TiVo Inc. TIVO reported first quarter fiscal 2017 non-GAAP earnings of 12 cents per share, which beat the Zacks Consensus Estimate of 7 cents per share.
On a GAAP basis, reported earnings came in at 4 cents per share compared with 8 cents per share reported in the year-ago quarter.
Revenues
TiVo’s revenues decreased 6.5% year over year to $107.3 million and missed the Zacks Consensus Estimate of $121 million.
The year-over-year downside was primarily due to lower Hardware revenues (7% of total revenue), which registered a year-over-year decline of 66.2% to $7.5 million. On the other hand Service and software and technology revenues (about 93% of revenues) rose 7.9% to $99.7 million.
The strong performance at the service and technology segments was mainly driven by 44% increase in Operator-related service and software revenue coupled with robust double-digit growth in data and analytics business. However, lower-than-expected growth in TiVo-Owned and IP revenues impacted the quarter’s revenues.
During the quarter, the company’s subscriptions totaledto over 7 million, reflecting 24% year-over-year growth. Furthermore, MSO subscriptions increased by 312,000 in the quarter.
It is worth mentioning that TiVo inked a deal for a possible acquisition by Rovi Corporation ROVI, which offers interactive programming guides to pay-TV companies and smart-TV manufacturers.
Operating Results
The company’s gross profit increased 3.7% year over year to $73.2 million. Moreover, gross margin expanded 670 basis points (bps) to 68.2%. Operating expenses increased 21.8% year over year to $63.9 million primarily on the back of increased general and administrative (up 38.7%) as well as research & development (up 11.9%) expenses.
Also, as a percentage of revenues, operating expenses were 59.6% compared with 45.7% reported in the year-ago quarter. TiVo’s operating income came in at $9.3 million compared with $18.1 million in the year-ago quarter. Operating margin contracted on a year-over-year basis, primarily due to higher operating expenses as a percentage of revenues.
Non-GAAP net income for the quarter came in at $12.1 million compared with $9.1 million reported in the year-ago quarter. GAAP net income for the quarter was $4.2 million.
Balance Sheet
TiVo exited the quarter with cash, cash equivalents and short-term investments of $502.6 million. In the first quarter of fiscal 2017, the company used approximately $4.2 million of cash from operational activities. TiVo repurchased common stock for approximately $6.4 million during the quarter.
Guidance
For fiscal 2017, TiVo continues to expect Service and software and Technology revenues in the range of $400–$420 million. Further, TiVo expects adjusted EBITDA in the range of $145 million to $155 million for fiscal 2017. Net income is projected in the range of $40 million to $50 million.
Our Take
TiVo reported mixed results in the first quarter of fiscal 2017, with its bottom line surpassing the Zacks Consensus Estimate but the top line missing the same. Year-over-year revenue comparisons were also unfavourable. The company reiterated its fiscal 2017 guidance.
We are optimistic about its prospects owing to its sustained focus on product innovation and subscriber addition. Further, the increased number of distribution deals with cable companies will support TiVo’s expansion plans and strengthen its customer base, which in turn will boost revenues.
We believe that TiVo has significant growth opportunities in Western Europe and Latin America, given its partnerships with local providers. Its strong balance sheet will also allow it to pursue strategic acquisitions and aggressive share buyback programs, thereby boosting near-term growth.
However, increasing competition from the likes of Dish Network DISH and Cablevision Systems Corporation CVC seems to be the primary headwind in the near term.
Currently, TiVo has a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Be the first to comment