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TheStreet Open House

Rovi Corporation Reports First Quarter 2013 Financial Performance

Forward Looking Statements

All statements contained herein, including the quotations attributed to Mr. Carson, that are not statements of historical fact, including statements that use the words "will," "believes," "anticipates," "estimates," "expects," "intends" or similar words that describe the Company's or its management's future plans, objectives, or goals, are "forward-looking statements" and are made pursuant to the Safe-Harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to, the Company's estimates of revenues and earnings for the 2013 fiscal year, business strategies, and possible sale of its Rovi Entertainment Store business.

Such forward-looking statements involve known and unknown risks, uncertainties and other factors that could cause the actual results of the Company to be materially different from the historical results and/or from any future results or outcomes expressed or implied by such forward-looking statements. Such factors include, among others, the Company's ability to successfully execute on its strategic plan and customer demand for and industry acceptance of the Company's technologies and integrated solutions, and the Company's completion of a sale transaction involving the Rovi Entertainment Store business. Such factors are further addressed in the Company's Quarterly Report on Form 10-Q for the period ended March 31, 2013 and such other documents as are filed with the Securities and Exchange Commission from time to time (available at www.sec.gov). The Company assumes no obligation, except as required by law, to update any forward-looking statements in order to reflect events or circumstances that may arise after the date of this release.

Rovi Q1 2013 Business and Operating Highlights:

Discovery:

  • Approximately 168 million worldwide subscribers; 120 million excluding pre-paid licensees

IP Licensing:

  • Entered into multi-year IP license agreement across all products with LG Electronics
  • Entered into a new license agreement with Hulu, resolving all outstanding litigation

Guide Products:

  • First commercial launch of TotalGuide xD including remote record capability with Cogeco Cable
  • Renewed 33 North American cable operators

Advertising:

  • Launched new advertising campaigns with a major fast food chain, a large airline, a top brewing company and a leading personal care consumer brand
  • Acquired IntegralReach and its predictive television analytics platform that enables broadcast networks, cable service providers, and others in the television distribution industry to analyze massive amounts of click-stream viewership information and other data to optimize ad placements and promotions
  • Signed an agreement with a leading North American service provider for custom analytics reports

Video Delivery and Display:

DivX:

  • Renewed LG Electronics relationship and expanded agreement to license DivX Plus Streaming for mobile devices
  • Expanded Samsung smart television and Blu-ray device license to include DivX Plus Streaming
  • Expanded DivX relationship with Hubee (France) and Maxx-XS BV (Netherlands) to include DivX Plus Streaming
  • More than 50 companies have signed up for and received pre-release copies of the MainConcept HEVC SDK for their internal testing
  • 90 million additional DivX deployments

Other:

Data:

  • Announced agreement with a leader in social media to enable more robust digital media user experiences
  • Expanded geographical coverage for one of the largest CE manufacturers
     
ROVI CORPORATION
GAAP CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
     
  Three Months Ended
  March 31,
  2013 2012
Revenues $ 154,730 $ 171,727
Costs and expenses:    
Cost of revenues 30,748 25,152
Research and development 35,824 40,165
Selling, general and administrative 41,756 40,476
Depreciation 4,464 5,000
Amortization of intangible assets 25,035 25,635
Restructuring and asset impairment charges 637 1,372
Total costs and expenses 138,464 137,800
Operating income from continuing operations 16,266 33,927
Interest expense (16,161) (12,148)
Interest income and other, net 629 1,610
Debt modification expense (304) (4,464)
Loss on interest rate swaps and caps, net (1,044) (104)
Loss on debt redemption (1,758)
(Loss) income from continuing operations before income taxes (614) 17,063
Income tax (benefit) expense (616) 4,543
Income from continuing operations, net of tax 2 12,520
Discontinued operations, net of tax (25,735) (17,129)
Net loss $ (25,733) $ (4,609)
Basic earnings per share:    
Basic income per share from continuing operations $ — $ 0.12
Basic loss per share from discontinued operations (0.26) (0.16)
Basic net loss per share $ (0.26) $ (0.04)
Shares used in computing basic net earnings per share 100,565 107,532
Diluted earnings per share:    
Diluted income per share from continuing operations $ — $ 0.12
Diluted loss per share from discontinued operations (0.26) (0.16)
Diluted net loss per share $ (0.26) $ (0.04)
Shares used in computing diluted net earnings per share 100,877 108,269
     

See notes to the GAAP Consolidated Financial Statements in our Form 10-Q.

     
ROVI CORPORATION
GAAP CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
(UNAUDITED)
     
  March 31, 2013 December 31, 2012
ASSETS    
Current assets:    
Cash and cash equivalents $ 280,380 $ 285,352
Short-term investments 457,387 577,988
Trade accounts receivable, net 99,821 106,018
Taxes receivable 13,787 9,237
Deferred tax assets, net 20,377 20,373
Prepaid expenses and other current assets 28,664 26,786
Assets held for sale 57,950 76,852
Total current assets 958,366 1,102,606
Long-term marketable investment securities 119,764 104,893
Property and equipment, net 31,352 32,791
Finite-lived intangible assets, net 667,320 689,494
Other assets 27,860 23,862
Goodwill 1,348,641 1,341,035
Total assets $ 3,153,303 $ 3,294,681
     
LIABILITIES AND STOCKHOLDERS' EQUITY    
Current liabilities:    
Accounts payable and accrued expenses $ 94,379 $ 94,830
Deferred revenue 14,550 16,152
Current portion of long-term debt 28,606 106,407
Liabilities held for sale 10,826 11,053
Total current liabilities 148,361 228,442
Taxes payable, less current portion 50,925 50,800
Long-term debt, less current portion 1,348,694 1,373,818
Deferred revenue, less current portion 3,241 3,921
Long-term deferred tax liabilities, net 43,058 41,596
Other non current liabilities 16,340 8,683
Total liabilities 1,610,619 1,707,260
Stockholders' equity:    
Common stock 128 125
Treasury stock (676,677) (634,571)
Additional paid-in capital 2,221,717 2,196,567
Accumulated other comprehensive loss (3,426) (1,375)
Retained earnings 942 26,675
Total stockholders' equity 1,542,684 1,587,421
Total liabilities and stockholders' equity $ 3,153,303 $ 3,294,681
     

See notes to the GAAP Consolidated Financial Statements in our Form 10-Q.

             
ROVI CORPORATION          
ADJUSTED PRO FORMA RECONCILIATION          
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)          
(UNAUDITED)          
             
  Three Months Ended Three Months Ended
  March 31, 2013 March 31, 2012
  GAAP   Adjusted GAAP   Adjusted
  Pro Forma (1) Adjustments Pro Forma Pro Forma (1) Adjustments Pro Forma
Revenues:            
Service providers $ 79,774 $ — $ 79,774 $ 79,354 $ — $ 79,354
CE discovery and advertising 38,466 38,466 38,199 38,199
CE video delivery and display 21,020 21,020 37,470 37,470
Other 15,470 15,470 16,704 16,704
Total revenues 154,730 154,730 171,727 171,727
Costs and expenses:            
Cost of revenues (2) 30,748 (1,385) 29,363 25,152 (1,215) 23,937
Research and development (3) 35,824 (6,561) 29,263 40,165 (6,252) 33,913
Selling, general and administrative (4) 41,756 (9,053) 32,703 40,476 (9,768) 30,708
Depreciation (5) 4,464 4,464 5,000 5,000
Amortization of intangible assets 25,035 (25,035) 25,635 (25,635)
Restructuring and asset impairment charges 637 (637) 1,372 (1,372)
Total costs and expenses 138,464 (42,671) 95,793 137,800 (44,242) 93,558
Operating income from continuing operations 16,266 42,671 58,937 33,927 44,242 78,169
Interest expense (6) (16,161) 5,984 (10,177) (12,148) 6,189 (5,959)
Interest income and other, net 629 629 1,610 1,610
Debt modification expense (304) 304   (4,464 4,464  
Loss on interest rate swaps and caps, net (7) (1,044) 1,044 (104) 104
Loss on debt redemption (1,758) 1,758
(Loss) income from continuing operations before income taxes (614) 50,003 49,389 17,063 56,757 73,820
Income tax (benefit) expense (8) (616) 5,061 4,445 4,543 624 5,167
Income from continuing operations, net of tax $ 2 $ 44,942 $ 44,944 $ 12,520 $ 56,133 $ 68,653
Diluted income per share from continuing operations $ —   $ 0.45 $ 0.12   $ 0.63
Shares used in computing diluted net earnings per share 100,877   100,877 108,269   108,269
             
(1) GAAP Pro Forma financial information is the same as our GAAP results; no adjustments have been made to the GAAP results since they are comparative with prior quarter's pro forma results.
(2) Adjustments to cost of revenues consist of the following:
    March 31, 2013 March 31, 2012      
Equity based compensation   $ (1,090) $ (1,215)      
Transition and integration costs   (295)      
Total adjustment   $ (1,385) $ (1,215)      
(3) Adjustments to research and development consist of the following:          
    March 31, 2013 March 31, 2012      
Equity based compensation   $ (5,785) $ (6,252)      
Transition and integration costs   (776)      
Total adjustment   $ (6,561) $ (6,252)      
(4) Adjustments to selling, general and administrative consist of the following:          
    March 31, 2013 March 31, 2012      
Equity based compensation   $ (8,642) $ (9,768)      
Transition and integration costs   (411)      
Total adjustment   $ (9,053) $ (9,768)      
(5) While depreciation is a non-cash item, it is included in Adjusted Pro Forma Income From Continuing Operations as management considers it a proxy for capital expenditures.
(6) Adjustments eliminate non-cash interest expense such as amortization of note issuance costs and the convertible note discount recorded under ASC 470-20 (formerly known as FSP APB 14-1) and reclass to include the impact of interest rate swaps on interest expense.
(7) Adjustment eliminates non-cash mark-to-market gain or loss related to interest rate swaps and caps and reclassifies the current period benefit from the interest rate swap to interest expense.
(8) Adjusts tax expense to the adjusted pro forma cash tax rate.
             
CONTACT: Investor Contacts
         
         Peter Halt
         Rovi Corporation
         +1 (818) 295-6800
         
         Lori Barker
         Rovi Corporation
         +1 (408) 764-5309

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