Rovi (ROVI) Q2 2011 Earnings Call August 09, 2011 4:30 pm ET Executives Alfred Amoroso - Chief Executive Officer, President and Director Lauren Landfield - Vice President of Corporate Finance and Investor Relations James Budge - Chief Financial Officer Analysts James Goss - Barrington Research Associates, Inc. Ingrid Chung - Goldman Sachs Group Inc. Ryan Fiftal - Morgan Stanley Corey Barrett Edward Maguire - Credit Agricole Securities (USA) Inc. Jason Cheu John Vinh - Collins Stewart LLC Michael Olson - Piper Jaffray Companies Robert Stone - Cowen and Company, LLC Presentation Operator
Second, our results and estimates released earlier today, as well as our discussion on this call, include non-GAAP adjusted pro forma information, which exclude, as applicable, non-cash items and items that impact comparability such as amortization, equity-based compensation and discrete tax items and the tax effect of all non-GAAP adjustments. Depreciation expense, while a non-cash item, is included in adjusted pro forma operating results as a proxy for capital expenditures to demonstrate recurring cash-based earnings results. Adjusted pro forma combined company information assumes the Sonic Solutions acquisition was effective on January 1, 2010. Adjusted pro forma reconciliations for historical results including Sonic Solutions are in our press release. We have presented and are discussing adjusted pro forma combined company information because this is how we have and will evaluate our business. We believe that this presentation may be meaningful to our investors in analyzing the company's results of operations.This presentation is not intended to be a substitute for our financial results presented in conformity with the Generally Accepted Accounting Principles in the United States, and investors and potential investors are encouraged to review the reconciliation of adjusted pro forma financial measures included in our earnings press release. And as the final piece of housekeeping, the webcast of this conference call will be available on our Investor Relations web page until our next quarterly earnings call. I'd now like to turn the call over to Fred. Alfred Amoroso Well, thank you, Lauren. And thanks, everyone, for joining us today for our quarterly conference call. As you may have seen in our earnings press release, we grew adjusted pro forma revenue to $193 million in Q2. Similar to previous quarters, our business continued to grow due to new license agreements, increases in device shipments that incorporate our products or are licensed under our patents, the continued conversion of analog TV subscribers to digital, as a well as advertising growth. When combined with operating efficiencies, this resulted in a 20% year-over-year increase in adjusted pro forma EPS to $0.61. I'm pleased with our successful financial results, as well as the significant progress we've made securing customer wins for our new solutions across our verticals. I'll discuss our progress in more depth shortly but first, James will review some of the financial metrics. James?
James BudgeThank you, Fred, and hello, everyone. As Fred mentioned, we grew adjusted pro forma revenue to $193 million in Q2. Revenue in our service provider vertical, which is primarily comprised of IPG products and patents licensed to cable satellite and telecom companies, grew 17% year-over-year to $74 million in the second quarter. This growth was driven by the continued conversion of analog subscribers to digital, the addition of new international licensees and accelerating growth in our service provider product revenues. It's worth noting that our service provider product revenues rose 39% year-over-year, marking the fourth consecutive quarter of 20-plus percent product growth. The strength in products was achieved by improved pricing on contract renewals, continued convergence of SARA guide to Passport, new applications and advertising. Subscribers worldwide receiving a license through our Rovi-provided set-top box based IPG rose to $133 million at the end of Q2 2011, up from $124 million in Q2 2010. Excluding prepaid licensees, primarily Comcast and Dish, total Rovi licensed subscribers are now approximately 91 million versus 85 million in the year-ago period. Subscribers receiving a Rovi-provided set-top box based IPG, either a Passport or i-Guide, rose 29% to $18 million at the end of Q2 2011. Adjusted pro forma revenue in our CE vertical, which includes guidance products and patents licensed to device manufacturers DivX and ACP for hardware, was $86 million in Q2 2011, up 15% from $74 million in Q2 2010. Read the rest of this transcript for free on seekingalpha.com