TiVo Announces Results for Third Quarter Ended October 31, 2007Wednesday, November 28th, 2007
- Adjusted EBITDA was $0.3 million, considerably ahead of guidance
- Net loss was ($8.2) million
- Goal of getting closer to Adjusted EBITDA breakeven for the year on track
- Announced relationship with NCTA and cable industry to enable cable operator installation and other support for TiVo standalone boxes
- Entered into strategic partnership with NBC to provide their advertisers with a comprehensive set of interactive advertising and audience research solutions
- Deal with Nero to bring the TiVo experience to the PC user
- Bolsters international presence with launch of TiVo service at retail in Canada
ALVISO, Calif. — TiVo Inc. (Nasdaq: TIVO), the creator of and a leader in television services for digital video recorders (DVRs), today reported financial results for the third quarter ended October 31, 2007.
“This was another solid quarter for TiVo as we continued to improve our financial profile by posting substantially better than guided Adjusted EBITDA of $0.3 million and net loss of ($8.2) million,” said Tom Rogers, CEO of TiVo. “In terms of the newer elements of our business driving long-term growth: in mass distribution, Comcast is now available in some non-employee subscriber homes in the greater Boston area with full marketing of TiVo service to begin shortly; we are moving forward on the international front with a launch of TiVo in Canada at retail; in our advertising business, we announced a multi- year partnership with NBC to provide their advertisers with both interactive advertising solutions and audience research and measurement tools; and we made progress on our litigation with EchoStar, which is moving closer to resolution.
“On the standalone side of the business, this quarter was about making clear that this part of the business can be developed without undermining the ability of the emerging businesses to grow. For example, the more popularly priced TiVo HD is now fully available to consumers and is offered at new retail outlets such as Costco and Sears. Additionally, we made substantial progress in solidifying our relationships with the cable industry, ensuring easier installation of our CableCARD products and underscoring the cable industry’s recognition of TiVo’s importance to their subscribers. Finally, we have added even more differentiated features that are all coming together to prove that TiVo is not only a Digital Video Recorder, but a Digital Video Receiver, highlighted by this quarter’s announcement with Rhapsody, which delivers over four million songs to the home.”
For the third quarter, service and technology revenues were $58.3 million, compared with $52.5 million for the same period last year. TiVo reported a net loss of ($8.2) million and a net loss per share of ($0.08), compared to a net loss of ($11.1) million, or ($0.12) per share, for the third quarter of last year. Adjusted EBITDA was $0.3 million, compared to a loss of ($6.0) million in the year-ago period and guidance for the third quarter of fiscal year 2008 of a ($5.0) million to ($8.0) million loss.
“In terms of our mass distribution strategy, our service on Comcast is now available in some non-employee subscriber homes and full marketing efforts will begin shortly in the greater Boston area. We are very excited by the emphasis that Comcast has placed on this product within its organization and their plans to aggressively market it at a $2.95 up-charge as well as through packaged bundles and win-back offers. Further, we are pleased with Comcast’s plans to promote and market the value of the TiVo experience, which will leverage many of their marketing assets including cross-channel TV.
“Also on the distribution front, we recently announced that we have joined forces with Windstream Communications, a telecommunications company that provides voice, broadband, and video services, to market the TiVo service bundled with its core wireline and other services to their over three million subscribers.”
Mr. Rogers continued, “On the international front, we took another significant step forward this quarter as TiVo will now be available in Canada beginning in early December at Best Buy and other major retailers. Given our relationship with Canadian retailers and our distributor, we will be operating on a more efficient marketing basis. We believe that international distribution of TiVo is an important component of our future business mix and see a tremendous amount of opportunity through partnerships, where upside is strong and financial risks are limited. In addition, this quarter the leading cable operator in Mexico City, Cablevision Mexico, began rolling-out the TiVo service.
“We also recently announced a deal with Nero, a leading provider of digital multimedia solutions, to develop a software solution that will bring the TiVo experience to users receiving their television signals through a computer. This deal provides us with another opportunity to deliver our unique user interface and differentiated feature set globally, as it addresses the estimated 50 million PC tuners expected to sell worldwide by 2011, most of which are expected to be purchased outside the U.S.
“This quarter we also saw progress in both our advertising sales and Audience Research and Measurement (ARM) businesses. First, we have entered a strategic relationship with NBC to provide their advertisers with access to certain TiVo interactive advertising solutions capabilities including Interactive Advertising Tags to target fast-forwarding viewers. NBC has also subscribed to our Stop||Watch™ Ratings Service, which provides second-by- second analytics on viewer behavior. This is the first time a network has entered into a subscription for this unique data, which provides insight into the viewership patterns of DVR homes. NBC’s subscription underscores the tremendous value that we are bringing to solve the significant strategic challenges television industry participants face in the age of the DVR.
“Additionally, we recently announced that Starcom is the first media agency to sign up for our Power||Watch™ Consumer Panel, a new research offering providing advertisers access to demographic data for 20,000 households who opt-in to our consumer panel. Finally, we announced a deal with Carat, one of the largest media buying shops and among the fastest growing marketing communications groups worldwide, to provide their clients with access to TiVo’s Stop||Watch and Power||Watch services. These deals significantly strengthen our research offering and bolster ARM’s long-term financial potential.
“In terms of litigation, our case against EchoStar is moving closer to resolution. We were pleased with our presentation of oral arguments before the Court of Appeals and believe that our arguments were well presented on appeal.”
TiVo-Owned subscription gross additions for the third quarter were 69,000, compared to 101,000 gross additions for the year-ago period. Overall, TiVo- Owned subscriptions increased slightly to 1.7 million from 1.6 million in the year ago-period. As expected, TiVo reported a net decline in DIRECTV TiVo subscriptions during the period as DIRECTV is no longer deploying new TiVo boxes. Cumulative total subscriptions as of October 31, 2007 were 4.1 million. Additionally, the monthly churn rate was 1.3% compared to 1.0% in the year-ago period and 1.2% in the second quarter.
Mr. Rogers continued, “In addition to the many new initiatives that will provide catalysts for growth over the long-term for TiVo, during the quarter we have also seen progress in the growth opportunities related to our standalone business.
“Through our recent announcement with the National Cable & Telecommunications Association (NCTA), we have significantly strengthened our relationship with the cable industry in two very meaningful ways. First, we have entered into an agreement with the cable industry that will ensure TiVo Series3 and TiVo HD standalone box users can access and enjoy the multitude of programming that will be delivered through switched digital video technology. Second, the cable industry has agreed, as part of the switched digital solution, to take additional steps to improve installation, including cable installers being part of the TiVo installation process, so that TiVo users have an easy and satisfying installation process. By having additional cable installer involvement, at no cost to TiVo, to ensure the set-up process is successful, we believe both TiVo and cable operators will benefit by having increased subscriber goodwill.
“In addition, as a result of our constructive conversations, TiVo and the cable industry have come to an agreement on a blue-print for a retail TiVo DVR using the cable industry’s OpenCable Application Platform that will have full two-way cable service functionality. While the technical specifications are still being worked out, such a set-top box will mean TiVo subscribers will be able to get full access to cable VOD and other two-way cable services. This could also mean that a standalone TiVo offering could fully substitute for a cable operator set-top box. This understanding was communicated yesterday to the FCC through an ex parte filing by TiVo. We believe that this dialogue with the cable industry has been very constructive, and demonstrates the cable industry’s genuine desire to work with TiVo, not to mention the clear recognition that TiVo is an important offering for cable subscribers.
“We also continue to drive efficiency in our standalone business as we keep a sharp eye on its impact on Adjusted EBITDA. For instance, because we were able to launch TiVo HD with no hardware subsidy in the direct channel, it allows us to continue to make progress on reducing the overall level of marketing resources directed toward the standalone business. We are also working to make our various advertising programs more efficient.
“Finally, our broadband strategy has gained traction this quarter. There are more than 15,000 titles now available to TiVo users through Amazon Unbox and more than 4 million songs available to TiVo subscribers through Rhapsody. Importantly, we are finding that TiVo’s broadband content offerings have strengthened our relationship with consumers as churn is significantly less for broadband connected users. Additionally, over the last year there have been more than 12 million downloads of TiVoCast content. We believe that just as the music world quickly became on-demand, a-la-carte, the television industry will be fully focused on providing broadband video straight to the television in the same way. Because user interface, search and advertising will be the critical underpinnings of any broadband video offering, and because we have pioneered the only comprehensive solution to those elements, we believe that we are very well positioned to be the leaders in offering the best a-la-carte on-demand consumer experience.”
Mr. Rogers concluded, “We believe that this quarter was an important one in terms of capitalizing on the growth opportunities we have in front of us, both in our standalone business and in the newer areas of our business that are beginning to show positive results. We believe that we have right pieces in place to move the business forward and have great confidence that we will.”
Management Provides Financial Guidance
For the fourth quarter of fiscal 2008, TiVo anticipates service and technology revenues in the range of $58 million to $60 million, a net loss in the range of ($9.0) million to ($12.0) million, and an Adjusted EBITDA loss in the range of ($2.0) million to ($5.0) million.
This financial guidance is based on information available to management as of November 28, 2007. 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).