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TiVo 8-K 2007

Documents found in this filing:

  1. 8-K
  2. 8-K
Form 8-K

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) November 28, 2007

TIVO INC.

(Exact name of registrant as specified in its charter)

 

Delaware   000-27141   77-0463167

(State or other jurisdiction

of incorporation)

 

(Commission

File Number)

 

(IRS Employer

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 November 28, 2007, we announced financial results for our third quarter ended October 31, 2007. Net service revenues for the quarter were $52.9 million an 8% increase compared to $49.0 million in the third quarter of fiscal year 2007. Net technology revenues were $5.3 million, which included recognition of Comcast development revenue of $2.9 million. This was an increase of 51%, compared with $3.5 million in the third quarter of fiscal year 2007. The net loss for the quarter was ($8.2) million or ($0.08) per basic and diluted share, compared to a net loss of ($11.1) million or ($0.12) per share, for the three months ended October 31, 2006.

As of October 31, 2007 our total subscriptions were approximately 4.1 million. TiVo-Owned subscription gross additions were 69,000 for the quarter, compared to 101,000 in the third quarter of last fiscal year. TiVo-Owned net subscription increased by 4,000 compared to an increase of 53,000 in the third quarter of last fiscal year. Our monthly churn rate increased to 1.3% for the quarter ended October 31, 2007 as compared to 1.0% in the year ago period. The installed base of MSO/Broadcasters’ TiVo subscriptions has declined to approximately 2.4 million.

TIVO INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share and share amounts)

(unaudited)

 

     Three Months Ended October 31,     Nine Months Ended October 31,  
     2007     2006     2007     2006  

Revenues

        

Service revenues

   $ 52,940     $ 49,000     $ 160,471     $ 145,381  

Technology revenues

     5,339       3,527       12,355       14,992  

Hardware revenues

     17,240       13,476       25,732       21,698  
                                

Net revenues

     75,519       66,003       198,558       182,071  

Cost of revenues

        

Cost of service revenues (1)

     10,738       10,820       30,957       30,883  

Cost of technology revenues (1)

     4,912       3,006       12,115       13,373  

Cost of hardware revenues

     29,114       31,925       68,033       68,678  
                                

Total cost of revenues

     44,764       45,751       111,105       112,934  
                                

Gross margin

     30,755       20,252       87,453       69,137  
                                

Research and development (1)

     14,049       12,221       43,364       37,973  

Sales and marketing (1)

     5,967       5,450       16,651       15,736  

Sales and marketing, subscription acquisition costs

     9,050       5,016       23,855       10,852  

General and administrative (1)

     11,106       9,811       32,720       35,961  
                                

Total operating expenses

     40,172       32,498       116,590       100,522  
                                

Loss from operations

     (9,417 )     (12,246 )     (29,137 )     (31,385 )

Interest income

     1,218       1,291       3,965       3,341  

Interest expense and other

     (45 )     (133 )     81       (165 )
                                

Loss before income taxes

     (8,244 )     (11,088 )     (25,091 )     (28,209 )

Provision for income taxes

     —         (4 )     (8 )     (35 )
                                

Net loss

   $ (8,244 )   $ (11,092 )   $ (25,099 )   $ (28,244 )
                                

Net loss per common share - basic and diluted

   $ (0.08 )   $ (0.12 )   $ (0.26 )   $ (0.32 )
                                

Weighted average common shares used to calculate basic and diluted net loss per share

     97,611,001       91,930,061       97,174,771       87,680,571  
                                

(1)    Includes stock-based compensation expense as follows :

        

Cost of service revenues

   $ 178     $ 129     $ 513     $ 353  

Cost of technology revenues

     726       236       1,693       682  

Research and development

     1,797       1,608       5,392       4,177  

Sales and marketing

     660       474       1,468       1,264  

General and administrative

     3,899       1,636       8,076       4,257  

 

2


TIVO INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share amounts)

(unaudited)

 

     October 31, 2007     January 31, 2007  
ASSETS     

CURRENT ASSETS

    

Cash and cash equivalents

   $ 42,296     $ 89,079  

Short-term investments

     40,162       39,686  

Accounts receivable, net of allowance for doubtful accounts of $1,132 and $271

     25,880       20,641  

Inventories

     22,466       29,980  

Prepaid expenses and other, current

     3,738       3,071  
                

Total current assets

     134,542       182,457  

LONG-TERM ASSETS

    

Property and equipment, net

     12,372       11,706  

Purchased technology, capitalized software, and intangible assets, net

     14,333       16,769  

Prepaid expenses and other, long-term

     1,901       1,018  
                

Total long-term assets

     28,606       29,493  
                

Total assets

   $ 163,148     $ 211,950  
                
LIABILITIES AND STOCKHOLDERS’ EQUITY     

LIABILITIES

    

CURRENT LIABILITIES

    

Accounts payable

   $ 25,350     $ 37,127  

Accrued liabilities

     25,862       36,542  

Deferred revenue, current

     58,992       64,872  
                

Total current liabilities

     110,204       138,541  

LONG-TERM LIABILITIES

    

Deferred revenue, long-term

     38,286       54,851  

Deferred rent and other

     888       1,562  
                

Total long-term liabilities

     39,174       56,413  
                

Total liabilities

     149,378       194,954  

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 150,000,000;

    

Issued shares are 99,028,387 and 97,311,986, respectively and outstanding shares are 98,900,908 and 97,231,483, respectively

     99       97  

Additional paid-in capital

     781,461       759,314  

Accumulated deficit

     (766,944 )     (741,845 )

Less: Treasury stock, at cost - 127,479 and 80,503 shares, respectively

     (846 )     (570 )
                

Total stockholders’ equity

     13,770       16,996  
                

Total liabilities and stockholders’ equity

   $ 163,148     $ 211,950  
                

 

3


TIVO INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(unaudited)

 

    

Nine Months Ended

October 31,

 
     2007     2006  

CASH FLOWS FROM OPERATING ACTIVITIES

    

Net loss

   $ (25,099 )   $ (28,244 )

Adjustments to reconcile net loss to net cash used in operating activities:

    

Depreciation and amortization of property and equipment and intangibles

     7,651       5,815  

Stock-based compensation expense

     17,142       10,733  

Inventory write-down

     8,961       —    

Loss on inventory barter transaction and utilization of trade credits

     1,124       —    

Changes in assets and liabilities:

    

Accounts receivable, net

     (5,239 )     (7,189 )

Inventories

     (4,221 )     (23,168 )

Prepaid expenses and other

     100       4,167  

Accounts payable

     (11,143 )     3,853  

Accrued liabilities

     (10,680 )     (4,652 )

Deferred revenue

     (22,445 )     (17,331 )

Deferred rent and other long-term liabilities

     (674 )     804  
                

Net cash used in operating activities

   $ (44,523 )   $ (55,212 )
                

CASH FLOWS FROM INVESTING ACTIVITIES

    

Purchases of short-term investments

     (26,976 )     (13,502 )

Sales of short-term investments

     26,500       4,350  

Acquisition of property and equipment

     (6,140 )     (6,115 )

Acquisition of capitalized software and intangibles

     (375 )     (13,125 )
                

Net cash used in investing activities

   $ (6,991 )   $ (28,392 )
                

CASH FLOWS FROM FINANCING ACTIVITIES

    

Proceeds from issuance of common stock, net

     —         64,516  

Proceeds from issuance of common stock related to exercise of warrants

     —         3,330  

Proceeds from issuance of common stock related to exercise of common stock options

     3,181       8,638  

Proceeds from issuance of common stock related to employee stock purchase plan

     1,826       1,290  

Treasury Stock - repurchase of stock for tax withholding

     (276 )     (570 )
                

Net cash provided by financing activities

   $ 4,731     $ 77,204  
                

NET DECREASE IN CASH AND CASH EQUIVALENTS

   $ (46,783 )   $ (6,400 )
                

CASH AND CASH EQUIVALENTS:

    

Balance at beginning of period

     89,079       85,298  
                

Balance at end of period

   $ 42,296     $ 78,898  
                

 

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TIVO INC.

OTHER DATA

Subscriptions

 

    

Three Months Ended

October 31,

 

(Subscriptions in thousands)

   2007     2006  

TiVo-Owned Subscription Gross Additions

   69     101  

Subscription Net Additions/(Losses):

    

TiVo-Owned

   4     53  

MSOs/Broadcasters

   (134 )   (37 )
            

Total Subscription Net Additions

   (130 )   16  

Cumulative Subscriptions:

    

TiVo-Owned

   1,712     1,625  

MSOs/Broadcasters

   2,355     2,809  
            

Total Cumulative Subscriptions

   4,067     4,434  

% of TiVo-Owned Cumulative Subscriptions paying recurring fees

   60 %   55 %

Included in the 4,067,000 subscriptions are approximately 190,000 lifetime subscriptions that have reached the end of the 48-month period TiVo uses to recognize lifetime subscription revenue. These lifetime subscriptions no longer generate subscription revenue.

 

5


TIVO INC.

OTHER DATA - KEY BUSINESS METRICS

 

    

Three Months Ended

October 31,

 

TiVo-Owned Churn Rate

   2007     2006  
     (In thousands)  

Average TiVo-Owned subscriptions

   1,708     1,596  

TiVo-Owned subscription cancellations

   (65 )   (48 )
            

TiVo-Owned Churn Rate per month

   -1.3 %   -1.0 %
            

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 for our low cost product offerings, and increased price sensitivity 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

October 31,

   

Twelve Months Ended

October 31,

 

Subscription Acquisition Costs

   2007     2006     2007     2006  
     (In thousands, except SAC)     (In thousands, except SAC)  

Sales and marketing, subscription acquisition costs

   $ 9,050     $ 5,016     $ 33,770     $ 16,803  

Hardware revenues

   $ (17,240 )   $ (13,476 )   $ (45,622 )   $ (35,833 )

Cost of hardware revenues

   $ 29,114     $ 31,925     $ 111,567     $ 107,489  
                                

Total Acquisition Costs

     20,924       23,465       99,715       88,459  
                                

TiVo-Owned Subscription Gross Additions

     69       101       330       487  

Subscription Acquisition Costs (SAC)

   $ 303     $ 232     $ 302     $ 182  
                                

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 acquisition costs for a given period divided by TiVo-Owned subscription gross additions for the same period. In the first fiscal quarter of 2008, we revised our definition of total acquisition costs. We now define total acquisition costs as sales and marketing, subscription acquisition costs less net hardware revenues (defined as gross hardware revenues less rebates, revenue share and market development funds paid to retailers) plus cost of

 

6


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 incur limited or no acquisition costs for these new subscriptions. 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

October 31,

 

TiVo-Owned Average Revenue per Subscription

   2007     2006  
     (In thousands, except ARPU)  

Total Service revenues

   $ 52,940     $ 49,000  

Less: MSOs/Broadcasters-related service revenues

     (6,599 )     (7,573 )
                

TiVo-Owned-related service revenues

     46,341       41,427  

Average TiVo-Owned revenues per month

     15,447       13,809  

Average TiVo-Owned per month subscriptions

     1,708       1,596  
                

TiVo-Owned ARPU per month

   $ 9.04     $ 8.65  
                
    

Three Months Ended

October 31,

 

MSOs/Broadcasters Average Revenue per Subscription

   2007     2006  
     (In thousands, except ARPU)  

Total Service revenues

   $ 52,940     $ 49,000  

Less: TiVo-Owned-related service revenues

     (46,341 )     (41,427 )
                

MSOs/Broadcasters-related service revenues

     6,599       7,573  

Average MSOs/Broadcasters revenues per month

     2,200       2,524  

Average MSOs/Broadcasters per month subscriptions

     2,422       2,837  
                

MSOs/Broadcasters ARPU per month

   $ 0.91     $ 0.89  
                

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 subscription fees, advertising, and audience research measurement. ARPU does not include rebates, revenue share and other payments to channel that reduce our GAAP revenues. As a result, 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.

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.

 

7


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.

Beginning in February 2006, pursuant to the most recent amendment of our agreement with DIRECTV, TiVo defers a portion of the DIRECTV subscription fees equal to the fair value of the undelivered development services. Additionally, beginning in February 2007, DIRECTV began paying us a monthly fee for all DIRECTV households with DIRECTV receivers with TiVo service similar to the lower amount paid by DIRECTV for households with DIRECTV receivers with TiVo service deployed since March 15, 2002, subject to a monthly minimum payment by DIRECTV.

Forward-Looking Statements

This report contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements relate to, among other things, TiVo’s business development strategies, current and future partnerships, future churn, subscription acquisition costs, subscription growth, MSOs/Broadcasters’ ARPU and TiVo-Owned ARPU as well as other factors that may affect future earnings or financial results. 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, the outcome of legal proceedings and claims, 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, 2007 and all subsequent filings. We caution 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.

 

8


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: November 28, 2007

    By:   /s/ Cal Hoagland
        Cal Hoagland
        Interim Chief Financial Officer
        (Principal Financial and Accounting Officer)

 

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