TiVo's Future Looks Nothing Like Its Past
Just a decade ago, TiVo had no cable operator customers. Today, its cable-generated subscribers vastly outnumber its retail subscriber base. And that's just the beginning of a story that paints TiVo's future as one diverging rapidly from its past.
On his very last earnings call as CEO, long-time TiVo Inc. (Nasdaq: TIVO) leader Tom Rogers was both exuberant about where the company stands today and optimistic about where it's headed. Despite missing analyst targets for earnings per share in the quarter (EPS came in at $.06 versus analyst estimates of $.08), TiVo's revenues were up, and Rogers was able to point to an expanding mix of products and services contributing to growth in his swansong call.
"Tivo has been transformed from a company that many thought as a single product simply would not survive," declared Rogers, adding that TiVo now sells not just to consumers, but also to operators and media companies.
That diversity of sources is what led TiVo's net revenue to jump from $118.4 million in the year-ago quarter to $132.3 million in the latest three-month period. Adjusted EBITDA also rose from $27.7 million to $29.3 million, although excluding litigation expenses and proceeds, that figure dropped slightly from $28.9 million a year ago to $28.4 million in the past quarter.
The news was positive on multiple fronts. Combined revenues from the service and software category and from technology were up nearly 17% to $102.8 million from $88.1 million a year ago, driven largely by increases in the MSO sales channel. And while service and software revenues generated from TiVo-owned subscribers dipped from $21.8 million to $20.5 million in a year (a result of selling more lower-end devices like the TiVo Mini), TiVo was able to boast not only a gross increase in retail subscribers, but also a net increase of 11,000 subscribers in the quarter. That marked the first time in a while that TiVo has been able to report gaining more retail customers than it lost -- a milestone the company attributes in part to the launch of its new set-top, the TiVo Bolt. (See TiVo Takes Aim With Bolt.)
The big story for TiVo, however, isn't its retail improvement. The big story is its growth in international markets and in data analytics services. In the past quarter, TiVo topped 4 million international subscribers for its traditional set-top product, and the company believes the recent acquisition of Cubiware, which is helping to power a "TiVo Lite" product, will open up new opportunities beyond North America and western Europe. (See TiVo Tops 4 Million International Subs.)
Separately, TiVo is also gaining traction from new data services. Revenue in this category (which also includes the proceeds from the admittedly vague sub-category known as "other service and software revenues") jumped an astonishing 67% from $4.3 million to $7.2 million year over year. And TiVo's big success for the quarter was signing a deal with Viacom Inc. (NYSE: VIA) to help develop its data and advertising solutions. (See TiVo, Viacom Team on Ad Targeting.)
On the company's earnings call, Rogers was careful to point out that TiVo's value in the data analytics market derives not from basic video viewing information -- which the company collects from set-top subscribers and plans to give away as free ratings data next year -- but from its ability to support media companies' targeted and programmatic advertising efforts. (See TiVo Promises Free Set-Top Data in Q1 2016.)
"Ratings aren't what is ultimately value," said Rogers. Instead, TiVo hopes to continue to grow its young data business with more customer wins like the one with Viacom.
Overall, TiVo still faces a number of challenges in the short term, making successful execution of new business strategies critical.
As CMO Ira Bahr pointed out earlier this fall, there are millions of video streaming devices on the market and tens of millions of DVRs, which means TiVo has "a lot of ground to make up" on that front. (See TiVo's Retail Fortunes Flag.)
Plus, with Rogers departing from the CEO position at the end of January (he will stay on as chairman), TiVo will have to work its way through a significant transition of leadership. (See TiVo CEO Rogers Bows Out at Critical Time.)
However, emerging revenue from new lines of business bodes well for the company. And Rogers was accurate in his summary assessment at the end of this quarter's earnings call: "Obviously TiVo has come a long, long way."
— Mari Silbey, Senior Editor, Cable/Video, Light Reading