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Why Is TiVo (TIVO) Down 4.8% Since Last Earnings Report?

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It has been about a month since the last earnings report for TiVo (TIVO - Free Report) . Shares have lost about 4.8% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is TiVo due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

TiVo's Q3 Earnings & Revenues Disappoint

TiVo reported dismal results for third-quarter 2018 wherein its top and bottom lines declined on a year-over-year basis.

The company reported loss of 19 cents per share, wider than the year-ago quarter’s loss of 14 cents.

The company’s non-GAAP earnings per share came in at 24 cents compared with 40 cents a year ago.

TiVo’s revenues decreased 16.8% year over year to $164.7 million and also missed the Zacks Consensus Estimate of $167 million. The decline in revenues was primarily due to lower revenues from the Legacy TiVo Time Warp IP deals and the company’s transition from being a seller of analog and hardware products.

The company’s core revenues (excludes revenues from Legacy TiVo Solutions IP Licenses, Hardware and Other Products) were $156.4 million, a decline of 4.5% from the year-ago quarter.

Quarter in Details

The company’s revenues from the Licensing, services and software division dropped 14.5% year over year to $160.8 million. The division contributed 97.6% to total revenues.
 
Hardware division’s revenues declined to $3.9 million from $9.9 million recorded in the year-ago quarter and contributed 2.4% to total revenues.

In terms of business segments, Product revenues were down 8.7% to $94.6 million. Revenues from Platform Solutions decreased 11.1% to $73.1 million. Software and Services declined 3.9% to $19.9 million. However, Other category grew from $0.6 million to $1.6 million.

Notably, Product revenues were down owing to the company’s shift to ASC 606 revenue standard, which per management resulted in a $4.5 million decline in revenues from the company’s two international MSO software customers.

However, management remains optimistic about TiVo Experience 4, which the company is plans to enhance by adding IPTV offering.

TiVo also launched the TiVo BOLT OTA, which received a flurry of positive reviews.

IP Licensing revenues declined approximately 25.7% year over year to $70.1 million due to fall in revenues from an out-of-license Consumer Electronics Manufacturers.

Notably, the company also announced that this was the last quarter in which revenues from Time Warp were realized. Notably, agreements with Time Warp expired in July.

Under the IP Licensing segment on a year-over-year basis, revenues of the U.S. Pay TV Providers declined 30% to $44.5 million. New Media, International Pay TV Providers and Other grew 8% to $16.8 million. Consumer Electronics Manufacturers decreased 43% to $8.9 million due to expiration of license with a customer.

The company’s total cost and expenses decreased 14% year over year to $172.4 million on the back of reduced hardware sales and the company’s ongoing cost-reduction efforts.

Adjusted EBITDA declined 29% from year-ago quarter to $47.1 million due to lower revenues and higher spend on patent litigation. The company anticipates further increase in IP litigation spends owing to investment in the ongoing Comcast litigation.

Non-GAAP pre-tax income was $32.9 million compared with $54.1 million in the same period last year.

TiVo exited the reported quarter with cash, cash equivalents and short-term marketable securities of $311.8 million compared with $297.3 million at the end of the previous quarter.

Note: The EPS data mentioned in the text of this section differs from the rest of report due to the difference in calculation or consideration of one-time items.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted 20% due to these changes.

VGM Scores

Currently, TiVo has a strong Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise TiVo has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.




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