TiVo (TIVO)

Q1 2013 Earnings Call

May 30, 2012 5:00 pm ET

Executives

Derrick Nueman - Investor Relations Professional

Thomas S. Rogers - Chief Executive Officer, President and Director

Anna Brunelle - Chief Financial Officer, Principal Accounting Officer and Vice President

Naveen Chopra - Senior Vice President of Corporate Development & Strategy

Matthew Zinn - Chief Privacy Officer, Senior Vice President and General Counsel

Analysts

Edward S. Williams - BMO Capital Markets U.S.

David W. Miller - Caris & Company, Inc., Research Division

Anthony Wible - Janney Montgomery Scott LLC, Research Division

Barton E. Crockett - Lazard Capital Markets LLC, Research Division

Paul Coster - JP Morgan Chase & Co, Research Division

Alan S. Gould - Evercore Partners Inc., Research Division

Todd T. Mitchell - Brean Murray, Carret & Co., LLC, Research Division

Eric Wold - B. Riley & Co., LLC, Research Division

Andy Hargreaves - Pacific Crest Securities, Inc., Research Division

Richard Tullo - Albert Fried & Company, LLC, Research Division

Presentation

Operator

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Welcome to the TiVo First Quarter Fiscal Year 2013 Earnings Conference Call. With that, I would now like to turn the call over to Derrick Nueman. Please go ahead.

Derrick Nueman

Thank you, and good afternoon. I'm Derrick Nueman, TiVo's Head of Investor Relations. Welcome to the First Quarter Conference Call Ending April 30, 2012. With me today are Tom Rogers, CEO; Anna Brunelle, CFO; Naveen Chopra, SVP of Business Development and Corporate Strategy; and Matt Zinn, our General Counsel.

We have just issued a press release and 8-K detailing our first quarter financial results. We also posted a first quarter key metric trend sheet on our Investor Relations website. You may access a recording of this call over the next 2 weeks. Our prepared remarks today should last about 25 to 30 minutes, followed by a question-and-answer session.

Our discussion today includes forward-looking statements about TiVo's future business and growth strategies. We caution you not to put undue reliance on these forward-looking statements, as they involve risks and uncertainties that may cause actual results to vary materially from the forward-looking statements. Factors that may cause actual results to differ materially are described under Risk Factors in our annual, quarterly and current reports with the SEC. Any forward-looking statements made on the call today reflect analysis as of today, and we have no plans or duty to update them.

Additionally, some of the metrics on today’s' call are non-GAAP. Please see our first quarter metric trend sheet on the Investor Relations website for a reconciliation.

With that, I will now turn over the call to Tom Rogers.

Thomas S. Rogers

Thanks, Derrick, good afternoon, everyone. We are more excited about our business now than ever before, and here's why. First, given our current subscriber run rate, we are on a pathway to add close to 1 million subscribers in the next 12 months, and this will lead to meaningful revenue growth during that period and ultimately, will lead to an increase of tens of millions of dollars of incremental MSO revenue over the next several years. Second, we fully expect to sign new distribution deals in the near term. Third, we continue to protect our intellectual property and believe there is potential for us to realize further upside in this fiscal year. Finally, should we continue to see a gap between the value we are building in our business and how the market values it, we will continue to look for ways to drive value, including buying back shares.

Now let's start off by putting some color around this quarter's earnings results. In some ways, financial results this quarter were not as straightforward as we would have liked, but as we cover the specifics today, I think you'll see that our underlying trends and growth opportunity remains solid. As Anna will cover in more detail, we had an unexpected inventory charge and higher-than-expected legal expenses that put some pressure on earnings. Regardless, these challenges do not alter our confidence in our expectations for the rest of the year and beyond.

Now, on to the positive highlights of the quarter. Our financial results were highlighted by 40% year-over-year revenue growth and a significant improvement in year-over-year adjusted EBITDA when excluding the impact of the past damages from the DISH settlement.

The global adoption of TiVo continued as we grew our subscription base by 400 -- I'm sorry, 524,000 subscriptions year-over-year and doubled our growth rate from the previous quarter.

We continue to protect our intellectual property. Just as our innovation helped revolutionize the TV On Demand era, recent innovative efforts have positioned TiVo to lead the whole home television consumption and TV Everywhere experience movements, as well as the transition of the viewing experience to IP delivery.

We are experiencing success because cable operators are increasingly demanding a product that contain an increasingly chaotic array of content choices. Consumers are now exposed to millions of pieces of content from a whole host of sources whether from traditional TV, broadband-delivered content or operator video on-demand.

The problem for consumers and, as a result for operators, is that more content and more devices mean more chaos, and more chaos means an ever-increasing need to organize all of this content in a way that makes it easily accessible and customizable.

Not only are consumers demanding any movie or television show whenever they want it, they're also demanding them wherever they want it on multiple devices and screens. Moreover, consumers want the flexibility to view the shows they care about most, which tend to be the ones they record on those devices. This trend is becoming even more critical to operators given that there have been close to 70 million iPads sold since the first model debuted and the appetite for tablets only continues to grow.

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