TIVo Corp. (TIVO) Q3 Earnings Impressive, Revenues Up Y/Y

Digital home entertainment services and solutions provider, TiVo Corporation (NASDAQ:TIVO) reported strong third-quarter 2016 results. The company reported earnings of 59 cents per share from continuing operations as against a loss of 22 cents in the year-ago quarter.

It should be noted that TiVo Corporation was formerly known as Rovi Corporation. Upon successfully completing the acquisition of TiVo Inc. early this September, Rovi adopted the iconic TiVo brand name.

Hence, this was the first quarterly results of the combined company. However, it only includes 23 days of TiVo Inc. operations. Let’s discuss the quarter in detail –

Quarter in Detail

TiVo’s revenues jumped 33.3% year over year to $153.1 million mainly due to inclusion of 23 days operations of TiVo Inc. and revenues from Dish Network’s (NASDAQ:DISH) licensing agreement.

The company’s revenues from Licensing, services and software division increased 29.4% year over year to $148.5 million, contributing 97% to total revenue. Hardware division’s revenues grew over thirty seven times to $4.6 million and contributed 3% to total revenue.

In terms of sales verticals, Service Provider revenues jumped 34.1% year over year to $126.1 million and Consumer Electronics sales were $24.3 million, marking year-over-year growth 39.2%. On the contrary, Other vertical’s revenues declined 19.4% to $2.8 million.

In terms of business segments, IP Licensing revenues grew 42.3% year over year to $81.8 million and contributed 53% to total revenue. Product revenues increased 24.3% to $71.3 million, contributing 43% to total revenue.

The company’s non-GAAP total cost of goods sold and operating expenses increased 26% year over year to $97.9 million. However, as a percentage of total revenue it contracted 350 basis points (bps) to 64%.

TiVo’s non-GAAP pre-tax income surged 57.7% year over year to $45.6 million.

TIVO CORP Price, Consensus and EPS Surprise

TIVO CORP Price, Consensus and EPS Surprise | TIVO CORP Quote

TiVo exited the quarter with cash, cash equivalents and short-term investments of $503.8 million.

Outlook

Upon successful completion of the acquisition of TiVo Inc., the new company now anticipates to generate revenues in the range of $620 million to $630 million in 2016. It further projects GAAP loss before taxes of $44.2 million to $37.2 million and non-GAAP pre-tax Income of $185 million to $195 million.

Our Take

TiVo reported strong third-quarter results with year-over-year improvement in its top and bottom lines. Moreover, the company’s outlook for the full year was encouraging.

Prior to the acquisition, Rovi provided a set of solutions that allowed businesses to protect, enable and distribute digital goods to consumers, helping them discover and manage digital media across multiple channels. On the other hand, TiVo Inc. pioneered a brand new category of products by developing the first commercially available digital video recorder. However, over the years, the company expanded its capabilities beyond hardware sales and patent licensing to online subscription services.

Therefore, the merger has brought together two leading players in the media entertainment industry with complementary products and services as well as a number of patented technologies. The new TiVo Corporation has now become the global leader in entertainment technology and audience insights. The company has a diverse product portfolio that ranges from interactive program guide to the DVR. The combined company has emerged as the world’s leading media and entertainment provider to deliver the ultimate entertainment experience.

Apart from this, the combined company has over 6,000 issued and pending patents, which offer it a competitive advantage over other media and tech giants.

Nonetheless, the actual synergies from the merger will take some time to reflect in the company’s performance and much depends on how successfully it integrates the legacy business of TiVo.

Currently, TiVo carries a Zacks Rank #4 (Sell).

A couple of better-ranked stocks in the Internet services space are TrueCar Inc. (NASDAQ:TRUE) and Shopify Inc. (NYSE:SHOP) .

TrueCar, which is engaged in developing and publishing online automotive information and communications platform, has surpassed the Zacks Consensus Estimate thrice while missing the same once in the trailing four quarters with an average positive surprise of 0.25%. The stock sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The cloud-based commerce platform provider, Shopify has a Zacks Rank #2 (Buy). The stock has surpassed the Zacks Consensus Estimate twice, missed the same once and matched it once in the trailing four quarters with an average positive surprise of 8.63%.

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