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TiVo (TIVO) Reports Q3 Loss, Revenues Benefit From Merger

Digital home entertainment services and solutions provider TiVo Corporation’s TIVO third-quarter revenues marked a significant year-over-year jump and outpaced the Zacks Consensus Estimate.

However, the company reported GAAP loss per share of 14 cents in the quarter. In the year-ago quarter, TiVo had posted earnings from continuing operation of 59 cents.

Quarter in Detail

TiVo’s revenues climbed 29.2% year over year to $197.9 million, mainly backed by the acquisition of TiVo Inc.’s business, new licensing agreements and launch of innovative products. Notably, increasing demand for Pay-TVs prompted various Pay-TV service providers, TV manufacturers, mobile device makers and OTT companies to make licensing deals with TiVo. The company’s quarterly revenues came ahead of the Zacks Consensus Estimate of $197 million.

It should be noted that TiVo Corporation was formerly known as Rovi Corporation. Upon successfully completing the acquisition of TiVo Inc. in early Sep 2016, Rovi adopted the iconic TiVo brand name.

The company’s revenues from the Licensing, services and software division jumped 26.6% year over year to $188 million, contributing 95% to total revenues. The Hardware division’s revenues grew to $9.9 million from $4.6 million recorded in the year-ago quarter and contributed 5% to total revenues.

In terms of business segments, IP Licensing revenues rose 13.5% year over year to $94.3 million and contributed 48% to total revenues. Under the IP Licensing segment, revenues of the U.S. Pay TV Providers increased 8.8% to $63.3 million, while the Other revenues jumped 24.4% year over year to $31 million.

Product revenues surged 47.9% to $103.6 million, contributing 52% to total revenues. Under this segment, Platform Solutions revenues surged nearly 73.9% year over year to $82.2 million, and Software and Services sales increased 3.6% to $20.7 million. Other vertical’s revenues, on the other hand, declined 77.2% to $0.6 million.

The company’s total cost and expenses flared up 15.2% to $199.5 million from $173.2 million incurred in the year-ago quarter. TiVo’s operating loss reduced to $1.6 million from $20 million reported in the year-ago quarter, mainly due to higher revenues.

TiVo exited the quarter with cash, cash equivalents and short-term investments of $225.2 million compared with $213.5 million at the end of the previous quarter.

Outlook

TiVo updated some of its 2017 outlook which is better than its earlier expectation. The company now anticipates to report GAAP operating loss in the range of $2-$8 million, down from a loss between $11 million and $16 million projected earlier. Similarly, GAAP loss before taxes is now estimated to lie between $60 million and $70 million, lower than the earlier range of $70-$80 million.

All other expectations were reiterated. The company still projects generating revenues in the range of $810-$830 million (mid-point $820 million). The Zacks Consensus Estimate is pegged at $823 million.

The company continues to anticipate adjusted EBITDA in the range of $276-$290 million. Non-GAAP pre-tax income is estimated to be in the range of $218-$232 million.

Our Take

We are encouraged by the company’s robust top-line growth, which was mainly driven by the inclusion of the recently merged TiVo Inc.’s business, new licensing agreements, as well as the introduction of innovative products.

Prior to the acquisition, Rovi provided a set of solutions that allowed businesses to protect, enable and distribute digital goods to consumers, helping them discover and manage digital media across multiple channels. On the other hand, TiVo Inc. pioneered a brand new category of products by developing the first commercially available digital video recorder. However, over the years, the company expanded its capabilities beyond hardware sales and patent licensing to online subscription services.

The merger has brought together two leading players in the media entertainment industry, with complementary products and services, as well as a number of patented technologies. The new TiVo Corporation is the global leader in entertainment technology and audience insights. The company has a diverse product portfolio that ranges from interactive program guide to DVR. The combined company has emerged as the world’s leading media and entertainment provider to deliver the ultimate entertainment experience.

Apart from this, the combined company has more than 6,000 issued and pending patents, which offer it a competitive advantage over other media and tech giants.

Nonetheless, the actual synergies from the merger will take some time to reflect in the company’s performance and much depends on how successfully it integrates the legacy business of TiVo.

Notably, TiVo has lost 16.8% of its value, year to date, versus 31.1% growth registered by its industry.

Currently, TiVo carries a Zacks Rank #3 (Hold).

Key Picks

Some better-ranked stocks in the same industry are Autohome Inc. ATHM, Facebook Inc. FB and Baidu, Inc. BIDU. While Autohome sports a Zacks Rank #1 (Strong Buy), Facebook and Baidu carry a Zacks Rank #2 (Buy).You can see the complete list of today’s Zacks #1 Rank stocks here.

Expected long-term EPS growth rates for Autohome, Facebook and Baidu are 18.8%, 25.6% and 27.1%, respectively.

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