TiVo Gets Back in the Black

Recent Settlements, MSO-Driven Subscription Growth Help TiVo Swing To a Q2 Profit of $268.9 Million
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MSO-based subscription growth and income tied to recent financial settlements with Google and Cisco Systems helped TiVo swing to record profits of $268.9 million ($1.96 per share) in the fiscal second quarter on net revenues of $100 million.

TiVo, which lost $27.7 million on revenues of $65.3 million in the year-ago quarter, said it "achieved the milestone of sustained net income profitability."

TiVo added a 212,000 net new subscribers in the quarter, versus 230,000 in the year-ago period. It added 238,000 net customers through MSO partnerships, giving it 3.6 million in the category. As a result, MSO service revenue rose 58% in the second quarter.

The ongoing challenge for TiVo has been on the retail end. TiVo-owned subs dropped by 23,000, giving it a total of 981,000 at the end of the period. TiVo is looking for its recently launched “Roamio” line of DVRs to provide a lift at retail.

"We expect Roamio to positively impact the trajectory of our retail business in the back half of the year and from an economic standpoint," TiVo CEO Tom Rogers said on Tuesday's earnings call. 

Despite historic sluggishness at retail, TiVo's MSO strategy has brought in almost 1 million new TiVo subscriptions, Rogers said.

He said TiVo's coming launch with Sweden's Com Hem later this year "is particularly exciting for us," as it marks the company's first integration with an IPTV service and could serve as a springboard for others. "We plan to showcase this implementation to a variety of other IPTV operators, including international telcos, which we believe broadens the market opportunity for our products and services beyond the cable arena, which has historically been our focus," Rogers said. With IPTV now a key piece of TiVo's arsenal, Rogers opened up the possibility that the company would look for ways to integrate its platform with connected game consoles.

TiVo CFO Naveen Chopra said TiVo’s operator deals represent companies that serve 10 million combined subs, a figure that does not include contributions from DirecTV and Charter Communications, “where we’re either a secondary option or the specific of when and how TiVo products might be deployed are still being resolved.”

TiVo’s $1 billion in cash has caught the eye of analysts. On the call, one asked if TiVo was thinking of using it toward something “transformative,” such as an acquisition or a merger. Rogers acknowledged that TiVo has been “extremely conservative” on that front, but hasn’t come across an M&A opportunity “that’s considered transformative.”

Looking ahead, TiVo said it expects third quarter service and technology revenues to be in the range of $80 million to $82 million, driven by a full quarter of revenue recognition of the Cisco/Google settlement, and net income of between $6 million to $8 million.