TiVo Reports a Small Profit

Submitted by itvt on August 25, 2005 - 1:22am

--Will Cease to Provide Guidance on Subscriber Acquisition Total

DVR vendor/service provider, TiVo, has released financial results and subscriber numbers for its fiscal second quarter, ended July 31st:

  • Service and technology revenues totaled $40.7 million, compared to $27.8 million for the year-ago quarter, while net revenues totaled $39.3 million, compared to $39.8 million for the year-ago quarter.
  • Net income totaled $240,000, or break-even on a per-share basis, compared to net losses of $10.8 million, or $0.13 per share, for the year-ago quarter. This is the first time that the company has recorded a profit.
  • The company added 254,000 net new subscriptions in the course of the quarter (compared to 288,000 for the year-ago quarter), bringing its subscriber base to 3.6 million. Gross standalone (i.e. TiVo-owned) subscriber additions during the quarter totaled 77,000, compared to 78,000 for the year-ago quarter. Net standalone subscriber additions totaled 40,000, compared to 63,000 for the year-ago quarter. Net new subscriptions from satellite TV provider DirecTV's "DirecTV with TiVo" service totaled 214,000: approximately 2.3 million TiVo subscribers are DirecTV with TiVo customers. (Note: DirecTV has stated publicly that it will not actively market TiVo's service when it launches a new DVR, based on the XTV technology of its News Corp.- stablemate, NDS, later this year.)

In a lengthy prepared statement included in the company's earnings press release, TiVo's recently appointed CEO, Tom Rogers, acknowledged that the company faces significant challenges as a result of the likely decline of its DirecTV with TiVo business, and signaled that it plans to invest significantly in increasing its standalone subscriber base--even if such investment means that the company is unlikely to turn a profit again in the near future: "While it is encouraging that we hit break-even this quarter, it is clear TiVo faces a number of significant challenges," the statement read. "In directly facing those challenges there is considerable long-term potential that can be realized. To that end, we have begun to aggressively attack a number of critical issues in sales, marketing, and distribution. Driving growth in the number of subscriptions at TiVo is the biggest critical challenge we face. Given the increasingly competitive environment, approaching this area more aggressively than we have in the past requires additional investment in subscription acquisition. We will be announcing a number of new promotional initiatives in the fall, one of which combines a hardware and service offer which we believe will be well received in the upcoming holiday season. As the results of this quarter indicate, we can hit profitability by managing to a low subscription growth number; but, we have elected to pursue a more aggressive marketing approach in keeping with building over time a broader scale subscription base, and in so doing, we will forgo reaching our goal of sustainable profitability by the fourth quarter. During the next year, before new mass deployment deals kick in, we feel it is important to be more aggressive in building the standalone TiVo base in light of the current competitive environment. It should be noted that even with these additional marketing initiatives, each new subscription offers TiVo substantially positive economic value."

TiVo also provided some guidance for the current quarter: it expects service and technology revenues to range between $41 million and $43 million, and net losses to range between $20 million and $25 million. However, the company did not provide any guidance on anticipated subscriber-acquisition totals. Another prepared statement from CEO Rogers explained why: "I believe we must focus on building a platform for long-term success," the statement read. "Consistent with that focus, we're making changes to our guidance practice. We have very limited control going forward over the marketing efforts and priorities of DirecTV, so we feel it is inappropriate to provide guidance on that part of the business. Additionally, standalone subscriptions are just one piece of our long-term distribution model, and, as we stated above, we are fundamentally changing our marketing approach to these potential subscriptions. As a result, we are not going to provide subscription guidance going forward. Having said that, we acknowledge the importance of subscription information. We are increasing the amount of historical information we provide on both gross and net subscription additions. We will also focus our guidance on the near-term, where the level of visibility allows us to provide the most useful information, and discontinue the practice of providing annual financial guidance."

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