TiVo (NASDAQ:TIVO) recently released the Q215 earnings report. The leader in next-generation television service reported mixed results with Q2 numbers that beat estimates and generally lower guidance for Q3. The stock had a muted reaction due to the company also announcing the approval of a $350 million share buyback. A buyback that equals roughly 20% of the current market cap of $1.6 billion and includes the plans to repurchase at least $100 million worth of stock during the remainder of fiscal 2015 that ends in January. TiVo ended Q2 with $782 million of cash on hand.
TiVo reported for the quarter ended July 31 that service and technology revenue grew 13% YoY to $86.6 million generating net income of $9.3 million, or $0.08 per share. Total income and adjusted EBITDA soared with a slight reduction in costs while generating the stated revenue growth. Adjusted EBITDA excluding litigation costs and proceeds soared to $31.1 million, up 73% from $18.0 million in the prior-year period. The company saw MSO-subscriptions soar 283,000, but TiVo-owned subs dropped roughly 20,000 sequentially. Total subscriptions hit 4.8 million with MSOs reaching 3.9 million based on 33% growth YoY. The guidance for Q315 revenue in the range of $86 million to $89 million was below the analyst targets of $89.5 million. Likewise, the guidance is for net income to decline sequentially more than expected.
The original investment thesis in the article "TiVo: Heading Into A Cloud Of Profits" suggested that investors buy the stock close to breakout levels around $14. At the time, the stock was trading at $13 and facing overhead resistance and a lot of doubts from the investment community. The updated Q2 numbers including the strong cash balance continue to back the thesis that the stock is incredibly cheap. Investors should own the stock if it breaks out above $14, especially considering it is backed by a rather large stock buyback and only trades at roughly 8x adjusted EBITDA with decent growth opportunities.
Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: The information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities. Before buying or selling any stock you should do your own research and reach your own conclusion or consult a financial advisor. Investing includes risks, including loss of principal.