The TiVo results this week, lifted by the payment of $100 million in legal settlements from Dish Networks, show perhaps the rosiest picture of the company in the past five years. Despite that a week ago its share price plummeted yet again, losing 20% due to concern that a US court has delayed a decision about whether or not Dish’s software workaround is legitimate until February next year. If it I given a court’s sanction it will not have to pay further royalties and that may undermine TiVo’s attempts to bring in other royalty revenues.
But now the record numbers are out, the share price has recovered somewhat, but nowhere in its share price is the potential for a company that will shortly be chasing every Consumer Electronics company for royalties to build DVRs.
It is the prospect of that kind of IPR control that has perhaps driven DirecTV back to the TiVo fold recently to rekindle their dying relationship. Tom Rogers, President and CEO reminded everyone of what a strong year this has been for TiVo, listing the rollout of TiVo service and new set top embedded features at Comcast; the fact that it now has $200 million in cash; the new deal with DirecTV to begin reselling TiVo service; its deal to offer TiVo capabilities through a PC in a deal with Germany company Nero and deals with key content providers Netflix and Jaman and with handset maker Blackberry to go with existing deals with Amazon, You Tube, and Rhapsody.
Rogers gave the flimsiest of warnings about the economic climate, more a ‘just in case’ admission that the company mustn’t be too sure of itself, it has announced some layoffs and spending controls.
For the quarter TiVo had service and technology revenues of $51.7 million, down from $58.3 million last year. It made an EBITDA of $95.3 million, including $87.8 million of litigation proceeds and this would have been just $7.5 million without them. And a net income of $100.6 million.
There was also $16.8 million in interest income to go with the $87.8 million in litigation proceeds. TiVo said that overall it would have made a lost without the court case, but not the $7 million to $9 million loss that it expected or anything near the net loss of $8.3 million a year ago.
Rogers continued, “In terms of our litigation with EchoStar to defend our intellectual property, we are pleased to have received approximately $105 million from EchoStar, which covers damages and interest awarded by the United States District Court for EchoStar’s continued infringement on our Time Warp patent for the period up to September 8, 2006. Additionally, we are pleased that the US District Court has scheduled a hearing on EchoStar’s purported workaround for February 17, 2009.
TiVo and EchoStar are now going through accelerated ‘discovery’ the collection of evidence phase of a trial, in order to bring the ‘workaround’ under legal scrutiny in record time. It is probably the final piece in the jigsaw before TiVo can chase further deals like the Comcast and DirecTV deals, which both involved an element of IPR licensing.
TiVo also said that its marketing spend had fallen dramatically by working with major retailers and content providers so that its quarterly subscription acquisition costs were down to $139 per subscriber rather than $304 a year ago.
TiVo-owned subscription gross additions for the third quarter were down at just 44,000, compared to 69,000 a year-ago with churn rate more or less unchanged at 1.4 % and it ended the quarter with 1.7 million TiVo owned subscribers, out of a total of 3.5 million subscribers. This has fallen from a peak of 4.0 million.
The TiVo market capital remained at $490 million, still about 50% of what it was in the early part of the year, roughly the cash it holds plus 1.9 time revenues.