Q3 2012 Earnings Call

November 22, 2011 5:00 pm ET


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

Derrick Nueman - Investor Relations Professional

Naveen Chopra - Senior Vice President of Corporate Development & Strategy

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

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


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

Michael Cohen

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

Anthony Wible - Janney Montgomery Scott LLC, Research Division

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

Daniel Ernst - Hudson Square Research, Inc.

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

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



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Good afternoon, my name is Misty, and I will be your conference operator today. At this time, I would like to welcome everyone to the TiVo Third Quarter Fiscal Year 2012 Conference Call. [Operator Instructions] Mr. Derrick Nueman, Head of Investor Relations, you may begin your conference.

Derrick Nueman

Thank you, and good afternoon. I'm Derrick Nueman, TiVo's Head of Investor Relations. Welcome to the Third Quarter Ending October 31, 2011 Earnings Call. With me today are Tom Rogers, our President and CEO; Anna Brunelle, our 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 third quarter financial results. We also posted a third quarter key metric trend sheet on our Investor Relations website. You may also access a recording of this call on our website over the next 2 weeks. Today's remarks will last about 30 minutes and will be 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 our 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 Securities and Exchange Commission. Any forward-looking statements made today on this call reflect our analysis as of today, and we have no plans or duty to update them.

Additionally, some of the metrics and financial information provided on today's call are non-GAAP metrics. Please see our third quarter fiscal year key metric trend sheet on our Investor Relations website for a reconciliation.

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

Thomas S. Rogers

Thanks, Derrick. Good afternoon, everyone. This was a great quarter for TiVo and one that represented a significant step forward in our growth strategy where we are focused on demonstrating our ability to execute on our current distribution deals to maintain leadership in advanced television and to continue to invest in our business to further extend that leadership. In addition, we posted solid financial results in the quarter. We grew our quarterly service and technology revenues by 25% year-over-year and exceeded guidance on service and technology revenues, adjusted EBITDA and net loss.

The first byproduct of our focus on distribution execution was making our MSO subscription growth positive in the second quarter. This quarter, built on that momentum as we have now put our total subscription growth on a positive trajectory, where we have increased overall subscriptions by 117,000 to more than 2 million. This success was driven by our mass distribution relationships where Virgin Media has now deployed its TiVo offering to more than 220,000 TiVo customers as of the end of October, and RCN has driven significant deployment of its TiVo offering and recently expanded its relationship with TiVo to a whole home solution.

Further, we recently began deployments with Grande Communications and ONO, the largest cable operator in Spain, and we expect Charter, the fourth largest U.S. cable company, to launch very soon. Lastly, DIRECTV will be launching in early December, and integration with Comcast video-on-demand service is now in field trials. We expect all of those initiatives to further contribute to our growth going forward.

The strategic deals with pay-TV operators we just mentioned provide us a potential to reach over 10 million homes on an exclusive or primary basis. Moreover, we have just begun to scratch the surface of this potentially huge opportunity. TiVo is one of only a few companies that offers an advanced television solution, and it's become clear that outside a very small number of operators in the world who are willing to absorb the massive expense of trying to build an advanced television solution on their own, all other operators are going to need an outside third party to provide a cost-effective solution for them.

Now let's discuss what's behind our growth in greater detail, starting with mass distribution. Our mass deployment efforts are proving successful in gaining momentum with pay-TV operators worldwide. These operators recognize the urgent need to retain their position as the key providers of the video experience for consumers. They're increasingly turning to TiVo for help because we have proven we can quickly deploy an effective advanced television solution, which gets exceedingly more value out of the television experience by joining traditional linear TV channels with broadband-delivered content while vastly upgrading the entire user experience. All of this helps to combat the subscriber declines operators are facing of late.

Importantly, it's recognized that cable's great competitive advantage in the U.S. is high-speed broadband connectivity, and not only does TiVo make the cable video product best-in-class, at the same time it drives greater use and perceived value of the broadband offering, which plays to the strategic objectives of all cable operators.

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