Q3 2012 Earnings Call
November 01, 2012 5:00 pm ET
Peter C. Halt - Chief Financial Officer and Chief Accounting Officer
Thomas Carson - Chief Executive Officer, President and Director
Ralph Schackart - William Blair & Company L.L.C., Research Division
Sterling P. Auty - JP Morgan Chase & Co, Research Division
Perry Huang - Goldman Sachs Group Inc., Research Division
Todd T. Mitchell - Brean Murray, Carret & Co., LLC, Research Division
Andy Hargreaves - Pacific Crest Securities, Inc., Research Division
John F. Bright - Avondale Partners, LLC, Research Division
Previous Statements by ROVI
» Rovi Management Discusses Q2 2012 Results - Earnings Call Transcript
» Rovi's CEO Discusses Q1 2012 Results - Earnings Call Transcript
» Rovi's CEO Discusses Q4 2011 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 third quarter results, which were released earlier today, I would like to start with some housekeeping items. First, during our conference call, we'll be making forward-looking statements, including statements regarding Rovi's forecasts 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 these 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 period ended September 30, 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, November 1, 2012, based on the 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 of the financial measures included in our earnings release. The most directly comparable GAAP information and the conciliation between the non-GAAP and GAAP figures are included in our Q3 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 web page at www.rovicorp.com.
Finally, the live broadcast 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
Thanks, Chris. Good afternoon, everyone. Hopefully you've had a chance to see the earnings release we issued today with our results for the third quarter. I'd also like to be sure everyone noticed the additional information we included in the release, listing a number of the quarter's business operating highlights. In the past, we provided much of the detail on the conference call. But in response to feedback from many of you, we're including this information in our earnings release so that we can focus the call on key events in the quarter and have plenty of time for Q&A.
Today, I'll give you the financial highlights with some context around our results, then Tom will address some of the larger trends we are seeing in our business and discuss the progress we've made on operational initiatives during the quarter. We hope you'll like the new format of the call and look forward to your feedback.
With that, let me get on to the results. Third quarter revenues were $169.6 million, down $12.3 million or 7% from the third quarter of 2011. The year-over-year change was driven by a decline in revenue from CE manufacturers, which were down $15.1 million or 17% in the third quarter of 2011. Our Other category, which includes data, the Rovi Entertainment Store and ACP for entertainment was down 7% year-over-year. The year-over-year decline was partially offset by increased revenues from service providers, which were up 6% year-over-year. However, sequentially, the quarter was up $11.3 million or 7%. The quarter benefited from the timing of certain nonrecurring CE revenue. While these revenues are nonrecurring with individual customers, these revenues are part of our regular recurring CE revenue model. Last quarter, we mentioned the likelihood of lumpiness in this revenue stream. Q3 benefited from more such revenues than Q2 or we expect in Q4. Additionally, the Rovi Entertainment Store revenues were up 26% from Q3 of 2011.
The key theme this quarter was our efforts around product rationalization and cost cutting. While Tom will speak about this in greater detail, I would like to point out the benefits to current earnings. SG&A costs were $32 million in the quarter, down 5% from last quarter and down 6% from the same quarter one year ago. R&D expenses also declined 2%, both sequentially and year-over-year to $34.4 million. As a result, operating income from continuing operations less depreciation expense represented 42% of revenue for the quarter, up from 38% last quarter.