TiVo focuses on OTT apps, pay-TV relationships in shaky earnings

DVR manufacturer TiVo, which has been offering OTT-enabled set-tops to both consumers and pay-TV operator partners, saw lower profits in its fiscal 2015 third quarter, coming in one cent below analyst estimates at 6 cents per share, with net income of $6.35 million.

The company said it reached a quarterly revenue record of $118.4 million, up from $117.3 million a year previous.

With a lower forecast looming for next quarter, TiVo turned the spotlight on its increased relationship with pay-TV providers, to whom it provides a DVR that includes over-the-top options like Netflix (NASDAQ: NFLX), and its broadened consumer product line. The company noted that it has added several OTT apps to its OTT-capable DVRs, including Amazon (NASDAQ: AMZN) Prime Instant Video, Home Shopping Network's Shop by Remote service and Walmart's Vudu transactional VOD service.

TiVo also said its revenues from pay-TV partners worldwide increased 37 percent in the quarter.

"The 337,000 MSO subscription additions in the quarter are on top of the approximately 624,000 we added during the first two quarters of the fiscal year," said Tom Rogers, president and CEO, in the earnings release. "We have now reached over four million total MSO subscriptions, proof that our operator relationships are thriving."

To further emphasize the issue, Rogers said on the company's earnings conference call that operators deploying its DVRs are doing better than MSOs that aren't working with them.

"Our partners, especially those who are deploying TiVo aggressively, grew or maintained their video subscribers in the quarter. Virgin Media [in the UK] added thousands of video subs and grew its TiVo base to 2.4 million subscriptions, which is 60 percent of their video footprint," Rogers told analysts.

Pay-TV operators overall saw a decline in video subscribers during the third quarter.

Digitalsmiths, the cloud based user interface and content discovery platform recently acquired by TiVo, grew its revenue 21 percent in the quarter, Rogers noted.

TiVo forecast that its fiscal fourth-quarter 2015 net income will be between $2 million and $5 million, with adjusted EBITDA between $21 million and $24 million. Despite its third-quarter results, Jefferies analyst Brian Fitzgerald maintained a "buy" rating for the company and raised his price target by $2, to $18.

Rogers told analysts that while its Roamio OTA (over the air) DVR has gained traction with consumers, particularly cord-cutters looking for a legal way to record shows, the company does not expect to see a big uptick in unit sales during the holiday season. "So that's a retail prospect for us, but not one you'll see as a major difference in the fourth quarter."

For more:
- see the earnings release
- Marketwatch has this story
- Seeking Alpha has this call transcript

Earnings roundup: Sizing up pay TV earnings for the third quarter of 2014

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