Rentrak's CEO Discusses F3Q2014 Results - Earnings Call Transcript

Feb. 6.14 | About: Rentrak Corporation (RENT)

Rentrak Corporation (NASDAQ:RENT)

F3Q2014 Earnings Call

February 6, 2014 5:00 PM ET

Executives

Bill Livek – Vice Chairman and CEO

David Chemerow – COO and CFO

Analysts

John Crowther – Piper Jaffray

Todd Mitchell – Brean Capital

Rich Tullo – Albert Fried

Matthew Harrigan – Wunderlich Securities

Jeb Terry – Aberdeen Investment Management

Operator

Welcome to Rentrak’s Fiscal 2014 Third Quarter Financial Results Conference Call. During the call, the company will be making forward-looking statements that are subject to certain risks and uncertainties. Please refer to the Safe Harbor statement contained in today’s press release and also to Rentrak’s periodic filings with the SEC for a complete discussion of those risks and uncertainties that could cause actual results to differ materially from those you might perceive today.

Rentrak will be discussing certain non-GAAP financial results during this call. The news release issued earlier today contains a reconciliation of these non-GAAP financial results to their most comparable GAAP measures. These reconciliations can also be found on the company’s website at www.rentrak.com. Additionally, the website contains supplemental financial information that provides historical trend data in Rentrak’s various lines of business. Please also note that the company has posted slides to accompany today’s webcast on its website at www.rentrak.com.

Now, I would like to turn the call over to Bill Livek, Vice Chairman and CEO of Rentrak. Please go ahead, sir.

Bill Livek

Thank you, operator and thank you everyone who is with us today. David Chemerow, our COO and CFO will provide our financial update momentarily. Members of our executive management team are also with me and online and will participate in the question-and-answer session.

I am excited to share with you another record revenue quarter for the current Rentrak management team. Our revenue improved 27% for Q3. Our advanced media information business or what we call, AMI, grew 35%, our highest percentage growth since the second quarter of fiscal ‘13 and home entertainment grew by 17%. Both AMI and home entertainment continued to perform very well. On the heels of signing the CBS Television Network as a new television essentials customer, we believe Rentrak is extremely well-positioned to continue our current growth path in our AMI business and are very excited about the future. As you know, only Rentrak can precisely measure the movie and TV content wherever and whenever it is being viewed with our unique census-like currencies, by measuring our movie and TV measurement information across products that viewers buy, the automobiles they drive, the lifestyles they lead, Rentrak has created high-value products to help advertisers, their ad agencies, the movie industry, the multi-channel video program distributors, television stations, TV networks better understand how to reach viewers and customers more efficiently and more profitably.

I would like to begin our business review with Rentrak’s television business, starting with our national product line. As you can see on Slide 5, we have built an impressive client list. A few weeks ago, we announced CBS and the CBS Sports Network as new TV essentials clients. CBS will utilize our television ratings measurement insights, including our automobile reporting TV viewing against hundreds of networks crossed against automobile make and model ownership to understand their viewership. As you know, automobile advertising accounts for a large portion of television ad spend in making reporting a must have for all television networks. So they utilize Rentrak.

CBS has been a pioneer in recognizing that advertisers are moving beyond traditional age and sex information for their media planning and buying activities. They are shifting towards product purchase data to gain a more comprehensive view of who is watching television and when. As the only company capable of providing this kind of detail from our census-like framework, Rentrak will help CBS advance this new paradigm in the buying and selling of television advertising on multiple platforms. During the quarter, we also added, Vme, the fourth largest ad supported Hispanic network, which is using our television ratings currency to gain insights about audience viewing patterns. We now measure more than three times the number of Hispanic networks than anyone else. Shorts International, TV Japan, UpTV and others also joined the growing list of networks utilizing Rentrak’s advanced demographic currency. We now have about 75 television networks. And with our national television service picking up steam in the marketplace, we expect to have several additional announcements in the coming months.

Now, moving to our local television business, we currently have more than 290 local television station clients among 56 television station groups, which accounts for 15% of the available 2,000 station market, as you can see on Slide 6. This is an increase of 55 television stations from our last earnings call. Our strategy of signing an anchored client in each local markets and then signing additional stations and local ad agencies within the market continues to pay dividends. We are pleased to announce on this call that we just recently signed seven CBS-owned and operated television stations as clients to our local TV service. These are the CBS owned and operated stations in four major markets, including Dallas-Fort Worth, Minneapolis-St. Paul, Miami-Fort Lauderdale, and Pittsburg. Our strategy of securing an anchor client is working.

Our recent wins and you are going to hear this again first includes Rentrak, which now covers nearly their entire 53 station group. We have added 19 television stations from Raycom. We began our relationship with them in 2010 with only two television stations. And we think this is an example of how Rentrak continues to expand within the groups that we have. We also recently renewed and expanded agreements with Nexstar where we added 22 of their stations in 11 markets. And again you are hearing this first on this earnings call and with London Broadcasting, where we are now being utilized in six of their seven television market share. Because of our success and focus on automotive and political in the local market vertical which can make up as much as 50% of the television station’s revenue in key markets, certain times of the year our discussions with major television station groups has picked up in the quarter as the television group consolidation appears to be quieting down.

We introduced last week at the recent NATPE conference our new overnight ratings report that gives clients as you will see a Slide 7 for the first time ever ratings within 24 hours from millions of television sets. We plan to roll this new service out in several markets over the next year based on television station demand. This is another advantage for Rentrak, which should help us continue to grow our station and local advertising client base. As we have discussed in the past both our national network and local advertiser station growth is driven by ad agencies and advertisers who commit to using our Advanced Demographic currency.

Slide 8 shows the sampling of our clients and their geographic coverage. Since the beginning of fiscal 2014, we have signed more than 70 agreements with local ad agencies. More than 20 of those were signed in the month of December alone, it’s pretty amazing. More than one-third of the agencies we signed are automotive agencies. Local agencies continue to sign with Rentrak, because they need the same stable and reliable information that television stations use. All 75 local ad agencies are now using Rentrak to buy TV advertising in over 100 television markets. As I mentioned on our last call, revenue related to our activities in the political advertising market has passed what we generated for the 2012 presidential election with a great deal of expansion potential between now and 2016. We worked with three candidates in both parties in the recent Virginia and New Jersey gubernatorial races. And we recently signed a large number of political analyst and media placement agencies that will be using Rentrak to help in their execution as the mid-term election television advertising, planning and buying.

Through these relationships the good majority of the key midterm elections will be utilizing Rentrak for their television placement decisions. Some of the organizations that we recently signed include Deep Root Analytics, i360, Target Enterprises (indiscernible) and AMG. We will announce soon publicly that one of the largest privately owned media services companies in the world will integrate our television essential system into publishers’ clearinghouse customer data in a privacy compliant matter. This will create one of the most advanced applications that we offer ad agencies and advertising clients, helping them improve their television planning and buying process.

I am now going to move to our OnDemand Everywhere business. As you are well aware, based on your television viewing habits more and more consumers are watching television on their own schedules. We consumers choose based on what’s most convenient live TV, recorded TV or OnDemand, that’s why it’s critically important that networks, advertisers and then their agencies have access to the most complete picture of viewing habits. Not just on the first day, second or third day but over the course of 28 days. Because of our complete census of all VOD viewing, Rentrak is the only company that can provide complete reporting of TV programs by title in detail beyond day three. The importance of this type of reporting has resulted in the participation of many key ad supporting networks in our video on demand transparency efforts. For the first time ever buyers and sellers of advertising are able to define viewership by specific timeframes, shows and networks added much efficiency into the ad buying process. We are very excited of about the progress that we have made on our total television service which includes VOD and regular television viewing very.

Our total television service which you can see on Slide 9 provides to our clients the ability to better understand and monetize cross platform viewing. As part of our commitment to total television viewing, we are excited to tell you again first on this call, that Rentrak has signed our first operator partner to provide us with complete census-based cross platform data, allowing us to provide measurement of TV, video-on-demand internet and mobile in a census like way. This relationship will continue to enhance our total television service when combining additional datasets to provide our clients with census-based multi-platform measurement at scale.

Lastly, I am happy to announce that we entered into an agreement with PlaceIQ, a company that helps to build mobile audiences and analytics from location intelligence for digital advertising. The agreement allows us to provide national television advertising brands with the most relevant and efficient consumer targeting for mobile audiences. By mapping Rentrak’s television viewing ratings against PlaceIQ insights about consumers mobile devices, we are building precise targeting mechanisms for mobile advertising. To-date we have helped a global brands connect with the National Baseball League and National Football League viewers as well as consumers watching programs across networks with popular advanced demographics. We have also deployed the product to help raise awareness for a national consumer electronics brand among its key target audience. As you know, the use of mobile devices for information and entertainment continues to rise, this product is right place at the right time.

I’ll finish our AMI discussion with our box office business, which continues to impress and can be seen on Slide 11. We remained focused on global expansion while we are launching new products in the United States to help studios better monetize their content. Post Track is tracking PreAct are recently getting a great deal of marketplace buzz and we are currently working to firm up new customers. By adding information about consumer reaction into the first two weeks of a movie’s release through Post Track and measuring the health of a marketing campaign before movie premieres with PreAct, we are the world’s leading provider of moving intelligence, bar none. Stay tuned for more announcements in the coming months and our continued progress that we make on these two product lines.

I will finish up with a review of home entertainment. We benefited from the addition of a large retailer using our PPT services last year for some titles, as well as Warner Brothers’ decision to provide store-based retailers with content on a title’s initial release date. Warner’s new releases combined with a strong slate of films from our other studio partners enabled Rentrak to offer almost 30% more theatrical titles to our participating PPT retailers in this year’s third quarter compared with last year. However, as you know that large retailer has closed its doors and will not – we will not be reporting any revenue from that retailer as of February 1 of this year.

Our management team has done a fantastic job of turning our PPT business around this fiscal year. And I thank them and they should be commended. At the same time given the secular trends in this business and our desire to share with our investors a company that can grow meaningfully and consistently for the long-term, we are actively pursuing strategic options for PPT business. We believe this business provides significant value for brick-and-mortar video stores. And we are confident in our ability to find the right option that will allow our home video customers to continue to receive the benefits of the PPT program, which allows us to focus on our higher growth AMI business that offers significant amount of upside in both revenue and profit. David and his remarks will talk about our growth for the quarter and what it would have been, excluding the PPT business. So you can get a better understanding of what Rentrak will look like without PPT included.

As we move closer to a decision on strategic options for a PPT business, it’s important to understand that the sale of this product line would likely yield minimal cash for the company. Rentrak is continuing to make significant progress operationally and financially. We are excited about where we stand now. And more importantly, we are excited about the future. Our AMI business is in the right market, at the right time with the right products.

Now, I am going to turn over the rest of the call to David for a financial review. David?

David Chemerow

Thank you, Bill. Starting on Slide 13, you can see that we posted consolidated revenue growth of 27%, reflecting a 35% increase in AMI revenue and a 17% increase in home entertainment revenue. Consolidated revenue for the second quarter rose to $31.6 million, up from $24.9 million last year. Home entertainment segment revenue increased to $13.1 million, up from $11.2 million. This segment continued to benefit from the addition of Blockbuster last year, Warner Bros.’ return as a customer and several strong titles during the quarter. AMI segment revenue advanced to $18.5 million for the fiscal 2014 third quarter, up from $13.7 million a year ago. AMI now represents 59% of our consolidated revenue versus 55% last year.

On Slide 14, there is a breakdown of our AMI results by business line. TV measurement grew 84% from last year’s third quarter, which was slightly higher than our projections. Box office revenue rose 11%, which was within our projections and OnDemand Everywhere increased 10% which was below our forecast for the full fiscal year. But as a reminder, we continue to expect quarter-to-quarter variability.

Moving to Slide 15, you will note the consolidated gross margin improved to 48% for the fiscal 2014 third quarter versus 44% last year. AMI contributed 77% of consolidated gross margin dollars, up from 74% for last year’s third fiscal quarter. Within AMI, gross margin totaled 63% of revenue for the third quarter of fiscal 2014 up from 60% a year ago due to the strong growth of our TV business and the leveraging effect of adding more revenue. Within home entertainment, gross margin was 26%, the same as in last year’s third quarter. Consolidated operating expenses were $15.8 million versus $12.9 million last year. The increase primarily reflected higher costs related to growth in our AMI business, specifically TV Essentials, as well as a full quarter of routine ongoing costs related to running iTVX’s business, as well as increased IT headcount.

This brings the operating loss which you will find on Slide 16 for the fiscal 2014 third quarter to $695,000, which included $1.8 million in stock-based compensation costs and $24,000 in acquisition-related costs. The $1.8 million in stock-based compensation costs included routine stock-based comp of $1.5 million and $300,000 for the revaluation of iTVX’s expected earn-out. For last year’s third fiscal quarter, the operating loss totaled $1.8 million, which included $1.5 million in stock-based compensation costs. So therefore for comparative purposes, excluding these amounts in both periods, operating income would have grown to $1.2 million, up significantly from an operating loss of $241,000 for the fiscal 2013 third quarter.

Next, I will review operating income by segment. AMI operating income totaled $2.8 million or 15% of AMI revenue for the fiscal 2014 third quarter. This is more than twice the operating income of $1.2 million or 9% of AMI revenue last year. Home entertainment operating income totaled $2.1 million or 16% of home entertainment revenue for the fiscal 2014 third quarter versus $1.5 million or 14% of home entertainment revenue a year ago. Our net loss for the third quarter of fiscal 2014 totaled $343,000 or $0.03 per share compared with the net loss of $1.8 million or $0.15 per share for last year’s third fiscal quarter. Excluding the items previously mentioned for both periods, net income would have risen substantially to $1.5 million or $0.12 per diluted share compared with a net loss of $286,000 or $0.02 per share for the third quarter of fiscal 2013.

As you can see on Slide 17, cash generated by operating activities was approximately $5 million for the quarter versus $3 million a year ago. For the fiscal 2014 year-to-date period, we generated more than $11 million in cash from operations versus only $1 million for the fiscal 2013 period. Cash, cash equivalents and marketable securities grew to $26.9 million at December 31, 2013, up from $20.4 million at the end of fiscal 2013. Of the $2.2 million in capital spending for the third fiscal quarter, $1.6 million was related to internally developed software costs in connection with our essential services and remaining $600,000 was related to computer equipment and leasehold improvements. For the full fiscal 2014 year, we expect to incur approximately $7.7 million in capital spending, $5.2 million of which is related to internally developed software with the remaining $2.5 million related to hardware purchases.

Our long-term business metrics can be found on Slide 18. Please remember that actual quarter to quarter growth will likely be a bit bumpy, but that the quarters are expected to average out to our full year estimates. It’s also important to note that as we continue to increase revenues, the leverage we built into our operating model should continue to drive improved profitability. Our TV business is expected to grow 80% for the next several years ago. Further, we expect this business line to reach operating income profitability in the fourth quarter of fiscal 2014. The annualized value or run rate of our current contracts is 81% higher during the third quarter last year.

Our box office business should grow 12% annually for the foreseeable future with some year-to-year variability. Remember that, none of our major studio contracts come up for renewal this year. So, we do not expect to benefit from any associated price increases from them in fiscal 2014. Our major contracts begin coming up for renewal next year with fiscal 2015 should benefit from price increases on these agreements. Our OnDemand Everywhere business should increase 20% per year for the foreseeable future, again with some year-to-year variability. As Bill indicated, we are making significant progress and evaluating the possible sale of our PPT business, which distributes physical DVDs to brick-and-mortar home video rental stores. Any sale would not include our DRS or direct revenue sharing business, which is also in the home entertainment segment. DRS is a high margin information business measuring all revenue-sharing transactions in the marketplace.

I’d like to share some additional information with you, so you can better understand the size of our PPT business and assess its value. This year based on our guidance of 7% to 10% revenue growth for the home entertainment segment, we expect PPT’s revenues to be $43 million to $46 million. For fiscal 2015, we expect PPT revenue to decline by 20% to 25% due to the total loss of revenue from Blockbuster as well as the long-term normal decline in the business. This would result in fiscal 2015 PPT revenue in the range of $33 million to $35 million. In fiscal 2015, we also expect the PPT business to generate operating income in the range of $2 million to $3 million.

I’d also like to share with you a little more information about how Rentrak would look if we did not own the PPT business. Our revenue this quarter if we included only AMI and DRS would have been $19.5 million, which is up 37% from the prior year. This was higher than the 35% growth rate of AMI, because of the growth in our DRS business. Including DRS would also have increased AMI’s gross margin from the reported 63% to 65%. Although we have not yet made a decision on the sale of the PPT business, if we do decide to sell it before the end of fourth fiscal quarter, we believe we will be able to treat that business as a discontinued operations for the entire fourth quarter. This means that PPT would be accounted for on a one line basis at the bottom of income statement for both historical and prospective purposes. We are experiencing high revenue growth in AMI and this also helps us generate robust EBITDA margin with minimal capital expenditures. Without the PPT business Rentrak exhibits the characteristics of many software as a service companies providing cloud based software to the entertainment and advertising industries.

In summary, as outlined on Slide 19 we are excited about the many growth opportunities that exist for all of our businesses. Our national TV business entered a new phase with the signing of CBS and we will continue to drive network client growth through the addition of new advertiser and ad agency relationships. A huge opportunity remains for our local TV service where ad agency growth will also help to drive client expansion. The launch of our total television service will provide the industry with a never before available picture of multiplatform viewing habits. And our gold standard global box office business should benefit from territorial expansion and new product introductions.

Bill and I both thank you for your ongoing support and interest in Rentrak. We look forward to updating you again next quarter. Operator we are now ready to take questions.

Question-and-Answer Session

Operator

Thank you Mr. Chemerow. Ladies and gentlemen, we will now begin the question-and-answer session (Operator Instructions) Our first question comes from the line of Peter Appert with Piper Jaffray. Please go ahead.

John Crowther – Piper Jaffray

I guess you got John Crowther on for Peter. My first question would be just on the local TV side a lot of momentum there this quarter congrats on that. Just wondering if maybe you could share a little bit of some of the decision making factors behind those clients and why that all of a sudden picked up now at the end of the year. I am just wondering if that’s momentum you think can continue or if there was a little bit of acceleration in last quarter, driven by sort of the annual budget cycles at your clients?

Bill Livek

As we announced on this call CBS television owned and operated stations in the markets that we described Miami, Dallas, Pittsburgh and Minneapolis that was just signed within last 24 hours. And the group – television group owned and operated with something that we started to penetrate with a few of the agency owned and operated stations. This is new momentum after the first of the year. And we think it’s a reaction to work that we ‘have done with the advertisers in the ad agencies. But television stations have no interest in buying a research service, but they have a lot of interest in buying Rentrak because it enhances the revenue. So the things that we have been reporting quarter-after-quarter progress with ad agencies that it creates an environment where stations and networks want to subscribe. This is the output of it. This momentum is real, it’s happening across a wide group of television stations and we believe that it will continue. We are bullish on local TV. We are bullish on our network business. We are bullish on our box office.

John Crowther – Piper Jaffray

Great and then maybe I could just shift down VOD real quickly. I think obviously there is going to be some variability to growth there but just wondering I think you guys had mentioned previously that some of the slowness was driven by a delay in a product release there. And then second, I was just wondering if maybe you could update us on the progress in terms of trying to get the VOD market transparent in terms of ratings so that television or that advertising opportunity can potential open up?

Bill Livek

We launched just in January our total television product the end of December beginning of January. And we are in the process of calling on large ad agencies right now the planners with that product. The transparency efforts are going great. It’s just simple we take pull track from CBS was at our Investor Day in September and it was ironically that week that CBS just put in place their new on-demand strategy, where they were selling advertising after day three. So this is happening in real time in front of us and those of you who watch primetime TV and video-on-demand are seeing that most of the shows that you just saw live are there just a couple of hours later. So the consumer is starting to watch it and the networks are working through their different ad models and the dynamic ad insertion that’s something that’s also happening. But our job right now is to get the ad agency’s planners looking at video-on-demand day three, day four to day 28 is it different ad medium. So that’s work in progress.

John Crowther – Piper Jaffray

Okay great. And then just one last question and I will hop back in queue but obviously you guys – we are seeing the results of your technology and datasets and the use of political advertising just wondering you talked about it being utilized heavily in this upcoming political cycle. I am just trying to remember I want to say for the last cycle that those were more sort of project or one-time use versus sort of subscription base, but maybe you could just shed a little bit more color on the use of that during this upcoming political season?

Bill Livek

Yes, basically what you see there is two types of political advertising. There is issues based advertising that continues. And many of these agencies that we are signing are using Rentrak for this issue-based advertising. And then of course there is the strategic work that is lumpy with the political cycles. And the off cycle is becoming more important – as important as the on cycle stuff. So this is subscription based. David do you have any…

David Chemerow

Yes, one of the attractive things we are doing John is trying to sell it to groups that influence many candidates. So rather than go out and have to deal with hundreds of candidates, we are selling it to many of the advisory groups or consultants or the organizations that basically help manage the campaign for many candidates. And they are able then to help apply what they are getting from us to all those candidates. So it’s a very efficient way for us to access the market without having to greatly staff up in order to make that happen.

Bill Livek

No, even though the political advertising happens in a brief period before the election. The planning for the incumbent happens continuously, so Rentrak is the planning currency and the buying currency. But the planning is happening all the time for the incumbents. And that’s what we have accomplished that’s pretty remarkable in the last couple of years.

John Crowther – Piper Jaffray

Great I appreciate the color there and congrats on the good quarter.

Bill Livek

Thank you.

Operator

Our next question comes from the line of Todd Mitchell with Brean Capital. Please go ahead.

Todd Mitchell – Brean Capital

Hi, thank you. I have a couple of financial quickies and then kind of housekeeping and then I have conceptual question. First of all David did you say maybe I heard this wrong that DVT is going to do kind of I mean basically you have a fairly negative fourth quarter did you say we are going to go I guess from 44 to 33 next year?

David Chemerow

That’s correct. And here is what’s happening think of the long-term decline in that business is being in the 10% to 15% range which is consistent with where we have been over the last five years with occasional variation based on title strength around that. In addition we have picked up a lot of blockbuster revenue in the last year. And that’s gone I mean blockbuster has finished closing its stores in January. And therefore that’s all gone and that pulls off. So therefore we get a greater than our normal trend line fall off as we shed that revenue over the next 12 months until that gets lapped in a whole year. So that’s why the first year of – the next year is going to have a greater than normal decline in that business. And that’s why I also shared with you the range of our expected – of the expected revenue for that business just so you have a feel for what kind of magnitude are we talking about.

Todd Mitchell – Brean Capital

So net, net on a fiscal basis that business will come in basically flat?

David Chemerow

No that businesses on a fiscal basis is declining greatly, it will be declining that 20 to 25.

Todd Mitchell – Brean Capital

No, fiscal ‘14 over ‘13.

David Chemerow

No, fiscal ‘14 over ‘13 we stand by our guidance of 7% to 10% increase in the home entertainment business and that’s the only guidance we have given for that is for the entire segment for that.

Todd Mitchell – Brean Capital

Okay.

David Chemerow

And we expect in that range.

Todd Mitchell – Brean Capital

Okay. And then the 44 is next year?

David Chemerow

It’s 33 to 35 next year for revenue from PPT as we are looking at that, as I have said in the remarks and Todd I’ll be happy to go over those numbers in more detail when we’re done, just because I’ll get the script out again and we’ll look at those numbers.

Todd Mitchell – Brean Capital

Okay. And again…

David Chemerow

Go ahead.

Bill Livek

And again Todd, that’s why we are considering strategic alternatives with PPT, that in this quarter trying to make a decision on what we with the board would like to do that’s in the best interest of all parties.

Todd Mitchell – Brean Capital

I know it’s not the focus here just the numbers jumps out of me I was made, there is no favor in that. And the second question I have really to the okay, so, at this point, you said that TV essentials goes operating income positive in the fourth quarter of this year. If you were to take PPT for home entertainment and put it below the line, are you going to have enough operating income to come out positive once you breakdown the corporate overhead between the two.

Bill Livek

Are you talking about fiscal ‘14 or into fiscal ‘15, Todd?

Todd Mitchell – Brean Capital

Well, the fourth quarter in the – March quarter on a run rate and fiscal ‘15 as well. You reached the inflection point where AMI is generating and as an aggregate is generating enough operating income do cover corporate overhead.

Bill Livek

We are really closer to that mark and I would hope that we’re going to be able to hit it this quarter and may be that we hit at the following quarter, we are very, very closed to that place.

Todd Mitchell – Brean Capital

Okay. And then my last question is and this is more conceptual so, you have now basically a TV everywhere measurement product in the market and at the same time a number of your competitors are rolling out and making a lot of noise about their cross platform measurement services, which seem to incorporate in some cases setup box data with the Internet panel. It seems to be that there is – it’s pretty clear what your product does in terms of measuring a network’s reach across a kind of the new distribution platforms that the cable companies have, but from an advertiser’s perspective talk to me about a little bit it seems to me that their ability to give a multiplatform measurement around a single or a single group of customers, talk – what are the pros and cons of these two approaches I get.

Bill Livek

Think about it in simple terms that there is sample currency – that the sample currency is actually pretty small, they put on the – they start with a base of 30,000. You can stretch that to the imagination of 70,000 if you include some other things. There is only so much that you can do that with that with the hyper fractionalization that’s occurring in all the platforms. So, it’s not very useful as a planning and a buying currency, but it’s got use – it does have usage within the market. We spent now over a $100 million to spend on the investment across all these platforms and we are laser light focus that you can only do multiplatform with a census currency. I’m not in the boardroom of those other companies, so I can’t comment on where they’re going, but I know what our customers want, they want density of information about reliable program ratings, on where the majority of the viewing is happening, whether it’s live on DVR and on vide on-demand, and then there is a small minority on the digital side that we believe you got to capture on a census basis and that’s why the one announcement that we made with one of our data providers is so important that were the only company that’s getting information on the census basis from computer and mobile devices. So, on a conceptual basis, Rentrak’s census and the other things that we see of a very strong component of sample and we’re excited about the multiplatform census based approach in the future.

Todd Mitchell – Brean Capital

So, let me just make sure I understand something. So when you measure anything on it – on a tablet for PC, you’re measuring it at the source of the distribution from the server that it’s sent out to and that’s the way you get the census level basically anywhere that say CBS streams something, it’s picked up because you’re measuring where that server log is streaming it too while your competitors going out and trying to measure it on a device by device basis.

Bill Livek

That’s how we’re doing it, as you know I never comment however, people do it because I’m not with them so, yes, our approach on return pass from the set-top boxes and a return path from server logs so, there is a density of information about the exact TV shows that are being viewed, then we’re going to continue to approach of merging customer data basis on top of that. Those are – we talk about care all the time, but it’s also the consumer package goods products that we have in our cupboard on top of it, and we’ve got some great partners on that side of the balance sheet.

Todd Mitchell – Brean Capital

Okay, then this will be my final question to follow-up that so, you can see everything that’s being sent out and you can compare with get the audience characteristics of what they’re watching, but you don’t necessarily see what else is being watched on that device. Is that – actually you can’t – is that I just want to understand the methodology kind of.

Bill Livek

So, well think about when I met my apartment in New York, I’m watching television from the TV set in the living room, in the bedroom and in my office and also on my tablet from time to time from the set-top box. We are starting to get that census like information from all the devices within the home. In the announcement that we just made we also are getting – we have not yet incorporated, but we are also signed an agreement to get mobile viewing and Internet viewing wherever it occurs.

Todd Mitchell – Brean Capital

Okay. And everything it’s on those devices.

Bill Livek

Yes.

Todd Mitchell – Brean Capital

Okay. That’s just what I wanted to understand. Thank you. Sorry for taking so long.

Bill Livek

No, that’s great. This is a newer area for sure.

Operator

Our next question comes from the line of Rich Tullo with Albert Fried. Please go ahead.

Rich Tullo – Albert Fried

Hi, guys, quick question on the PPT. Is there any savings benefit from that being part of a public corporation that was flow through the bottom-line and create excess EBITDA from the $2 million to $3 million talked about.

Bill Livek

We’re going to the economics of what the transaction looks like when and if a transaction is announced. We’re working hard at it. We’re very sensitive to those kinds of issues and I would really rather going to the rest of the economics.

Rich Tullo – Albert Fried

That’s fine. I was just curious is all. Is the broadcast versus – positive for Rentrak, I would think it would be because it would create a kind of an exclusive area for broadcast television to be on cable only.

Bill Livek

The more – one thing I’d often said is more fractionalization that occurs, it’s Rentrak’s brands, a long time ago when I made a decision to get involved in the information business, it was when I saw early in my carrier, the official airline guide traded at a price that was greater than several airlines combined. Information about an industry is usually more valuable than some of the industry players so, that’s why we love what we do in movies and TV. And there’s – the more customers that we have the more fractionalization it becomes more complex, it’s more – it becomes less practical to measure it with the sample, it becomes an imperative to measure it with a return path type of approach. So, again we don’t have a dog in that fight, but there is going to be a lot more dogs in a fight for sure.

Rich Tullo – Albert Fried

Yes, I got you there. You said the – you have 75 network accounts, right? By networks and by revenue, what is your market share of – market share potential or business potential facing you in that business?

Bill Livek

Well, in both the local stations and the networks, we’re in the 14% to 15% of the total available share. Now that’s not revenue weighted share, that’s just number of networks and if anything we probably have more of the relatively smaller ones giving us more opportunities as we sign the relatively larger ones of both stations and networks.

Rich Tullo – Albert Fried

And how we always look at these businesses, that somehow through subscription 1% to 2% of what you’re measuring the advertising transaction as these businesses get more and more integrated into the Lexicon. So we have years of growth ahead of us.

Rich Tullo – Albert Fried

Okay, one last question, is it fair, and I don’t want sound hyperbolic or anything like that is not me, but is it fair to kind of think about key plus 3 as the more solid shell of TV right now and Rentrak is the provider of horizontal type equipment?

David Chemerow

So Rich just to make sure I understand what are you seeing that there is a huge opportunity for us in the view after day 3 on video-on-demand and other forms of viewing is that what you are asking.

Rich Tullo – Albert Fried

The whole industry really.

David Chemerow

I think this is simply yes. We think there is a huge opportunity there. We are working hard trying to build out that opportunity. As we discussed Investor Day and we discussed sort of individually and we feel great about where that’s going. And there is the challenge as Bill said is I mean we don’t control all of the timing and if the networks aren’t sprinting and just running it affects the timing on which we can achieve all of that.

Rich Tullo – Albert Fried

Okay and one last thing, on the operating income on DVT, you said about $2 million to $3 million over the next two years is that correct?

David Chemerow

I said about $2 million to $3 million in fiscal ‘15.

Rich Tullo – Albert Fried

Okay. Fair enough. Thank you very much. I appreciate it. Congratulations on a good quarter.

Bill Livek

Thank you, Rich.

Operator

(Operator Instructions) Our next question comes from the line Matthew Harrigan with Wunderlich Securities. Please go ahead.

Matthew Harrigan – Wunderlich Securities

Thank you. I was just curious as the Europe moves up the curve particularly on television there is a long lag but catching up pretty fast, what’s happening over there on census based approach, I mean obviously the large MSOs Kabel Deutschland and Liberty Global I assume pretty ample in-house capabilities, I know you get it wonderful opportunity just domestically. But you could just comment a little bit more overseas. And then when you look at the advance console market I think PS3 plus Xbox 360 was about 50 million devices I mean they have got a lot of ambitions for entertainment and for video channels as well would someone like Microsoft use the capabilities they have with Navik, is that a point of interest to you or a point of competition in terms of having another bucket of sampling data available to programmers?

Bill Livek

Last question first, we look at Xbox 360 and those other devices as being customers of ours and working with those folks as third party data. In terms of Europe, it’s funny you bring that up we are talking about that today. We have not discussed on the earnings call for sometime but we did enter Spain several years ago measuring all of the on-demand capability that is going on in that country. And have actually really cool business that we built in Spain and we’re not talking about it because slowly we are going to be adding countries. You mentioned Liberty, the way to think about this as those companies settled down and need unified information around the globe, we are the logical choice. So we talk about the U.S. opportunity because it so enormous, but we think globally in the first footprint that we totally built out with the movie footprint. So when you think on-demand streaming around the globe, think of our movie footprint and that’s where we are going in the long run.

Matthew Harrigan – Wunderlich Securities

And just it sounds like PS1 and all that you think there will also be a customer, but and I know you are not going to talk too much about Microsoft but on the template that the democratic party used on the elections, was Navik working with you on providing that information or were they a complementary source to the democratic party?

Bill Livek

I have no idea what they did. All I know is what we did for Obama for America and what was written after the fact, and they have said they were 20% more effective using the Rentrak. And next part of that the political party you have all of the arbitrage early of being able to target and television stations and networks didn’t yet have the information then they are part of price. And as information services gets built out and then there is somewhat an equivalency that both the buyer and seller save in that efficiency. And again I have no idea what anyone else is doing, but we know our approach has been adopted by both parties.

David Chemerow

And Matt our approach is very similar to what we do with autos or consumer package goods or anything else. It’s the advance demographic linking enormously the TV viewing with others specific characteristic. And for that we don’t need other vendor, we need information vendors like we get data from Epsilon and Polk and other information on parties like that. But we do not need other tech vendors to help make that work effectively.

Matthew Harrigan – Wunderlich Securities

Got it. Thank you.

Operator

We have time for one final question and it comes from the line of Jeb Terry with Aberdeen Investment Management. Please go ahead.

Jeb Terry – Aberdeen Investment Management

Hi, Dave, Bill. Question about PreAct, you just launched it as of your Investor Analyst Day, I was curious if you could provide a little more color on what kind of traction, what you’re doing as far as go to market planning or resources related to that. And then secondly, wouldn’t that also apply to TV series and for that matter Super Bowl ads testing?

Bill Livek

The answer is we announced that Investor Day. We physically rolled out the product just recently towards the end of the year. And the movie studios were in the middle of contract negotiations with all of them, and then we’re rolling it more widely when those contracts are secured. Your high poses this is correct the same technology is applicable for television shows and but were not trying to boil the ocean early on. We want to get that product toward out and movie vertical before we move it into the television vertical.

Jeb Terry – Aberdeen Investment Management

Great, thanks very much. Look forward to your development.

Bill Livek

Thanks Jeb.

Operator

And Mr. Livek, there are no further question at this time. Please continue with any closing remarks.

Bill Livek

As always, thank you very much for being on the investor call and more importantly thank you all for trusting this management team with some of your investment dollars. We will talk to you either in the quarter or most certainly our next quarterly call. Thank you very much.

Operator

Ladies and gentlemen, this concludes the Rentrak Financial 2014 third quarter financial results conference call. You may now disconnect.

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