TiVo Reports Results for the First Quarter Fiscal Year 2009 Ended April 30, 2008
Posted on May 28, 2008
Filed Under Tech Biz
ALVISO, Calif., May 28 /PRNewswire-FirstCall/ — TiVo Inc. (Nasdaq:
TIVO), the creator of and a leader in television services for digital video
recorders (DVRs), today reported financial results for the first quarter
ended April 30, 2008.
“This quarter was about improving our financial profile by managing our
subscription acquisition costs, making progress on our key growth
initiatives such as our mass distribution strategy, and protecting our
intellectual property,” said Tom Rogers, President and CEO of TiVo. “We are
especially pleased with our record Net Income and Adjusted EBITDA results
for the quarter. Our well executed performance this quarter positions us to
post our first profitable year on an Adjusted EBITDA basis in fiscal 2009.”
For the first quarter, service and technology revenues were $54.9
million, compared with $58.1 million for the same period last year.
Adjusted EBITDA was $11.1 million, compared to $6.7 million in the year-ago
period and guidance of $5 million to $7 million. The better than
anticipated Adjusted EBITDA was driven by lower than expected operating
expenses, primarily due to less marketing and research and development
spending. TiVo reported net income of $3.6 million and net income per share
of $0.04, compared to net income of $835 thousand, or $0.01 per share, for
the first quarter of last year.
Mr. Rogers continued, “In terms of our litigation with EchoStar and
defending our intellectual property, the Appeals Court unanimously upheld
the District Court’s ruling that EchoStar had infringed on our patent and
more recently denied EchoStar’s petition for a rehearing en banc. We are
pleased the Court upheld the ruling for full award of damages and an order
for the injunction to be reinstated. We have informed the District Court
that, based on what we’ve been provided by EchoStar to date, we believe
that EchoStar’s modified software does not avoid infringement. Further, we
are gratified that the District Court is moving forward with respect to the
remaining issues and has scheduled a status conference later this week. We
look forward to final resolution in the near-future and to realizing the
full value of our intellectual property.”
Mr. Rogers continued, “On the mass distribution front, as you know our
service on Comcast has been available in Comcast’s New England region since
early this year, and we’re preparing to make it available in a new New
England state, beyond Massachusetts and New Hampshire, very soon. Comcast
and TiVo are pleased with the roll-out so far and we expect Comcast will
expand their marketing efforts this summer as the rollout continues in the
New England region.
“Additionally, the TiVo service on Cox, which is currently in trials,
is on track for a launch in Cox’s New England market later this year.”
Rogers continued, “On the international front, TiVo continues to gain
traction and is now available in Canada, Mexico, and Taiwan. Importantly,
both Seven and TiVo expect to be launching in Australia prior to the
Olympics with the first boxes arriving in late July. There is strong
interest in other geographies for TiVo and we expect a number of
international broadcasters, cable companies, satellite companies, and/or
telecom companies looking to customize a DVR solution for their market will
turn to TiVo, the only brand name available to them.
“In addition, we are making progress on our previously announced deal
with the National Cable and Television Association to ensure TiVo consumers
continue to seamlessly receive programming on systems utilizing switched
digital video technology. We have worked very closely with Time Warner,
Cox, Comcast, CableLabs, and the NCTA on this process and recently Cisco
and Motorola displayed switched digital tuning adapters at the NCTA Cable
Show. These adapters, which are currently undergoing verification testing
with CableLabs are near completion and will soon be available in the small
number of areas, where limited numbers of lightly watched program channels
are provided now on a switched digital basis.”
Mr. Rogers continued, “On the TiVo-Owned side of the business, we are
committed to focusing on efficient marketing spend and continue to assess
the speed with which consumers recognize the value and importance of
broadband distribution of digital video. Our success in this area is
underscored by the considerable decline of our quarterly subscription
acquisition costs to $116, which is a $132 improvement over the same period
last year and our lowest quarterly SAC figure since calendar year 2005.
This was key in terms of driving our improved Adjusted EBITDA results.”
TiVo-Owned subscription gross additions for the first quarter were
approximately 48,000, compared to 57,000 gross additions for the year-ago
period. This is the lowest year over year quarterly decline since the third
quarter of fiscal 2007. Overall, TiVo-Owned subscriptions ended the quarter
at 1.7 million. As expected, TiVo reported a net decline in
MSOs/Broadcaster subscriptions during the period as DIRECTV is no longer
deploying new TiVo boxes and other mass distribution deals are still in
early phases of deployment. Cumulative total subscriptions as of April 30,
2008 were 3.8 million. Additionally, the monthly churn rate was 1.3%, down
from 1.5% in the prior quarter.
Rogers continued, “On the broadband front, what continues to set us
apart is our approach to become a comprehensive video solution - one box,
one remote, one user interface and all content from all sources. We
continue to add more content choice to our offering and recently announced
content deals with Disney and YouTube. These content deals, which are all
expected to be become available in the next few months, build on the 30,000
movies and television shows from Amazon and the four million songs from
Rhapsody, connecting TiVo users with entertainment possibilities in a way
no other company can.
“Our new partnership with the Chicago Tribune will allow TiVo
subscribers to download the recommendations of the newspaper’s TV critic
directly to their televisions so these recommendations are waiting there
when the TV set is turned on. This can be a great way to make a newspaper’s
TV section that has long existed far more valuable to the viewer by
guaranteeing the newspaper’s TV choices are automatically recorded and
delivered to the television set. This is another example of how we are
weaving our way into the fabric of the media industry, deeply engaging with
many media players including cable operators and international
broadcasters, and now newspapers.
“We are also working with leading retailers and consumer electronic
manufacturers to bundle TiVo with HD television sales. Several of the
bundling programs we ran during the quarter were promising, increasing
sales for both TiVo and the consumer electronic manufacturer, while
allowing us to acquire subs at lower costs. For example, we ran a bundle in
conjunction with Amazon.com and Mitsubishi that increased not only TiVo
sales but Mitsubishi’s as well. We plan to expand these bundling efforts
and are hopeful that our early successes will translate on a broader scale.
“Additionally, TiVo.com re-launched successfully. The new and improved
website is designed to more efficiently market TiVo and get people to see
why TiVo is better, different, easier, and cheaper.”
Mr. Rogers concluded, “We began fiscal 2009 on the right foot. Our
Adjusted EBITDA results are an indication of the progress we are seeing in
terms of an improving financial profile. The EchoStar litigation is playing
out in our favor and the enforcement of the injunction strengthens our
intellectual property status in the industry. Our domestic and
international mass distribution strategy is beginning to show results and
will be a key catalyst to driving the wide adoption of TiVo. When you add
to these pieces our unique broadband functionality and the continued
progress of our advertising and ARM businesses, we are confident in the
future of TiVo and believe that we can continue to move the business
forward this year and beyond.”
Management Provides Financial Guidance
For the second quarter of fiscal 2009, TiVo anticipates service and
technology revenues in the range of $53 million to $55 million, a net loss
in the range of ($2.0) million to ($4.0) million, and Adjusted EBITDA in
the range of $3.0 million to $5.0 million.
This financial guidance is based on information available to management
as of May 28, 2008. TiVo expressly disclaims any duty to update this
guidance.
Management’s guidance includes Adjusted EBITDA, a non-GAAP financial
measure as defined in Regulation G. TiVo has provided a reconciliation of
EBITDA and Adjusted EBITDA to net income (loss) in the attached schedules
solely for the purpose of complying with Regulation G and not as an
indication that EBITDA or Adjusted EBITDA is a substitute measure for net
income (loss).
Conference Call and Webcast
TiVo will host a conference call and Webcast to discuss the first
quarter financial and operating results and guidance outlook at 2:00 pm PT
(5:00 pm ET), today, May 28, 2008. To listen to the discussion, please
visit http://www.tivo.com/ir and click on the link provided for the Webcast
or dial (888) 240-9345 (no password required). The Webcast will be archived
and available through June 4, 2008 at http://www.tivo.com/ir or by calling
(719) 457-0820 and entering the conference ID number 8458870.
About TiVo Inc.
Founded in 1997, TiVo (Nasdaq: TIVO) pioneered a brand new category of
products with the development of the first commercially available digital
video recorder (DVR). Sold through leading consumer electronic retailers
and TiVo.com, TiVo has developed a brand which resonates boldly with
consumers as providing a superior television experience. Through agreements
with leading satellite and cable providers, TiVo also integrates its DVR
service features into the set-top boxes of mass distributors. TiVo’s DVR
functionality and ease of use, with such features as Season Pass(TM)
recordings and WishList(R) searches and TiVo KidZone, have elevated its
popularity among consumers and have created a whole new way for viewers to
watch television. With a continued investment in its patented technologies,
TiVo is revolutionizing the way consumers watch and access home
entertainment. Rapidly becoming the focal point of the digital living room,
TiVo’s DVR is at the center of experiencing new forms of content on the TV,
such as broadband delivered video, music, and photos. With innovative
features, such as TiVoToGo(TM) transfers and online scheduling, TiVo is
expanding the notion of consumers experiencing “TiVo, TV your way.(R)” The
TiVo(R)service is also at the forefront of providing innovative marketing
solutions for the television industry, including a unique platform for
advertisers and audience research measurement.
TiVo, “TiVo, TV your way.” Season Pass, WishList, TiVoToGo, and the
TiVo Logo are trademarks or registered trademarks of TiVo Inc.’s
subsidiaries worldwide. (C) 2008 TiVo Inc. All rights reserved
This release contains forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995. These statements
relate to, among other things, TiVo’s future business and growth strategies
including TiVo’s mass distribution strategy and bundling efforts,
profitability and financial guidance, distribution of the TiVo service
domestically with Comcast and Cox and internationally in Australia, Mexico,
Canada, Taiwan and other regions, growth and innovation in TiVo’s
advertising and audience research measurement business, the timing and
availability of broadband content, TiVo’s software development for the
cable industry including with respect to switch digital technology, the
results of TiVo’s litigation with EchoStar, how TiVo intends to exploit its
intellectual property, TiVo’s future marketing spend and related
activities, and financial performance. Forward-looking statements generally
can be identified by the use of forward-looking terminology such as,
“believe,” “expect,” “may,” “will,” “intend,” “estimate,” “continue,” or
similar expressions or the negative of those terms or expressions. Such
statements involve risks and uncertainties, which could cause actual
results to vary materially from those expressed in or indicated by the
forward-looking statements. Factors that may cause actual results to differ
materially include delays in development, competitive service offerings and
lack of market acceptance, as well as the other potential factors described
under “Risk Factors” in the Company’s public reports filed with the
Securities and Exchange Commission, including the Company’s Annual Report
on Form 10-K for the fiscal year ended January 31, 2008 and Current Reports
on Form 8-K. The Company cautions you not to place undue reliance on
forward-looking statements, which reflect an analysis only and speak only
as of the date hereof. TiVo disclaims any obligation to update these
forward-looking statements.
TIVO INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share and share amounts)
(unaudited)
Three Months Ended April 30,
2008 2007
Revenues
Service revenues $48,443 $54,155
Technology revenues 6,407 3,932
Hardware revenues 5,945 2,293
Net revenues 60,795 60,380
Cost of revenues
Cost of service revenues (1) 11,194 10,155
Cost of technology revenues (1) 3,920 3,507
Cost of hardware revenues 10,344 10,648
Total cost of revenues 25,458 24,310
Gross margin 35,337 36,070
Research and development (1) 14,748 14,245
Sales and marketing (1) 5,936 5,303
Sales and marketing, subscription
acquisition costs 1,159 5,790
General and administrative (1) 10,336 11,222
Total operating expenses 32,179 36,560
Income (loss) from operations 3,158 (490)
Interest income 579 1,416
Interest expense and other (87) (83)
Income before income taxes 3,650 843
Provision for income taxes (13) (8)
Net income $3,637 $835
Net income per common share - basic $0.04 $0.01
Net income per common share - diluted $0.04 $0.01
Weighted average common shares used to
calculate basic net income per share 99,386,826 96,829,128
Weighted average common shares used to
calculate diluted net income per share 102,709,583 98,046,685
(1) Includes stock-based compensation expense as follows:
Cost of service revenues $191 $157
Cost of technology revenues 606 463
Research and development 1,982 1,628
Sales and marketing 540 476
General and administrative 2,158 1,916
TIVO INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
(unaudited)
April 30, 2008 January 31, 2008
ASSETS
CURRENT ASSETS
Cash and cash equivalents $92,800 $78,812
Short-term investments 1,798 20,294
Accounts receivable, net of allowance for
doubtful accounts of $1,219 and $1,194 10,427 20,019
Inventories 13,889 17,748
Prepaid expenses and other, current 3,446 3,792
Total current assets 122,360 140,665
LONG-TERM ASSETS
Property and equipment, net 11,330 11,349
Purchased technology, capitalized
software, and intangible assets, net 12,718 13,522
Prepaid expenses and other, long-term 1,793 1,513
Long-term investments 4,296 -
Total long-term assets 30,137 26,384
Total assets $152,497 $167,049
LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES
CURRENT LIABILITIES
Accounts payable $8,066 $23,615
Accrued liabilities (1) 23,256 28,834
Deferred revenue, current 58,163 59,341
Total current liabilities 89,485 111,790
LONG-TERM LIABILITIES
Deferred revenue, long-term 33,950 38,128
Deferred rent and other 227 309
Total long-term liabilities 34,177 38,437
Total liabilities 123,662 150,227
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS’ EQUITY
Preferred stock, par value $0.001:
Authorized shares are 10,000,000;
Issued and outstanding shares - none - -
Common stock, par value $0.001:
Authorized shares are 275,000,000;
Issued shares are 102,034,090 and
100,098,426, respectively, and
outstanding shares are 101,854,510
and 99,970,947, respectively 102 100
Additional paid-in capital 802,186 792,654
Accumulated deficit (1) (771,449) (775,086)
Less: Treasury stock, at cost -
179,580 and 127,479, respectively (1,300) (846)
Unrealized gain/loss of
marketable securities (704) -
Total stockholders’ equity 28,835 16,822
Total liabilities and
stockholders’ equity $152,497 $167,049
(1) The consolidated balance sheet as of January 31, 2008 has been revised
to reflect the increase of $1,784,000 in accrued liabilities with a
corresponding increase in accumulated deficit to correct immaterial
errors related to an under accrual of non-income based taxes for
fiscal year 2007 and fiscal year 2006.
TIVO INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)
Three Months Ended April 30,
2008 2007
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $3,637 $835
Adjustments to reconcile net income to net
cash used in operating activities:
Depreciation and amortization of property
and equipment and intangibles 2,572 2,620
Stock-based compensation expense 5,477 4,640
Inventory write-down 1,349 -
Allowance for doubtful accounts 25 -
Changes in assets and liabilities:
Accounts receivable 9,567 2,483
Inventories 2,510 19
Prepaid expenses and other 66 621
Accounts payable (15,649) (22,009)
Accrued liabilities (5,578) (6,745)
Deferred revenue (5,356) (8,530)
Deferred rent and other long-term
liabilities (82) (147)
Net cash used in operating
activities $(1,462) $(26,213)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of short-term and long-
term investments (4) (3,037)
Sales of short-term investments 13,500 -
Acquisition of property and equipment (1,649) (1,160)
Acquisition of capitalized software
and intangibles - (375)
Net cash provided by (used in)
investing activities $11,847 $(4,572)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common
stock related to exercise of
common stock options 4,057 852
Treasury Stock - repurchase of
stock for tax withholding (454) (85)
Net cash provided by financing
activities $3,603 $767
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS $13,988 $(30,018)
CASH AND CASH EQUIVALENTS:
Balance at beginning of period 78,812 89,079
Balance at end of period $92,800 $59,061
TIVO INC.
OTHER DATA
Guidance Reconciliation
Three Months Ended April 30, Three Months Ending
2008 2007 July 31, 2008
(In thousands) (In millions)
Net income (loss) $3,637 $835 $(2.0) - $(4.0)
Add back:
Depreciation & amortization 2,572 2,620 $2.0 - $3.0
Interest income & expense (564) (1,400) $(1.0)
Provision for income tax 13 8 $0.0 - $1.0
EBITDA 5,658 2,063 $(1.0)
Stock-based compensation 5,477 4,640 $4.0 - $6.0
Adjusted EBITDA $11,135 $6,703 $3.0 - $5.0
EBITDA and Adjusted EBITDA Results. TiVo’s “EBITDA” means income before
interest income and expense, provision for income taxes and depreciation
and amortization. TiVo’s “Adjusted EBITDA” is EBITDA less expense for
stock-based compensation. EBITDA and Adjusted EBITDA are not measures of
financial performance under generally accepted accounting principles, which
we refer to as GAAP. A table reconciling TiVo’s EBITDA and Adjusted EBITDA
to GAAP net income is included with the condensed consolidated financial
statements attached to this release. We have presented EBITDA and Adjusted
EBITDA solely as supplemental disclosure because we believe they allow for
a more complete analysis of our results of operations and we believe that
EBITDA and Adjusted EBITDA are useful to investors because EBITDA and
Adjusted EBITDA are commonly used to analyze companies on the basis of
operating performance. In addition, because of the variety of equity awards
used by companies, the varying methodologies for determining stock-based
compensation expense, and the subjective assumptions involved in those
determinations, we believe excluding stock-based compensation enhances the
ability of management and investors evaluate our operating performance over
multiple periods. Management does not use EBITDA or AEBITDA as a measure of
liquidity because, among other things, they do not exclude the impact of
deferred revenues associated with the amortization of product lifetime
subscriptions. We do not use stock-based compensation expense in our
internal measures. A limitation associated with these non-GAAP measures is
that they do not include any stock-based compensation expense related to
hiring, retaining, and incentivizing the Company’s workforce. EBITDA and
Adjusted EBITDA are not intended to represent, and should not be considered
more meaningful than, or as an alternative to, measures of operating
performance as determined in accordance with GAAP EBITDA and Adjusted
EBITDA Results. TiVo’s “EBITDA” means income before interest income and
expense, provision for income taxes and depreciation and amortization.
TiVo’s “Adjusted EBITDA” is EBITDA less expense for stock-based
compensation. EBITDA and Adjusted EBITDA are not measures of financial
performance under generally accepted accounting principles, which we refer
to as GAAP.
TIVO INC.
OTHER DATA
Subscriptions
Three Months Ended April 30,
(Subscriptions in thousands) 2008 2007
TiVo-Owned Subscription Gross Additions 48 57
Subscription Net Additions/(Losses):
TiVo-Owned (17) 1
MSOs/Broadcasters (128) (103)
Total Subscription Net Additions/(Losses) (145) (102)
Cumulative Subscriptions:
TiVo-Owned 1,728 1,727
MSOs/Broadcasters 2,073 2,615
Total Cumulative Subscriptions 3,801 4,342
% of TiVo-Owned Cumulative Subscriptions
paying recurring fees 61% 59%
Included in the 3,801,000 subscriptions are approximately 163,000
lifetime subscriptions that have reached the end of the period TiVo
uses to recognize lifetime subscription revenue. These lifetime
subscriptions no longer generate subscription revenue.
Subscriptions. Management reviews this metric, and believes it may be
useful to investors, in order to evaluate our relative position in the
marketplace and to forecast future potential service revenues. The
TiVo-Owned lines refer to subscriptions sold directly or indirectly by TiVo
to consumers who have TiVo-enabled DVRs and for which TiVo incurs
acquisition costs. The MSOs/Broadcasters lines refer to subscriptions sold
to consumers by MSOs/Broadcasters such as DIRECTV, Cablevision Mexico, and
Comcast and for which TiVo expects to incur little or no acquisition costs.
Additionally, we provide a breakdown of the percent of TiVo-Owned
subscriptions for which consumers pay recurring fees, including on a
monthly and a prepaid one, two, or three year basis, as opposed to a
one-time prepaid product lifetime fee.
We define a “subscription” as a contract referencing a TiVo-enabled DVR
for which (i) a consumer has committed to pay for the TiVo service and (ii)
service is not canceled. We count product lifetime subscriptions, under
which consumers may purchase a subscription that is valid for the lifetime
of a particular DVR, until both of the following conditions are met: (i)
the period we use to recognize product lifetime subscription revenues ends;
and (ii) the related DVR has not made contact to the TiVo service within
the prior six- month period. Product lifetime subscriptions past this
period which have not called into the TiVo service for six months are not
counted in this total. During the quarter ended April 30, 2006, we
discontinued general sale of the product lifetime service option. During
the quarter ended January 31, 2008, we began offering product lifetime
service subscriptions only to existing customers and during the quarter
ended April 30, 2008 we began offering product lifetime subscriptions to
new customers. Effective November 1, 2007, we have extended the period we
use to recognize product lifetime subscription revenues from 48 months to
54 months for product lifetime subscriptions acquired on or before October
31, 2007. Additionally, we also increased the amortization period to 60
months for new product lifetime subscriptions acquired on or after November
1, 2007. We are not aware of any uniform standards for defining
subscriptions and caution that our presentation may not be consistent with
that of other companies. Additionally, the subscription fees that some of
our MSO/Broadcasters pay us may be based upon a specific contractual
definition of a subscriber or subscription which may not be consistent with
how we define a subscription for our reporting purposes.
TIVO INC.
OTHER DATA - KEY BUSINESS METRICS
Three Months Ended April 30,
TiVo-Owned Churn Rate 2008 2007
(In thousands, except
Churn Rate per month)
Average TiVo-Owned subscriptions 1,737 1,729
TiVo-Owned subscription cancellations (65) (56)
TiVo-Owned Churn Rate per month -1.3% -1.1%
TiVo-Owned Churn Rate per Month. Management reviews this metric, and
believes it may be useful to investors, in order to evaluate our ability to
retain existing TiVo-Owned subscriptions (including both monthly and
product lifetime subscriptions) by providing services that are competitive
in the market. Management believes factors such as service enhancements,
service commitments, higher customer satisfaction, and improved customer
support may improve this metric. Conversely, management believes factors
such as increased competition, lack of competitive service features such as
high definition television recording capabilities for our low cost product
offerings, and increased price sensitivity may cause our TiVo-Owned Churn
Rate per month to increase.
We define the TiVo-Owned Churn Rate per month as the total TiVo-Owned
subscription cancellations in the period divided by the Average TiVo-Owned
subscriptions for the period (including both monthly and product lifetime
subscriptions), which then is divided by the number of months in the
period. We calculate Average TiVo-Owned subscriptions for the period by
adding the average TiVo-Owned subscriptions for each month and dividing by
the number of months in the period. We calculate the average TiVo-Owned
subscriptions for each month by adding the beginning and ending
subscriptions for the month and dividing by two. We are not aware of any
uniform standards for calculating churn and caution that our presentation
may not be consistent with that of other companies.
Three Months Ended Twelve Months Ended
April 30, April 30,
2008 2007 2008 2007
Subscription Acquisition Costs (In thousands, except SAC)
Sales and marketing, subscription
acquisition costs $1,159 $5,790 $26,419 $23,774
Hardware revenues $(5,945) $(2,293) $(45,450) $(42,162)
Cost of hardware revenues $10,344 $10,648 $91,614 $107,714
Total Acquisition Costs 5,558 14,145 72,583 89,326
TiVo-Owned Subscription Gross
Additions 48 57 267 395
Subscription Acquisition Costs
(SAC) $116 $248 $272 $226
Subscription Acquisition Cost or SAC. Management reviews this metric,
and believes it may be useful to investors, in order to evaluate trends in
the efficiency of our marketing programs and subscription acquisition
strategies. We define SAC as our total acquisition costs for a given period
divided by TiVo-Owned subscription gross additions for the same period. We
define total acquisition costs as sales and marketing, subscription
acquisition costs less net hardware revenues (defined as gross hardware
revenues less rebates, revenue share and market development funds paid to
retailers) plus cost of hardware revenues. The sales and marketing,
subscription acquisition costs line item includes advertising expenses and
promotion-related expenses directly related to subscription acquisition
activities, but does not include expenses related to advertising sales. We
do not include third parties subscription gross additions, such as
MSOs/Broadcasters’ gross additions with TiVo subscriptions, in our
calculation of SAC because we incur limited or no acquisition costs for
these new subscriptions. We are not aware of any uniform standards for
calculating total acquisition costs or SAC and caution that our
presentation may not be consistent with that of other companies.
Three Months Ended April 30,
TiVo-Owned Average Revenue per 2008 2007
Subscription (In thousands, except ARPU)
Total Service revenues $48,443 $54,155
Less: MSOs/Broadcasters-related
service revenues (5,699) (7,160)
TiVo-Owned-related service revenues 42,744 46,995
Average TiVo-Owned revenues per month 14,248 15,665
Average TiVo-Owned per month subscriptions 1,737 1,729
TiVo-Owned ARPU per month $8.20 $9.06
Three Months Ended April 30,
MSOs/Broadcasters Average Revenue per 2008 2007
Subscription (In thousands, except ARPU)
Total Service revenues $48,443 $54,155
Less: TiVo-Owned-related service revenues (42,744) (46,995)
MSOs/Broadcasters-related service revenues 5,699 7,160
Average MSOs/Broadcasters revenues per month 1,900 2,387
Average MSOs/Broadcasters per month
subscriptions 2,136 2,668
MSOs/Broadcasters ARPU per month $0.89 $0.89
Average Revenue Per Subscription or ARPU. Management reviews this
metric, and believes it may be useful to investors, in order to evaluate
the potential of our subscription base to generate revenues from a variety
of sources, including subscription fees, advertising, and audience research
measurement. ARPU does not include rebates, revenue share and other
payments to channel that reduce our GAAP revenues. As a result, you should
not use ARPU as a substitute for measures of financial performance
calculated in accordance with GAAP. Management believes it is useful to
consider this metric excluding the costs associated with rebates, revenue
share and other payments to channel because of the discretionary and
varying nature of these expenses and because management believes these
expenses, which are included in hardware revenues, net, are more
appropriately monitored as part of SAC. We are not aware of any uniform
standards for calculating ARPU and caution that our presentation may not be
consistent with that of other companies.
We calculate ARPU per month for TiVo-Owned subscriptions by subtracting
MSOs/Broadcaster-related service revenues (which includes
MSOs/Broadcasters’ subscription service revenues and
MSOs/Broadcasters’-related advertising revenues) from our total reported
net service revenues and dividing the result by the number of months in the
period. We then divide by Average TiVo-Owned subscriptions for the period,
calculated as described above for churn rate. The above table shows this
calculation. The decrease in ARPU per month for TiVo-Owned subscriptions
during the first quarter ended April 30, 2008 as compared to the prior year
period was the result of the recent change in amortization period for
product lifetime subscriptions.
We calculate ARPU per month for MSOs/Broadcasters’ subscriptions by
first subtracting TiVo-Owned-related service revenues (which includes
TiVo-Owned subscription service revenues and TiVo-Owned related advertising
revenues) from our total reported service revenues. Then we divide average
revenues per month for MSOs/Broadcasters’-related service revenues by the
average MSOs/Broadcasters’ subscriptions for the period. The above table
shows this calculation.
Beginning in February 2006, pursuant to the most recent amendment of
our agreement with DIRECTV, TiVo began deferring a portion of the DIRECTV
subscription fees equal to the fair value of the undelivered development
services. Additionally, beginning in February 2007, DIRECTV began paying us
a monthly fee for all DIRECTV households with DIRECTV receivers with TiVo
service similar to the lower amount paid by DIRECTV for households with
DIRECTV receivers with TiVo service deployed since March 15, 2002, subject
to a monthly minimum payment by DIRECTV.
SOURCE TiVo Inc.
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