8-k 8.01 Q2 FY12


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) August 24, 2011
TIVO INC.
(Exact name of registrant as specified in its charter)
_______________________

Delaware      
000-27141     
77-0463167
(State or other jurisdiction
(Commission
(IRS Employer
of incorporation)
File Number)
Identification No.)

2160 Gold Street,
 
Alviso, California
95002
(Address of principal executive offices)
(Zip Code)


Registrant's telephone number, including area code (408) 519-9100
(Former name or former address, if changed since last report.)


Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))





ITEM 8.01 OTHER EVENTS.
On August 24, 2011, we announced financial results for our second quarter of fiscal year 2012 ended July 31, 2011. Net service revenues were $34.0 million in the second quarter of fiscal year 2012, a decrease from the $35.7 million in the same prior year period. Net technology revenues increased to $15.6 million in the second quarter ended July 31, 2011 compared to $6.4 million in the same prior year period. The net loss for the quarter was $(19.6) million or $(0.17) per basic and diluted share, compared to a net loss of $(15.3) million or $(0.13) per basic and diluted share, for the quarter ended July 31, 2010. We ended this quarter with approximately $628 million in cash and short-term investments, compared to approximately $243 million in cash and short-term investments in the same prior year period.
As of July 31, 2011, our total subscriptions were approximately 1.9 million. TiVo-Owned subscription gross additions were 25,000 for the quarter, compared to 32,000 in the second quarter fiscal year 2011. TiVo-Owned net subscription losses were 43,000 for the quarter ended July 31, 2011 as compared to 48,000 for the quarter ended July 31, 2010. Our monthly churn rate was (1.9)% for the quarter ended July 31, 2011 and TiVo-Owned subscriptions were approximately 1.2 million compared to 1.4 million a year ago. The installed base of MSO/Broadcasters' TiVo subscriptions was approximately 763,000 compared to approximately 1.0 million in the same prior year period.




TIVO INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share and share amounts)
(unaudited)
 
Three Months Ended July 31,
Six Months Ended July 31,
 
2011
2010
2011
2010
Revenues
 
 
 
 
Service revenues
$
34,016

$
35,654

$
67,350

$
71,898

Technology revenues
15,586

6,415

21,089

13,388

Hardware revenues
11,580

9,481

18,495

27,650

Net revenues
61,182

51,550

106,934

112,936

Cost of revenues
 



Cost of service revenues
9,089

9,887

17,889

20,290

Cost of technology revenues
3,813

4,211

10,833

9,232

Cost of hardware revenues
13,401

11,546

22,254

30,765

Total cost of revenues
26,303

25,644

50,976

60,287

Gross margin
34,879

25,906

55,958

52,649

Research and development
26,042

19,326

53,270

37,954

Sales and marketing
6,905

6,622

13,242

14,382

Sales and marketing, subscription acquisition costs
2,441

1,366

3,674

4,557

General and administrative
17,826

14,103

40,278

25,800

Litigation Proceeds
—

—

(175,716
)
—

Total operating expenses
53,214

41,417

(65,252
)
82,693

Income (loss) from operations
(18,335
)
(15,511
)
121,210

(30,044
)
Interest income
678

381

3,841

750

Interest expense and other income (expense)
(1,965
)
(145
)
(4,589
)
(147
)
Income (loss) before income taxes
(19,622
)
(15,275
)
120,462

(29,441
)
Benefit from (provision for) income taxes
71

(29
)
(988
)
(63
)
Net income (loss)
$
(19,551
)
$
(15,304
)
$
119,474

$
(29,504
)
 
 
 
 
 
Net income (loss) per common share
 
 
 
 
Basic
$
(0.17
)
$
(0.13
)
$
1.03

$
(0.26
)
Diluted
$
(0.17
)
$
(0.13
)
$
0.91

$
(0.26
)
 
 
 
 
 
Income (loss) for purposes of computing net income (loss) per share:
 
 
 
 
Basic
(19,551
)
(15,304
)
119,474

(29,504
)
Diluted
(19,551
)
(15,304
)
122,472

(29,504
)
 
 
 
 
 
Weighted average common and common equivalent shares:
 
 
 
 
Basic
116,146,567

113,814,828

115,695,989

112,663,287

Diluted
116,146,567

113,814,828

135,161,128

112,663,287








TIVO INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share and share amounts)
(unaudited)
 
July 31, 2011
January 31, 2011
ASSETS
 
 
CURRENT ASSETS
 
 
Cash and cash equivalents
$
96,027

$
71,221

Short-term investments
531,798

138,216

Accounts receivable, net of allowance for doubtful accounts of $406 and $275, respectively
11,246

16,011

Inventories
13,588

13,228

Deferred cost of technology revenues, current
12,056

13,760

Prepaid expenses and other, current
11,174

6,983

Total current assets
675,889

259,419

LONG-TERM ASSETS
 
 
Property and equipment, net of accumulated depreciation of $44,217 and $44,682, respectively
10,377

10,229

Purchased technology, capitalized software, and intangible assets, net of accumulated amortization of $16,438 and $15,110, respectively
5,909

6,956

Deferred cost of technology revenues, long-term
13,573

2,100

Prepaid expenses and other, long-term
4,123

1,224

Long-term investments
3,400

5,890

Total long-term assets
37,382

26,399

Total assets
$
713,271

$
285,818

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
LIABILITIES
 
 
CURRENT LIABILITIES
 
 
Accounts payable
$
19,202

$
18,052

Accrued liabilities
34,002

30,115

Deferred revenue, current
74,720

33,792

Total current liabilities
127,924

81,959

LONG-TERM LIABILITIES

 
Deferred revenue, long-term
100,927

34,857

Convertible senior notes
172,500

—

Deferred rent and other long-term liabilities
560

246

Total long-term liabilities
273,987

35,103

Total liabilities
401,911

117,062

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 121,718,388 and 117,420,874, respectively and outstanding shares are 120,441,826 and 116,475,318, respectively
122

117

Treasury stock, at cost - 1,276,562 shares and 945,556 shares, respectively
(11,869
)
(8,660
)
Additional paid-in capital
982,855

956,947

Accumulated deficit
(659,751
)
(779,225
)
Accumulated other comprehensive income (loss)
3

(423
)
Total stockholders’ equity
311,360

168,756

Total liabilities and stockholders’ equity
$
713,271

$
285,818







TIVO INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)
 
 
Six Months Ended July 31,
 
2011
2010
CASH FLOWS FROM OPERATING ACTIVITIES
 
 
Net income (loss)
$
119,474

$
(29,504
)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:


Depreciation and amortization of property and equipment and intangibles
4,493

4,560

Loss on disposal of fixed assets
—

42

Stock-based compensation expense
14,559

12,374

Amortization of discounts and premiums on investments
1,010

1,076

Non-cash loss on overallotment option
1,536

—

Utilization and write-down of trade credits
619

65

Allowance for doubtful accounts
267

184

Changes in assets and liabilities:

 
Accounts receivable
4,498

3,214

Inventories
(360
)
(6,789
)
Deferred cost of technology revenues
(9,178
)
(5,483
)
Prepaid expenses and other
(1,915
)
(926
)
Accounts payable
985

1,997

Accrued liabilities
3,887

(1,411
)
Deferred revenue
106,998

(3,828
)
Deferred rent and other long-term liabilities
314

21

Net cash provided by (used in) operating activities
$
247,187

$
(24,408
)
CASH FLOWS FROM INVESTING ACTIVITIES
 

Purchases of short-term investments
(567,013
)
(84,190
)
Sales or maturities of long-term and short-term investments
174,222

81,573

Acquisition of property and equipment
(3,148
)
(4,113
)
Acquisition of capitalized software and intangibles
(281
)
—

Net cash used in investing activities
$
(396,220
)
$
(6,730
)
CASH FLOWS FROM FINANCING ACTIVITIES
 
 
Proceeds from issuance of convertible senior notes, net
166,285

—

Proceeds from issuance of common stock related to exercise of common stock options
7,479

29,185

Proceeds from issuance of common stock related to employee stock purchase plan
3,284

2,407

Treasury stock - repurchase of stock for tax withholding
(3,209
)
(3,794
)
Net cash provided by financing activities
$
173,839

$
27,798

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
$
24,806

$
(3,340
)
CASH AND CASH EQUIVALENTS:


Balance at beginning of period
71,221

70,891

Balance at end of period
$
96,027

$
67,551







TIVO INC.
OTHER DATA
Subscriptions
Three Months Ended July 31,
(Subscriptions in thousands)
2011
2010
TiVo-Owned Subscription Gross Additions:
25

32

Subscription Net Additions/(Losses):




TiVo-Owned
(43
)
(48
)
MSOs/Broadcasters
10

(77
)
Total Subscription Net Additions/(Losses)
(33
)
(125
)
Cumulative Subscriptions:




TiVo-Owned
1,165

1,366

MSOs/Broadcasters
763

1,018

Total Cumulative Subscriptions
1,928

2,384

% of TiVo-Owned Cumulative Subscriptions paying recurring fees
57
%
56
%
 
 
 

Included in the 1,165,000 TiVo-Owned subscriptions are approximately 286,000 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, Seven/Hybrid TV (Australia), Television New Zealand (TVNZ) (New Zealand), Virgin Media (United Kingdom), RCN, Suddenlink, and Comcast (under the prior agreement with 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 in our subscription base 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. We amortize all product lifetime subscriptions over a 60 month period. 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 our MSOs/Broadcasters pay us are typically 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 nor be representative of how such subscription fees are calculated and paid to us by our MSOs/Broadcasters. Our MSOs/Broadcasters subscription data is based in part on reporting from our third party MSOs/Broadcasters partners.






TIVO INC.
OTHER DATA - KEY BUSINESS METRICS
 
 
 
 
Three Months Ended July 31,
TiVo-Owned Churn Rate
2011
2010
 
(In thousands, except churn rate per month)
Average TiVo-Owned subscriptions
1,188

1,390

TiVo-Owned subscription cancellations
(68
)
(80
)
TiVo-Owned Churn Rate per month
(1.9
)%
(1.9
)%

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 in our older model DVRs or access to certain digital television channels or MSO Video-on-Demand services, as well as, increased price sensitivity and installation and CableCARDTM technology limitations 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 July 31,
Twelve Months Ended July 31,
 
2011
2010
2011
2010
Subscription Acquisition Costs
(In thousands, except SAC)
Sales and marketing, subscription acquisition costs
$
2,441

$
1,366

$
7,286

$
7,785

Hardware revenues
(11,580
)
(9,481
)
(42,463
)
(61,069
)
Less: MSOs/Broadcasters-related hardware revenues
8,079

1,601

18,691

20,046

Cost of hardware revenues
13,401

11,546

60,522

73,163

Less: MSOs/Broadcasters-related cost of hardware revenues
(6,019
)
(1,222
)
(13,730
)
(17,647
)
Total Acquisition Costs
6,322

3,810

30,306

22,278

TiVo-Owned Subscription Gross Additions
25

32

147

145

Subscription Acquisition Costs (SAC)
$
253

$
119

$
206

$
154


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 TiVo-Owned 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 TiVo-Owned related hardware revenues (defined as TiVo-Owned related gross hardware revenues less rebates, revenue share and market development funds paid to retailers) plus TiVo-Owned related 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 typically incur limited or no acquisition costs for these new subscriptions, and so we also do not include MSOs/Broadcasters’ sales and marketing, subscription acquisition costs, hardware revenues, or cost of hardware revenues in our calculation of TiVo-Owned SAC. 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 July 31,
TiVo-Owned Average Revenue per Subscription
2011
2010
 
(In thousands, except ARPU)
Total Service revenues
$
34,016

$
35,654

Less: MSOs/Broadcasters-related service revenues
(4,371
)
(3,819
)
TiVo-Owned-related service revenues
29,645

31,835

Average TiVo-Owned revenues per month
9,882

10,612

Average TiVo-Owned per month subscriptions
1,188

1,390

TiVo-Owned ARPU per month
$
8.31

$
7.63

 
 
 
 
 
 
 
 
 
 
Three Months Ended July 31,
MSOs/Broadcasters Average Revenue per Subscription
2011
2010
 
(In thousands, except ARPU)
Total Service revenues
$
34,016

$
35,654

Less: TiVo-Owned-related service revenues
(29,645
)
(31,835
)
MSOs/Broadcasters-related service revenues
4,371

3,819

Average MSOs/Broadcasters revenues per month
1,457

1,273

Average MSOs/Broadcasters per month subscriptions
753

1,063

MSOs/Broadcasters ARPU per month
$
1.94

$
1.20


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 service fees, advertising, and audience research measurement. 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. Furthermore, ARPU for our MSOs/Broadcasters may not be directly comparable to the service fees we may receive from these partners on a per subscription basis as the fees that our MSOs/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 or be representative of how such subscription fees are calculated and paid to us by our MSOs/Broadcasters. For example, an agreement that includes contractual minimums may result in a higher than expected MSOs/Broadcasters ARPU if such fixed minimum fee is spread over a small number of subscriptions.
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.
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.




Forward-Looking Statements

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 future subscription growth with TiVo's MSO/Broadcaster customers and subscription growth in TiVo's retail business, future repurchases of TiVo stock by TiVo, the timing of future TiVo product roll-outs and availability of particular products in the future with customers such as DIRECTV, ONO, Charter, RCN, and Grande Communications among others, TiVo's ability to leverage its research and development in the future between customers and MSO and retail markets and the future strength and value of TiVo's intellectual property portfolio. 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, 2011, our Quarterly Report on Form 10-Q for the period ended April 30, 2011, 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.






SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.


TIVO INC.


Date: August 24, 2011
 
By:
/s/ Anna Brunelle
 
 
 
Anna Brunelle
 
 
 
Chief Financial Officer
 
 
 
(Principal Financial and Accounting Officer)