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TiVo Inc. (TIVO)
-- Service & Technology revenue up about 10% year-over-year; Adjusted
EBITDA and Net Income exceed guidance
-- Continued momentum from operator deals leads to a 36% increase in MSO
revenue over last quarter
-- Total subscriptions grew by 230,000 in the quarter, increasing total
subscriptions 41% from last year
-- TRA acquisition creates a powerful combination of analytics and
insights that TiVo expects will offer the TV advertising industry
Internet-level measurement and accountability
-- Success continues with Virgin Media; reaches one million subscriptions
in just over a year; ONO subscriptions double from last quarter
-- Com Hem selects TiVo as its preferred solution for video delivered
through an IP network from the cloud to any device
-- GCI, Alaska’s largest cable provider, chooses TiVo as its advanced
television solution
-- Comcast offering showing positive early results in Boston and San
Francisco; Sacramento, Portland, and Denver to roll out with
additional markets to follow
TiVo Inc. (TIVO), a leader in the advanced television
entertainment market, today reported financial results for the second
quarter ended July 31, 2012.
Tom Rogers, President and CEO of TiVo, said, "This was another solid
quarter for TiVo as we achieved our financial guidance, gained more
subscriptions within our current distribution relationships, signed
new distribution deals, deepened our capabilities in the audience
research business, and showcased the benefits of our R&D investment
through the delivery of the TiVo experience via virtually any kind of
operator infrastructure and through tablets, smartphones, and
computers. The number of TiVo subscriptions across the globe grew 41%
year-over-year this quarter, highlighted by continued success at
Virgin Media, which recently reached one million TiVo subscriptions.
We believe the positive momentum this quarter, as well as the cost
efficiencies we are targeting in the second half of the year, will
significantly advance us towards our goal of approaching breakeven
Adjusted EBITDA excluding litigation spend."
For the second quarter, service and technology revenues were $54.1
million, an increase of about 10% year-over-year. This compared to
our guidance of $53 million to $55 million and $49.6 million for the
same quarter in Fiscal 2012. TiVo reported a net loss of ($27.7)
million, compared to guidance of a net loss of ($28) million to ($30)
million, and a net loss of ($19.6) million in the same quarter in
Fiscal 2012. Adjusted EBITDA was a loss of ($15.8) million, compared
to Adjusted EBITDA guidance of a loss of ($16) million to ($18)
million, and to an Adjusted EBITDA loss of ($9.2) million in the same
quarter last year.
Rogers continued, "The subscription increases we achieved this
quarter are the result of operators utilizing our advanced television
offering to become more competitive in their markets and to drive
materially improved subscriber metrics.
"Our success in the U.K. with Virgin Media is a perfect example of
how, through TiVo, an operator can clearly set itself apart from
competitors and create stickier subscribers. Recently, Virgin Media
reported it had reached one million TiVo subscriptions in just over a
year, making it the most successful advanced television deployment to
date. Virgin Media’s television subscribers continue to grow despite
the challenging macroeconomic environment in the U.K. In Spain, the
economic climate is even more challenging, yet ONO reported that TiVo
subscriptions doubled over last quarter and that ONO experienced
lower churn levels and excellent customer satisfaction metrics.
"We expanded in Europe this quarter through our deal with Com Hem,
the largest cable operator in Scandinavia, which is one of the
world’s leading broadband markets. Beyond being a new geographical
footprint for TiVo, this deal signifies that not only does the
leading cable operator in one of the world’s leading broadband
markets believe TiVo is the best advanced television option today,
but that TiVo is the best option in the future when video will be
delivered through an IP network from the cloud to any device. As a
result of this deal, we are confident other operators will turn to
TiVo to provide a solution that delivers their service to homes with
or without a set-top box.
"We also experienced positive momentum in the U.S. this quarter. We
recently announced that GCI, a top twenty cable operator, has chosen
to work with TiVo to deploy an advanced television solution for their
customers. Like most of the operators we work with or are in
discussions with, GCI is not only focused on today but also on how
they can provide their customers with the best television viewing
experience in the future. Additionally, it was very important for GCI
to choose a provider that could implement quickly and inexpensively,
and they believe TiVo is the best option.
"Our Comcast offering, which is their only product that brings
together traditional linear television, operator video on-demand and
the most popular broadband video offerings all in one experience, has
been well received by subscribers in Boston and the San Francisco Bay
Area, the first markets to offer the service. Comcast will make the
TiVo offering available in Sacramento, Portland, and Denver next, and
we expect multiple more markets to launch this year.
"Additionally, momentum is picking up with Suddenlink as they
recently had their strongest quarter to date, adding TiVo customers
at a faster pace than in prior quarters. In terms of our relationship
with Charter Communications, both TiVo and Charter continue to focus
on driving TiVo software to future set-top box platforms and
potentially to other platforms including those that go beyond the
set-top box to any device via the cloud.
"Underpinning our distribution success is our best-in-class product
and continued innovation. Additions to TiVo’s ever-expanding suite of
products include the upcoming launch of TiVo Stream, which seamlessly
delivers the content available on a consumer’s TiVo to alternative
screens such as iPads and iPhones. Unlike similar offerings in the
market, this is the first product to give cable subscribers the
ability to simultaneously stream or download shows to multiple
portable devices without interrupting what’s playing on the
television. These offerings, in addition to the recently announced
TiVo Premiere 4 DVR, which is our reduced-cost four tuner DVR that
can record up to four programs simultaneously, help to create a
seamless television ecosystem that delivers the TiVo experience and
any content consumers want, wherever they want.
"While TiVo is driving the best advanced television consumer
experience, we are also dedicated to providing the best analytics and
insights for the television advertising industry. This was a very
significant quarter for TiVo in this regard as we announced the
acquisition of TRA, Inc., now called TiVo Research and Analytics,
Inc., a company which pioneered a platform that connects the exposure
of ads to actual purchases in the same household. TRA has proven it
can determine the effectiveness of television advertising, helping
advertisers identify the right audience and get the most out of their
advertising dollars. With this proposition, TRA has driven a
substantial client list of advertisers, agencies and networks
including 27 cable and broadcast networks and 45 different
advertising brands. This acquisition is strategic for our data
analytics business, establishes new revenue enhancing opportunities,
and bolsters our ability to provide unique insights to an industry
increasingly seeking alternative ways to measure audience behavior.
"As fast-forwarding through content only becomes more prevalent,
finding new ways to market through the television screen becomes
increasingly imperative for advertisers. TiVo has created solutions
that not only allow advertisers to present their content less
obtrusively, but also allow viewers to make purchases from the screen
in a way that does not interfere with the viewing experience. In that
regard, we are working with PayPal to give TiVo users the benefit of
a TV wallet -- the ability to immediately purchase products featured
in interactive advertisements on the TiVo user interface through
their secure PayPal accounts. Working with PayPal provides an easy
way to go from ads and content directly to purchasing products on the
TV, bringing the effectiveness of advertising to the next level.
"In terms of protecting our intellectual property, we are preparing
for a trial this coming October in the Verizon case, and are moving
forward on our other cases involving Motorola, Cisco, and Time Warner
Cable. While our significant investment in these cases is impacting
our expense base in the near-term, we believe it is vital to protect
our innovation and we are confident that the return on investment
will continue to be substantial over time."
Rogers concluded, "We made substantial progress this quarter. Our
current deals are bringing the TiVo experience to a greater number of
new homes, providing increased customer satisfaction for operators
and growing our MSO revenue. We continue to defend our intellectual
property, we signed on new deals that will further increase
distribution, and we established new growth opportunities,
highlighted by our acquisition of TRA. In the meantime, with further
expected revenue growth and our work to reduce costs in the back half
of the year, we expect to significantly advance towards our aim of
approaching Adjusted EBITDA profitability excluding litigation
spend."
Management Provides Financial Guidance
For the third quarter of fiscal 2013, TiVo anticipates service and
technology revenues in the range of $57 million to $59 million. TiVo
anticipates net loss to be in the range of ($27) million to ($29)
million and an Adjusted EBITDA loss to be in the range of ($14)
million to ($16) million. Litigation costs due to the upcoming
Verizon trial scheduled for October 2012 are expected to remain high
and to significantly impact net loss and Adjusted EBITDA loss in the
third quarter of Fiscal Year 2013.
Further, TiVo continues to expect to significantly advance towards
its aim of approaching breakeven Adjusted EBITDA excluding litigation
spend. As such, TiVo anticipates increases in MSO revenue, a
reduction in research & development spend, and increases in
litigation spend during the back half of the year. Finally, TRA is
expected to be accretive to Adjusted EBITDA in the next fiscal year
once planned synergies are realized but is expected to have a modest
Adjusted EBITDA impact of up to $2 million in the second half of this
year.
This financial guidance is based on information available to
management as of August 29, 2012. TiVo expressly disclaims any duty
to update this guidance.
Management’s guidance includes Adjusted EBITDA, a non-GAAP financial
measure as defined in Regulation G. TiVo has provided a
reconciliation of EBITDA and Adjusted EBITDA to net income (loss) in
the attached schedules solely for the purpose of complying with
Regulation G and not as an indication that EBITDA or Adjusted EBITDA
is a substitute measure for net income (loss).
Conference Call and Webcast
TiVo will host a conference call and Webcast to discuss the second
quarter financial and operating results and guidance outlook at 2:00
pm PT (5:00 pm ET), today, August 29, 2012. To listen to the
discussion, please visit http://www.tivo.com/ir and click on the link
provided for the Webcast or dial (877) 618-4505 (conference ID number
is 21104676). The Webcast will be archived and available through
September 5, 2012 at http://www.tivo.com/ir or by calling (404)
537-3406; and entering the conference ID number 21104676.
About TiVo Inc.
Founded in 1997, TiVo Inc. (TIVO) developed the first
commercially available digital video recorder (DVR). TiVo offers the
TiVo service and TiVo DVRs directly to consumers online at
www.tivo.com and through third-party retailers. TiVo also distributes
its technology and services through solutions tailored for cable,
satellite, and broadcasting companies. Since its founding, TiVo has
evolved into the ultimate single solution media center by combining
its patented DVR technologies and universal cable box capabilities
with the ability to aggregate, search, and deliver millions of pieces
of broadband, cable, and broadcast content directly to the
television. An economical, one-stop-shop for in-home entertainment,
TiVo’s intuitive functionality and ease of use puts viewers in
control by enabling them to effortlessly navigate the best digital
entertainment content available through one box, with one remote, and
one user interface, delivering the most dynamic user experience on
the market today. TiVo also continues to weave itself into the fabric
of the media industry by providing interactive advertising solutions
and audience research and measurement ratings services to the
television industry.
TiVo and the TiVo Logo are trademarks or registered trademarks of
TiVo Inc. or its subsidiaries worldwide. Copyright 2012 TiVo Inc. All
rights reserved. All other trademarks are the property of their
respective owners.
This release contains 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 business and
growth strategies including future subscription growth with TiVo’s
MSO customers and subscription growth in TiVo’s retail business,
future repurchases of TiVo stock by TiVo, the timing of future TiVo
product roll-outs in retail and availability of particular products
in the future with customers such as DIRECTV, Com Hem, GCI, ONO,
Charter, RCN, Suddenlink, and Grande Communications among others,
future expected benefits of TiVo’s acquisition of TRA including
whether the acquisition is accretive to TiVo next fiscal year and
future revenue opportunities from TRA, estimated future impact to
Adjusted EBITDA from TiVo’s acquisition of TRA in this fiscal year,
future development and integration of a TV wallet feature between
TiVo and Pay Pal, future increases in MSO revenues, decreases in TiVo
R&D spending in the second half of this fiscal year, increases in
litigation spend in connection with the Verizon trial in October
2012, TiVo’s ability to leverage its research and development in the
future between customers and MSO and retail markets and the future
strength and value of TiVo’s intellectual property portfolio.
Forward-looking statements generally can be identified by the use of
forward-looking terminology such as, "believe," "expect," "may,"
"will," "intend," "estimate," "continue," or similar expressions or
the negative of those terms or expressions. Such statements involve
risks and uncertainties, which could cause actual results to vary
materially from those expressed in or indicated by the
forward-looking statements. Factors that may cause actual results to
differ materially include delays in development, competitive service
offerings and lack of market acceptance, as well as the other
potential factors described under "Risk Factors" in the Company’s
public reports filed with the Securities and Exchange, including the
Company’s Annual Report on Form 10-K for the fiscal year ended
January 31, 2012, our Quarterly Reports on Form 10-Q for the period
ended April 30, 2012 and Current Reports on Form 8-K. The Company
cautions you not to place undue reliance on forward-looking
statements, which reflect an analysis only and speak only as of the
date hereof. TiVo disclaims any obligation to update these
forward-looking statements.
TIVO INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share and share amounts)
(unaudited)
Three Months Ended Six Months Ended
July 31, July 31,
-------------------------- --------------------------
2012 2011 2012 2011
------------ ------------ ------------ ------------
Revenues
Service revenues $ 32,302 $ 34,016 $ 62,923 $ 67,350
Technology
revenues 21,825 15,586 45,712 21,089
Hardware
revenues 11,129 11,580 24,390 18,495
------------ ------------ ------------ ------------
Net revenues 65,256 61,182 133,025 106,934
Cost of revenues
Cost of service
revenues 8,871 9,089 17,250 17,889
Cost of
technology
revenues 3,792 3,813 10,078 10,833
Cost of hardware
revenues 14,431 13,401 32,902 22,254
------------ ------------ ------------ ------------
Total cost of
revenues 27,094 26,303 60,230 50,976
------------ ------------ ------------ ------------
Gross margin 38,162 34,879 72,795 55,958
------------ ------------ ------------ ------------
Research and
development 29,652 26,042 60,212 53,270
Sales and
marketing 7,243 6,905 13,467 13,242
Sales and
marketing,
subscription
acquisition
costs 2,372 2,441 3,629 3,674
General and
administrative 25,429 17,826 41,595 40,278
Litigation
proceeds -- -- -- (175,716)
------------ ------------ ------------ ------------
Total
operating
expenses 64,696 53,214 118,903 (65,252)
------------ ------------ ------------ ------------
Income (loss)
from
operations (26,534) (18,335) (46,108) 121,210
Interest income 852 678 1,760 3,841
Interest expense
and other
income
(expense) (1,966) (1,965) (3,948) (4,589)
------------ ------------ ------------ ------------
Income (loss)
before income
taxes (27,648) (19,622) (48,296) 120,462
Benefit from
(provision
for) income
taxes (93) 71 (219) (988)
------------ ------------ ------------ ------------
Net income
(loss) $ (27,741) $ (19,551) $ (48,515) $ 119,474
============ ============ ============ ============
Net income
(loss) per
common share
Basic $ (0.23) $ (0.17) $ (0.41) $ 1.03
Diluted $ (0.23) $ (0.17) $ (0.41) $ 0.91
Income (loss)
for purposes of
computing net
income (loss)
per share:
Basic (27,741) (19,551) (48,515) 119,474
Diluted (27,741) (19,551) (48,515) 122,472
Weighted average
common and
common
equivalent
shares:
Basic 119,137,118 116,146,567 119,041,708 115,695,989
Diluted 119,137,118 116,146,567 119,041,708 135,161,128
TIVO INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share and share amounts)
(unaudited)
July 31, January 31,
2012 2012
----------- -----------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 122,514 $ 169,555
Short-term investments 420,268 449,244
Accounts receivable, net of allowance for
doubtful accounts of $334 and $370,
respectively 26,117 24,665
Inventories 26,583 18,925
Deferred cost of technology revenues, current 4,835 4,400
Prepaid expenses and other, current 12,020 12,106
----------- -----------
Total current assets 612,337 678,895
LONG-TERM ASSETS
Property and equipment, net of accumulated
depreciation of $48,114 and $47,170,
respectively 9,924 9,191
Intangible assets and capitalized software, net
of accumulated amortization of $19,047 and
$17,797, respectively 13,507 4,677
Deferred cost of technology revenues, long-term 24,755 23,546
Goodwill 10,139 --
Prepaid expenses and other, long-term 3,425 3,501
----------- -----------
Total long-term assets 61,750 40,915
----------- -----------
Total assets $ 674,087 $ 719,810
=========== ===========
LIABILITIES AND STOCKHOLDERS’EQUITY
LIABILITIES
CURRENT LIABILITIES
Accounts payable $ 21,519 $ 32,102
Accrued liabilities 37,568 45,341
Deferred revenue, current 76,633 74,986
----------- -----------
Total current liabilities 135,720 152,429
LONG-TERM LIABILITIES
Deferred revenue, long-term 92,325 81,336
Convertible senior notes 172,500 172,500
Deferred rent and other long-term liabilities 598 518
----------- -----------
Total long-term liabilities 265,423 254,354
----------- -----------
Total liabilities 401,143 406,783
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS’ EQUITY
Preferred stock, par value $0.001: Authorized
shares are 10,000,000; Issued and outstanding
shares - none -- --
Common stock, par value $0.001: Authorized
shares are 275,000,000; Issued shares are
127,290,963 and 123,073,486, respectively, and
outstanding shares are 124,242,699 and
121,616,908, respectively 127 123
Treasury stock, at cost: 3,048,264 shares and
1,456,578 shares, respectively (29,034) (13,788)
Additional paid-in capital 1,027,235 1,003,696
Accumulated deficit (725,578) (677,064)
Accumulated other comprehensive income 194 60
----------- -----------
Total stockholders’ equity 272,944 313,027
----------- -----------
Total liabilities and stockholders’ equity $ 674,087 $ 719,810
=========== ===========
TIVO INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)
Six Months Ended July 31,
----------------------------
2012 2011
------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (48,515) $ 119,474
Adjustments to reconcile net income (loss)
to net cash used in operating activities:
Depreciation and amortization of property
and equipment and intangibles 4,158 4,493
Stock-based compensation expense 16,145 14,559
Amortization of discounts and premiums on
investments 3,053 1,010
Non-cash loss on over allotment option and
non-cash interest expense 481 1,952
Utilization and write-down of trade
credits -- 619
Allowance for doubtful accounts 77 267
Changes in assets and liabilities, net of
the effects of the acquisition:
Accounts receivable (734) 4,498
Inventories (7,658) (360)
Deferred cost of technology revenues (1,354) (9,178)
Prepaid expenses and other 651 (2,155)
Accounts payable (13,191) 985
Accrued liabilities (8,643) 3,887
Deferred revenue 11,555 106,998
Deferred rent and other long-term
liabilities 80 314
------------- -------------
Net cash provided by (used in) operating
activities $ (43,895) $ 247,363
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of short-term investments (229,764) (567,013)
Sales or maturities of long-term and short-
term investments 255,573 174,222
Acquisition of business, net of cash and
cash equivalents acquired (17,579) --
Acquisition of property and equipment (3,239) (3,148)
Acquisition of capitalized software and
intangibles -- (281)
------------- -------------
Net cash provided by (used in) investing
activities $ 4,991 $ (396,220)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of convertible senior
notes, net of issuance costs of $6,391 -- 166,109
Proceeds from issuance of common stock
related to exercise of common stock options 3,368 7,479
Proceeds from issuance of common stock
related to employee stock purchase plan 3,741 3,284
Treasury stock - repurchase of stock (15,246) (3,209)
------------- -------------
Net cash provided by (used in) financing
activities $ (8,137) $ 173,663
------------- -------------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS $ (47,041) $ 24,806
------------- -------------
CASH AND CASH EQUIVALENTS:
Balance at beginning of period 169,555 71,221
------------- -------------
Balance at end of period $ 122,514 $ 96,027
============= =============
TIVO INC.
OTHER DATA
Guidance
Three Months Ended Reconciliation
----------------
Three Months
July 31, Ending
--------------------
October 31,
2012 2011 2012
--------- --------- ----------------
(In thousands) (In millions)
Net loss $ (27,741) $ (19,551) $(29) - $(27)
Add back:
Depreciation & amortization 2,070 2,259 $3 - $2
Interest income & expense 1,115 1,288 $1
Provision for income tax 93 (71) $0
--------- --------- ----------------
EBITDA (24,463) (16,075) $(25) - $(23)
Stock-based compensation 8,696 6,902 $9
--------- --------- ----------------
Adjusted EBITDA $ (15,767) $ (9,173) $(16) - $(14)
========= ========= ================
EBITDA and Adjusted EBITDA Results. TiVo’s "EBITDA" means income
before interest income and expense, provision for income taxes and
depreciation and amortization. TiVo’s "Adjusted EBITDA" is EBITDA
less expense for stock-based compensation. EBITDA and Adjusted EBITDA
are not measures of financial performance under generally accepted
accounting principles, which we refer to as GAAP. We have presented
EBITDA and Adjusted EBITDA solely as supplemental disclosure because
we believe they allow for a more complete analysis of our results of
operations and we believe that EBITDA and Adjusted EBITDA are useful
to investors because EBITDA and Adjusted EBITDA are commonly used to
analyze companies on the basis of operating performance. In addition,
because of the variety of equity awards used by companies, the
varying methodologies for determining stock-based compensation
expense, and the subjective assumptions involved in those
determinations, we believe excluding stock-based compensation
enhances the ability of management and investors evaluate our
operating performance over multiple periods. Management does not use
EBITDA or Adjusted EBITDA as a measure of liquidity because, among
other things, they do not exclude the impact of deferred revenues
associated with the amortization of product lifetime subscriptions.
We do not use stock-based compensation expense in our internal
measures. A limitation associated with these non-GAAP measures is
that they do not include any stock-based compensation expense related
to hiring, retaining, and incentivizing the Company’s workforce.
EBITDA and Adjusted EBITDA are not intended to represent, and should
not be considered more meaningful than, or as an alternative to,
measures of operating performance as determined in accordance with
GAAP.
TIVO INC.
OTHER DATA
Subscriptions Three Months Ended July 31,
----------------------------
(Subscriptions in thousands) 2012 2011
------------- -------------
TiVo-Owned Subscription Gross Additions: 28 25
Subscription Net Additions/(Losses):
TiVo-Owned (23) (43)
MSOs 253 10
------------- -------------
Total Subscription Net Additions/(Losses) 230 (33)
Cumulative Subscriptions:
TiVo-Owned 1,057 1,165
MSOs 1,658 763
------------- -------------
Total Cumulative Subscriptions 2,715 1,928
% of TiVo-Owned Cumulative Subscriptions
paying recurring fees 54% 57%
Included in the 1,057,000 TiVo-Owned subscriptions are approximately
221,000 lifetime subscriptions that have reached the end of the
period TiVo uses to recognize lifetime subscription revenue. These
lifetime subscriptions no longer generate subscription revenue.
Subscriptions. Management reviews this metric, and believes it may be
useful to investors, in order to evaluate our relative position in
the marketplace and to forecast future potential service revenues.
The TiVo-Owned lines refer to subscriptions sold directly or
indirectly by TiVo to consumers who have TiVo-enabled DVRs and for
which TiVo incurs acquisition costs. The MSOs lines refer to
subscriptions sold to consumers by multiple system operators and
broadcasters such as DIRECTV, Virgin Media (United Kingdom), ONO,
RCN, Grande, and Suddenlink, among others, and for which TiVo expects
to incur little or no acquisition costs. Additionally, we provide a
breakdown of the percent of TiVo-Owned subscriptions for which
consumers pay recurring fees, including on a monthly and a prepaid
one, two, or three year basis, as opposed to a one-time prepaid
product lifetime fee.
We define a "subscription" as a contract referencing a TiVo-enabled
DVR for which (i) a consumer has committed to pay for the TiVo
service and (ii) service is not canceled. We count product lifetime
subscriptions in our subscription base until both of the following
conditions are met: (i) the period we use to recognize product
lifetime subscription revenues ends; and (ii) the related DVR has not
made contact to the TiVo service within the prior six month period.
Product lifetime subscriptions past this period which have not called
into the TiVo service for six months are not counted in this total.
Prior to November 1, 2011 we amortized all product lifetime
subscriptions over a 60 month period. Effective November 1, 2011, we
have extended the period we use to recognize product lifetime
subscription revenues from 60 months to 66 months for product
lifetime subscriptions where we have not recognized all of the
related deferred revenue as of the reassessment date. We are not
aware of any uniform standards for defining subscriptions and caution
that our presentation may not be consistent with that of other
companies. Additionally, the subscription fees that our MSOs pay us
are typically based upon a specific contractual definition of a
subscriber or subscription which may not be consistent with how we
define a subscription for our reporting purposes nor be
representative of how such subscription fees are calculated and paid
to us by our MSOs. Our MSOs subscription data is based in part on
reporting from our third-party MSO partners.
TIVO INC.
OTHER DATA - KEY BUSINESS METRICS
Three Months Ended July 31,
---------------------------
TiVo-Owned Churn Rate 2012 2011
------------ ------------
(In thousands, except churn
rate per month)
Average TiVo-Owned subscriptions 1,068 1,188
TiVo-Owned subscription cancellations (51) (68)
------------ ------------
TiVo-Owned Churn Rate per month (1.6)% (1.9)%
------------ ------------
TiVo-Owned Churn Rate per Month. Management reviews this metric, and
believes it may be useful to investors, in order to evaluate our
ability to retain existing TiVo-Owned subscriptions (including both
monthly and product lifetime subscriptions) by providing services
that are competitive in the market. Management believes factors such
as service enhancements, service commitments, higher customer
satisfaction, and improved customer support may improve this metric.
Conversely, management believes factors such as increased
competition, lack of competitive service features such as high
definition television recording capabilities in our older model DVRs
or access to certain digital television channels or MSO
Video-on-Demand services, as well as, increased price sensitivity and
installation and CableCARD(TM) technology limitations may cause our
TiVo-Owned Churn Rate per month to increase.
We define the TiVo-Owned Churn Rate per month as the total TiVo-Owned
subscription cancellations in the period divided by the Average
TiVo-Owned subscriptions for the period (including both monthly and
product lifetime subscriptions), which then is divided by the number
of months in the period. We calculate Average TiVo-Owned
subscriptions for the period by adding the average TiVo-Owned
subscriptions for each month and dividing by the number of months in
the period. We calculate the average TiVo-Owned subscriptions for
each month by adding the beginning and ending subscriptions for the
month and dividing by two. We are not aware of any uniform standards
for calculating churn and caution that our presentation may not be
consistent with that of other companies.
Three Months Ended Twelve Months Ended
July 31, July 31,
-------------------- --------------------
2012 2011 2012 2011
--------- --------- --------- ---------
Subscription Acquisition Costs (In thousands, except SAC)
Sales and marketing,
subscription acquisition costs $ 2,372 $ 2,441 $ 7,347 $ 7,286
Hardware revenues (11,129) (11,580) (53,788) (42,463)
Less: MSOs’-related hardware
revenues 6,696 8,079 36,603 18,691
Cost of hardware revenues 14,431 13,401 70,087 60,522
Less: MSOs’-related cost of
hardware revenues (5,399) (6,019) (31,321) (13,730)
--------- --------- --------- ---------
Total Acquisition Costs 6,971 6,322 28,928 30,306
========= ========= ========= =========
TiVo-Owned Subscription Gross
Additions 28 25 114 147
Subscription Acquisition Costs
(SAC) $ 249 $ 253 $ 254 $ 206
========= ========= ========= =========
Subscription Acquisition Cost or SAC. Management reviews this metric,
and believes it may be useful to investors, in order to evaluate
trends in the efficiency of our marketing programs and subscription
acquisition strategies. We define SAC as our total TiVo-Owned
acquisition costs for a given period divided by TiVo-Owned
subscription gross additions for the same period. We define total
acquisition costs as sales and marketing, subscription acquisition
costs less net TiVo-Owned related hardware revenues (defined as
TiVo-Owned related gross hardware revenues less rebates, revenue
share and market development funds paid to retailers) plus TiVo-Owned
related cost of hardware revenues. The sales and marketing,
subscription acquisition costs line item includes advertising
expenses and promotion-related expenses directly related to
subscription acquisition activities, but does not include expenses
related to advertising sales. We do not include third parties’
subscription gross additions, such as MSOs’ gross additions with TiVo
subscriptions, in our calculation of SAC because we typically incur
limited or no acquisition costs for these new subscriptions, and so
we also do not include MSOs’ sales and marketing, subscription
acquisition costs, hardware revenues, or cost of hardware revenues in
our calculation of TiVo-Owned SAC. We are not aware of any uniform
standards for calculating total acquisition costs or SAC and caution
that our presentation may not be consistent with that of other
companies.
Three Months Ended July 31,
----------------------------
TiVo-Owned Average Revenue per Subscription 2012 2011
------------- -------------
(In thousands, except ARPU)
Total Service revenues $ 32,302 $ 34,016
Less: MSOs’-related service revenues (5,326) (4,371)
------------- -------------
TiVo-Owned-related service revenues 26,976 29,645
Average TiVo-Owned revenues per month 8,992 9,882
Average TiVo-Owned subscriptions per month 1,068 1,188
------------- -------------
TiVo-Owned ARPU per month $ 8.42 $ 8.31
============= =============
Three Months Ended July 31,
----------------------------
MSOs’ Average Revenue per Subscription 2012 2011
------------- -------------
(In thousands, except ARPU)
Total Service revenues $ 32,302 $ 34,016
Less: TiVo-Owned-related service revenues (26,976) (29,645)
------------- -------------
MSOs’-related service revenues 5,326 4,371
Average MSOs’ revenues per month 1,775 1,457
Average MSOs’ subscriptions per month 1,539 753
------------- -------------
MSOs’ ARPU per month $ 1.15 $ 1.94
============= =============
Average Revenue Per Subscription or ARPU. Management reviews this
metric, and believes it may be useful to investors, in order to
evaluate the potential of our subscription base to generate revenues
from a variety of sources, including service fees, advertising, and
audience research measurement. You should not use ARPU as a
substitute for measures of financial performance calculated in
accordance with GAAP. Management believes it is useful to consider
this metric excluding the costs associated with rebates, revenue
share, and other payments to channel because of the discretionary and
varying nature of these expenses and because management believes
these expenses, which are included in hardware revenues, net, are
more appropriately monitored as part of SAC. We are not aware of any
uniform standards for calculating ARPU and caution that our
presentation may not be consistent with that of other companies.
Furthermore, ARPU for our MSOs may not be directly comparable to the
service fees we may receive from these partners on a per subscription
basis as the fees that our MSOs pay us may be based upon a specific
contractual definition of a subscriber or subscription which may not
be consistent with how we define a subscription for our reporting
purposes or be representative of how such subscription fees are
calculated and paid to us by our MSOs. For example, an agreement that
includes contractual minimums may result in a higher than expected
MSOs ARPU if such fixed minimum fee is spread over a small number of
subscriptions.
We calculate ARPU per month for TiVo-Owned subscriptions by
subtracting MSOs’-related service revenues (which includes MSOs’
subscription service revenues and MSOs’-related advertising revenues)
from our total reported net service revenues and dividing the result
by the number of months in the period. We then divide by Average
TiVo-Owned subscriptions for the period, calculated as described
above for churn rate. The above table shows this calculation.
We calculate ARPU per month for MSOs’ subscriptions by first
subtracting TiVo-Owned-related service revenues (which includes
TiVo-Owned subscription service revenues and TiVo-Owned related
advertising revenues) from our total reported service revenues. Then
we divide average revenues per month for MSOs’-related service
revenues by the average MSOs’ subscriptions for the period. The above
table shows this calculation.
SOURCE: TiVo
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