TiVo Reports Results for the Third Quarter Ended October 31, 2011
-- Total net subscription additions of approximately 117,000, accelerating significantly compared to net subscription losses of 33,000 in the prior quarter; First increase in total subscriptions in four years
ALVISO, CA -- (Marketwire) -- 11/22/2011 -- TiVo Inc. (NASDAQ: TIVO), a leader in advanced television services, including digital video recorders (DVRs), for consumers, television service providers, and consumer electronics manufacturers, today reported financial results for the third quarter ended October 31, 2011.
Tom Rogers, President and CEO of TiVo, said, "This was a great quarter and represented a significant step in our growth strategy. Our efforts to get TiVo in more homes globally continues to accelerate as we drove approximately 117,000 net subscription additions and returned to total positive net subscription growth for the first time in four years. We also exceeded our quarterly guidance on service and technology revenues, Adjusted EBITDA and net income. In the U.K., Virgin Media has now deployed its TiVo offering to more than 220,000 subscribers as of the end of October, and RCN recently expanded its TiVo product offering through the deployment of a whole-home solution. Both ONO and Grande deployments are now live, and we expect Charter Communications to begin initial deployments shortly. Additionally, DirecTV intends to launch its TiVo offering in select markets in December with a nationwide rollout to follow early next year. All of this is a testament to our leadership in advanced television and our ability to drive meaningful solutions to market."
For the third quarter, service and technology revenues were $51.8 million, growing 25% year-over-year. This compared to our guidance of $49 million to $51 million, $41.3 million for the same quarter last year and $49.6 million in the prior quarter. TiVo reported a net loss of ($24.5) million, compared to guidance of a net loss of ($27) million to ($29) million and a net loss of ($20.6) million in the same quarter last year. Net loss per share this quarter on a basic share basis was ($0.21). Additionally, Adjusted EBITDA was a loss of ($13.9) million, compared to Adjusted EBITDA guidance of a loss of ($17) million to ($19) million, and to an Adjusted EBITDA loss of ($12.2) million in the same quarter last year. TiVo ended the quarter with 2.04M total subscriptions, up 117,000.
Rogers continued, "Our mass deployment efforts are proving successful and gaining momentum with Pay-TV operators worldwide. These operators recognize the need to retain their position as the key providers of a video experience for consumers. They are increasingly turning to TiVo because of TiVo's proven advanced television solution that enables them to extract more value out of the television experience by joining traditional linear TV channels with broadband delivered content while vastly upgrading the user interface.
"Demand for Virgin Media's TiVo offering is quickly growing throughout the U.K. Just six months after launch, Virgin Media said that it had more than 220,000 TiVo subscribers live, up from the 50,000 just three months prior. Even more impressive is that 40% of these TiVo subscribers are new to Virgin Media. Virgin Media has also seen a significant increase in its customer satisfaction metrics, and CEO Neil Burkett best summed up what TiVo has done for Virgin Media when he said on the company's most recent earnings call, 'So how are our customers finding it? Well, firstly, they love it. Our net promoter score or customer satisfactions is much higher for TiVo than our legacy TV product. In fact, TiVo customers are twice as likely to recommend Virgin Media to their friends, telling their friends and their family about the game-changing technology, about the content discovery, and about their control. TiVo is facilitating a personalization that customers want. It's liberating them and putting them in control of their own viewing. 80% said that TiVo gives them more freedom to watch TV when they want it. 50% are watching more catch-up TV."
Rogers continued, "Moving to RCN in the United States, in a short period of time we've had an excellent reception for TiVo Premiere from RCN, and RCN has been a key contributor to our turnaround in subscription growth. More importantly, RCN has experienced higher customer satisfaction, lower churn and increased Video On Demand (VOD) usage in homes with TiVo. To that end, we are pleased that RCN is now expanding its suite of TiVo offerings to become the first Pay-TV operator to deploy what cable operators have been seeking for a long time, which is a way to get the TiVo user interface distributed more broadly in the form of a non-DVR set-top box. This is an indication of how operators want to use TiVo as an interface for an entire whole-home experience.
"We believe the success we've seen with these two operators along with our on-going deployment with Suddenlink, our recent launches with Grande and ONO and our planned upcoming launch with Charter puts us in a solid position to continue our upward trajectory as these operators represent more than 10 million homes that we now have the ability to reach as an exclusive or primary product offering. Additionally, DirecTV has informed us that they intend to initiate the launch of the TiVo-DIRECTV product in select markets in December with a nationwide rollout to follow early next year. Finally, we believe the tangible success current Pay-TV partners are seeing with our product will lead to further distribution opportunities both domestically and abroad.
"We believe that penetration within our current distribution deals and potential new deployment deals along with stabilizing our TiVo-Owned business, where churn has slowed and new subscriptions have come in at much higher subscription fees, is setting the foundation for the long-term growth of TiVo. Further, we believe our upcoming integration of Comcast VOD with our retail product, which is now currently in field trial, will be the first retail set-top box to combine traditional cable and cable video on demand with all of the great services the Tivo Premier DVR enables, will be an opportunity to drive incremental TiVo-Owned subscriptions.
"Turning to our advertising and audience research and measurement business, TiVo's advertising solutions continue to be an important offering for brands, advertisers and networks looking to grab the attention of the timeshifting viewer in a nonintrusive way. During this year, we have delivered 1.95 billion interactive ad impressions thus far for our advertising clients which compares very favorably to many large cable operators' interactive advertising offerings. This number is derived from just our current base while we continue to focus on creating opportunities for advertising growth off of our operator deployments.
"Finally, we continue to believe there is tremendous value in defending our innovation and intellectual property. We are pleased with how our case against AT&T and Microsoft in the United States District Court for the Eastern District of Texas is progressing after receiving what we believe is a positive claim construction and with trial currently scheduled to begin in January."
Rogers concluded, "This is an exciting time for TiVo as we head down a path toward sustained growth, marked this quarter by returning our total subscription base to positive growth and exceeding guidance in our financial results. Looking out at the fourth quarter and into our next fiscal year, we are focused on improving Adjusted EBITDA and achieving success in four key areas: executing on current distribution deals we have in place; signing new distribution deals; reducing R&D and litigation spend over time; and protecting our intellectual property. As these four key areas play out, TiVo is well positioned to create shareholder value."
Management Provides Financial Guidance
For the fourth quarter of fiscal 2012, TiVo anticipates service and technology revenues in the range of $48 million to $50 million. TiVo anticipates net loss to be in the range of ($31) million to ($33) million, and an Adjusted EBITDA loss to be in the range of ($21) million to ($23) million. Included in the fourth guidance is higher expected litigation expense relating to AT&T/Microsoft cases where significant activity is scheduled in December and January and the expected impact of flooding in Thailand on our hard drive costs which we believe will be less than $1 million in the fourth quarter. Further, we anticipate litigation expense to be lower in both the first quarter and the full-year fiscal 2013.
This financial guidance is based on information available to management as of November 22, 2011. 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).