TiVo Adds 285K Net Subs in Q1

Eyes International Expansion Via Cubiware Acquisition
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TiVo said Tuesday that it added 285,000 subscribers in its fiscal first quarter, most of them coming way of MSO partnerships, to extend its cumulative sub base to 5.75 million.

TiVo ended the period with 4.81 million subs through MSO deals, up from 3.58 million in the year-ago quarter, and with 944,000 TiVo-owned subs, versus 957,000 a year ago.  However, positive TiVo-owned net adds in Q1 represented the best first quarter in that category in eight years, while gross retail sub adds of 39,000 were up 22% year-over-year, TiVo said.

Retail subscription growth came way of a mix of products, driven by the Roamio lineup (including contributions from the new OTA model)  and more attractive whole-home pricing involving the TiVo Mini, Tom Rogers, TiVo’s president and CEO, said in an interview.

Update: Speaking on Tuesday's earnings call, Rogers said North American operator partners represented 48% of TiVo's total new MSO subscription additions in the first quarter, the highest it has ever been, noting that Cogeco of Canada, for example, launched its TiVo-powered product in its Quebec market "and the early results there are promising...This launch was important, as it was the first time the TiVo software has included bilingual capabilities, which is something we believe can help as we look to expand distribution in Canada as well as other regions where this is a necessary capability." TiVo, he said, sizes that market at about 15 million homes between the U.S. and Canada, and that TiVo now has about 7 million of those homes represented by its existing operator contracts.

"We are also having active ongoing discussions with a number of operators covering the remaining eight million homes as well as with operators beyond this identified segment," Rogers said. 

Cubiware Deal 

TiVo also announced that it has acquired Cubiware, a provider of middleware for cable, satellite and IPTV operators, claiming that the deal will enable TiVo to expand its presence in 25 countries. Warsaw, Poland-based Cubiware has deals with about 40 customers across Latin America, Europe, and the Middle East and Asia, representing approximately 12 million pay-TV subs. Cubiware’s announced partners include Columbus Communications (part of Cable & Wireless) and Cablemas (part of Televisa) in Latin America. Cubiware said its software is deployed on more than 4 million devices in the field.

Evolution Digital, one of TiVo’s partners, has shown the TiVo platform running as a native app on middleware from Cubiware without requiring TiVo’s full-on Hardware Porting Kit, enabling TiVo to run on digital transport adapters and other devices that rely on less horsepower.

“We’ve been quite impressed with the level of their [Cubiware’s] reach in the international sector,” Rogers said. Cubiware, he added, has built a reputation as a player that can help small- and mid-tier operators looking for more cost-efficient approaches to next-generation, advanced TV.

The acquisition is “an important, strategic step for us internationally,” Rogers said. 

Update: Naveen Chopra, TiVo’s CFO and SVP of corporate development strategy, said on the earnings call that the Cubiware has three components – an upfront amount of $16 million, a fixed amount of $11.5 million to be paid over time subject to continued employment of “certain key employees,” and an earn-out of up to $20.5 million if certain annual revenues and adjusted EBITDA growth targets are achieved. 

TiVo said it expects the Cubiware acquisition to be accretive to adjusted EBITDA in its current fiscal year. 

Financial Snapshot 

On the financial front, TiVo posted a first quarter profit of $7.9 million (8 cents per share), and revenues of $114.7 million, up 7.1%. Both figures beat analyst expectations.

Digitalsmiths, the video recommendations company acquired by TiVo last year, saw revenue roughly double in the quarter year-on-year and 15% sequentially, thanks in part to a new set-top rollouts with Foxtel and a signfiant acceleration of its deployment with Time Warner Cable.

Looking ahead to the second quarter, TiVo said it anticipates service and technology revenues in the range of $94 million to $97 million, adjusted EBITDA of $29 million to $32 million, and net income of $7 million to $10 million -- figures that do not factor in Cubiware. TiVo noted that it also expects lower hardware revenue in the period verus the first quarter due to the continuing trend of MSO partners opting to offer TiVo services on third-party hardware. On that count, TiVo recently announced an integration deal with Arris, complementing similar agreements with other major set-top box providers such as Cisco Systems, Samsung and Pace, which is in the process of merging with Arris

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).

TiVo shares were up 44 cents (4.25%) to $10.80 each in after-hours trading Tuesday.

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