TiVo Inc. (TIVO) swung to a fiscal second-quarter profit, as the
maker of TV set-top boxes benefited from a large settlement
agreement and posted higher subscriber rolls.
For its third quarter, TiVo projected net income of $6 million
to $8 million, aided by significantly lower litigation spending,
and service-and-technology revenue of $80 million to $82 million.
Analysts polled by Thomson Reuters most recently forecast $73
million in comparable revenue.
TiVo, which has mostly posted losses since the second half of
2009, has seen intellectual-property battles and heavy litigation
costs affect its bottom-line results in recent periods.
The Alviso, Calif., company has posted good returns for its
legal spending, reaching settlements with companies including
AT&T Inc. (T), EchoStar Corp. (SATS), Dish Network Corp. (DISH)
and Verizon Communications Inc. (VZ). In June, TiVo said it would
receive $490 million from Google Inc. (GOOG) and Cisco Systems Inc.
(CSCO) to settle patent litigation with both companies, though
TiVo's stock tumbled soon after as the deal looked to be well below
market expectations.
Chief Executive Tom Rogers said the latest litigation settlement
"will produce significantly increased licensing revenue well into
the future and which have substantially increased our cash
resources."
For the period ended July 31, TiVo reported a profit of $268.9
million, or $1.96 a share, compared with a year-earlier loss of
$27.7 million, or 23 cents a share. Excluding the Cisco and Google
settlement, the company said it posted a loss of $13.1 million.
Net revenue rose 53%, to $100.1 million, while
service-and-technology revenue grew 42% to $77 million.
In May, TiVo predicted a net loss of $13 million to $16 million
and service-and-technology revenue of $68 million to $70
million.
Gross margin narrowed to 54.8% from 58.5%, as input costs jumped
67%.
TiVo has been placing less emphasis on the set-top boxes it
sells at retail and more on distributing its offerings through
operators' set-top boxes or through TVs alone. The company has also
continued to build technology that allows its software to run in
other devices.
The company has now posted subscriber increases for eight
straight quarters, following a four-year streak of declining
subscriber numbers. In the latest period, TiVo added a net 212,000
subscribers, compared with the 230,000 subscribers it gained a year
earlier.
TiVo-owned subscription acquisition costs were down 20%. Monthly
churn, or the customer cancellation rate, was 1.5% for TiVo-owned
subscriptions, compared with 1.6% a year earlier.
Shares rose 1.6% after hours to $11.15, after closing at $10.97.
As of Tuesday's close, the stock was down 11% so far this year.
Write to Ben Fox Rubin at ben.rubin@wsj.com
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