In its first full quarter reporting as the merged entity of legacy companies Rovi and TiVo, new TiVo unveiled the announcement of a five-year, wide-ranging licensing deal with Samsung alongside Q3 earnings that beat Wall Street analyst forecasts.
The announcement with Samsung promises an end to previous litigation with the company and expands TiVo Inc. (Nasdaq: TIVO)'s licensing reach across Samsung Corp. 's mobile, consumer electronic and set-top devices.
"Recall that prior to the acquisition by Rovi, TiVo had initiated litigation against Samsung," noted TiVo CEO Tom Carson in the company's earnings call. "In connection with the arrangement reached with Samsung, the legacy TiVo/Samsung litigation will be immediately stayed, and upon satisfaction of certain conditions in Q4 2016, the litigation will be dismissed."
Carson added that he believes the deal with Samsung proves "the merger of Rovi and TiVo resulted in a stronger combined company and serves as an example of the many avenues available to realize revenue synergies as the new TiVo."
For the quarter, TiVo reported $153.1 million in revenue and non-GAAP pre-tax income of $45.6 million. After subtracting an estimated $7 million in cash taxes, TiVo's non-GAAP net income ended up at about $38.6 million in the three-month period.
TiVo CFO Peter Halt also weighed in on the calculations necessary to reach an estimated non-GAAP earnings-per-share number. Halt placed non-GAAP EPS at "$0.42 per share if you chose to do the math."
In addition to the Samsung news, TiVo's leadership team also highlighted several milestones for the company in the Q3 earnings report. With the close of the TiVo/Rovi merger, TiVo realized a ten-year deal with Dish Network LLC (Nasdaq: DISH) that includes a patent agreement and licensing of TiVo's conversational search platform. That announcement means that TiVo now counts nine of the top ten US pay-TV providers as customers.
In the quarter, TiVo also launched its TiVo Bolt+ DVR product, although company leadership was careful not to put too much emphasis on the retail device given its hesitation about pursuing the hardware market going forward. (See TiVo Touts New 4K Bolt and TiVo May Exit Retail Hardware Business.)
Much of the focus in TiVo's Q3 earnings report was on the integration of the legacy Rovi and TiVo businesses. The company said it is still expecting at least $100 million in cost synergies from the merger, with $40 million realized by the end of the year.
In addition, TiVo executives are optimistic about potential revenue synergies, noting the opportunity to upgrade legacy Rovi guide customers to the TiVo software platform, and the ability to create new products with technology coming from both the Rovi and TiVo teams. As an example, Halt mentioned the possibility of combining TiVo's Digitalsmiths content discovery software with Rovi's conversational user interface.
The one lingering negative for TiVo is ongoing litigation with Comcast Corp. (Nasdaq: CMCSA, CMCSK). TiVo is suing Comcast for patent infringement in a lawsuit that may be stuck in court for several years. TiVo executives said that a proceeding with the International Trade Commission is expected to begin in mid-December. A District Court case with Comcast over the patent infringement issue isn't expected to go to trial until sometime in 2018.
According to TiVo's Carson, the Comcast litigation is centered on pricing for the licensing of TiVo's patents. "Our approach," said Carson, "has been to do our best to try to avoid litigation and to get a reasonable deal done. I would hope that all the deals that we have now send a message to Comcast that the industry is set in terms of what the rates are."
— Mari Silbey, Senior Editor, Cable/Video, Light Reading