Back to top

Analyst Blog

TiVo Inc (TIVO - Analyst Report) reported dismal second quarter 2013 results. Although the loss per share of 23 cents was in line with the Zacks Consensus Estimate, revenue was slightly short of the consensus mark of $67.0 million.

Quarter Details

Revenues increased 6.7% year over year to $65.3 million in the reported quarter. The strong growth was primarily driven by higher Service and Technology revenue, which jumped 9.1% year over year to $54.1 million. This fully offset a 3.9% decline in hardware revenue in the quarter.

Net subscription additions for the quarter were 230,000 compared with 33,000 subscription loss in the year-ago quarter. Churn rate was negative 1.6% in the quarter versus negative 1.9% posted in the prior-year quarter. Subscription acquisition costs (SAC) decreased to $249 from $252 reported in the prior-year quarter.

Gross profit climbed 9.4% year over year to $38.2 million. Gross margin expanded 150 basis points to 58.5% in the reported quarter, primarily due to lower, service and technology costs, which fully offset a significant increase in hardware cost.

Operating expenses jumped 21.6% year over year to $64.7 million due to higher general & administrative expense (“G&A”), which surged 42.7% on an annual basis. Research & development (“R&D”) expense soared 13.9% year over year while sales & marketing (“S&M”) expense increased 4.9% in the reported quarter.

TiVo reported an operating loss of $26.5 million compared with a loss of $18.3 million in the year-ago quarter. Adjusted EBITDA loss was $15.8 million compared with $9.2 million in the year-ago quarter, much better than management’s guided range of a loss of $16.0 million to $18.0 million.

TiVo reported net loss of $27.7 million or 23 cents compared with a loss $19.6 million or 17 cents in the year-ago quarter.

TiVo exited the second quarter with cash, cash equivalents and short-term investments of $542.8 million versus $567.3 million in the previous quarter.

Guidance

For the third quarter of 2013, TiVo expects service and technology revenues in the range of $57 million to $59 million. TiVo expects net loss in the range of $27.0 million to $29.0 million and an adjusted EBITDA loss in the range of ($14.0) million to ($16.0) million. Litigation costs are expected to hurt EBITDA in the upcoming quarter.

For the second half of the year, management expects strong growth in license revenues, lower R&D cost, and higher litigation costs. TiVo expects adjusted EBITDA to significantly benefit from higher licensing revenue and subscriber fees. Management expects adjusted EBITDA to breakeven for full year 2013.

Our Take

We remain optimistic about TiVo’s long-term growth potential owing to new partnerships, product launches and international expansion. We believe that TiVo will continue to witness strong subscriber growth based on its partnerships with Virgin Media Inc. , RCN, ONO, Charter Communications, Comcast Corp. (CMCSA - Analyst Report), Suddenlink and DIRECTV going forward.

However, pending patent litigation issues, rising R&D costs, higher hardware and sales & marketing costs are expected to impact TiVo’s profitability over the next few quarters. Increasing competition from cable and satellite providers could also hurt profitability over the long term. Thus, we have a Neutral recommendation on TiVo over the long term (6-12 months).

Currently, TiVo has a Zacks #3 Rank, which implies a Hold rating for the short term (1-3 months).

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
RPC INC RES 24.91 +8.35%
LITHIA MOTO… LAD 94.59 +4.60%
DELTA AIR L… DAL 39.15 +3.90%
FLAMEL TECH… FLML 14.51 +3.50%
SOUTHWEST A… LUV 28.87 +2.92%