Why Is TiVo (TIVO) Down 18.8% Since Last Earnings Report?

A month has gone by since the last earnings report for TiVo (NASDAQ:TIVO). Shares have lost about 18.8% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is TiVo due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

TiVo’s Q1 Suffers Loss, Revenues Meet Mark & Down Y/Y

TiVo incurred first-quarter 2019 loss of 21 cents per share against the year-ago quarter’s earnings of 15 cents.

The company’s non-GAAP earnings per share came in at 16 cents compared with 31 cents a year ago.

TiVo’s revenues of $158.2 million, which matched the Zacks Consensus Estimate, declined 17% year over year.

The company’s core revenues (excludes revenues from Legacy TiVo Solutions IP Licenses, Hardware and Other Products) were $155.8 million (98.5% of total), representing a decline of 11% from the year-ago quarter.

The company also announced that it is separating its product division from its intellectual property (IP) licensing unit. The spin-off is likely to be completed in the first half of 2020.

Quarter in Detail

In terms of business segments, Product revenues (58% of total revenues) were down 22% to $91.3 million. Revenues from Platform Solution decreased 26% to $71 million. Revenues from Other products, primarily legacy analog ACP product, plunged 85% to $364K. However, Software and Services improved 8% to $19.9 million.

Core Product revenues (excludes revenues from Hardware and Other Products) dropped 20% to $88.9 million.

IP Licensing revenues (42%) fell approximately 8% year over year to $66.9 million due to expiration of the Legacy Time Warp agreements.

Under the IP Licensing segment, on a year-over-year basis, revenues from the U.S. Pay TV Providers declined 16% to $42 million. New Media, International Pay TV Providers and Other grew 15% to $16 million. Consumer Electronics Manufacturers dipped 4% to $8.6 million.

Core IP Licensing revenues (excludes revenues from Legacy TiVo Solutions IP Licenses) rose 4% year over year to $66.9 million owing to higher revenues from existing customers.

TiVo’s unique voice users surged 31% sequentially to 4.9 million unique users at the end of the first quarter. Additionally, quarterly queries increased 36% on a sequential basis to 324 million.

Adjusted EBITDA was down 36.5% from the year-ago quarter to $37.4 million due to lower revenues. However, the company’s cost-saving initiatives and its planned transition of its MSO partners and retail customers to deploy the TiVo service on third-party hardware are a positive.

TiVo exited the reported quarter with cash, cash equivalents and short-term marketable securities of $271.9 million compared with $320.9 million at the end of the previous reported quarter.

Guidance

For fiscal 2019, TiVo expects revenues in the range of $640-$654 million.

Adjusted EBITDA is anticipated between $172 million to $178 million.

Further, the company’s non-GAAP earnings are likely to be in the range of 72-76 cents per share in 2019.

Note: The EPS data mentioned in the text of this section differs from the rest of report due to the difference in calculation or consideration of one-time items.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted 20% due to these changes.

VGM Scores

Currently, TiVo has an average Growth Score of C, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of this revision has been net zero. Notably, TiVo has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.