Brean reiterates its Buy rating and $14 price target on TiVo (TIVO) following Q4 results after the close. While a solid quarter, the status quo will likely be frustrating for investors.
"TiVo reported solid F3Q14 results. Net adds of 274,000 for the quarter exceeded expectations, with an uptick in U.S. MSO activity making up for a negative comparison at Virgin and ONO in Europe, as expected. Top-line Service & Technology revenues of $81.7M were at the high end of the guide, while adjusted Ebitda of $23.8M was slightly better than expected on a better-than-expected hardware gross margin and non-GAAP EPS of $0.11 was further favorably impacted by a tax benefit. However, there was no announcement on expanded distribution, and capital returns were well below expectations, which together are likely to exacerbate nagging concerns about TiVo’s longer term positioning and proclivity to use its large cash position for an acquisition. As a result, we think shares are likely to trade sideways in the near-term. We are maintaining our $14 price target, and we reiterate our Buy rating, but with the caveat that we would wait for a pull-back to be more aggressive."
MKM Partners analyst Rob Sanderson reiterates his Buy rating and $15 price target on TiVo (TIVO) ahead of Q3 results after the close Tuesday.
Sanderson expects a solid but uneventful quarter, saying the capital structure and deal pipeline will be more important. "Given that 85% of current market value is the balance sheet and guaranteed future payments, small deviations to operating trends are not that consequential to the stock."
Sanderson said the bigger questions for the stock will be: How aggressive has management been on the buy-back? There was $106M remaining on the authorization last quarter. What will the company do with the $1B in cash and $500M in guaranteed payments? We doubt an announcement on return of capital would come on the call. This is a board decision and would more likely be announced following a meeting of the board. What are the prospects for new operator wins? The Charter deployment, potential Charter-Time Warner hook-up, potential to penetrate other Liberty properties (outside of Virgin) and potential with telcos are hot topics.
Firm notes that the value of cash and guaranteed payments is over $11/share.
TIVO -2.3% today to $13.05, with a 52-week range of $9.98-14.25.
Netflix (NFLX) is reportedly in talks with Comcast (CMCSA), Time Warner Cable (TWC), Suddenlink Communications and other cable TV providers to make its service available to their customers via an app on their set-top boxes. However, one snag is that Netflix wants its potential partners to use its technology.
Talks are most advanced with regional operators and smaller providers that use TiVo's (TIVO) devices. Any deals would add to two that Netflix has in Europe.
The negotiations indicate how telecom / cable TV providers could use Netflix as a way to draw in and keep subscribers rather than just viewing the company as a threat.
TIVO expects FQ3 service and technology revenue of $80M-$82M, which by itself is above a $73.3M consensus. Net income is expected to total $6M-$8M, an improvement from FQ2's adjusted -$13M, which excludes the impact of Cisco/Motorola settlement payments.
Thanks to those settlement payments, technology (licensing) revenue nearly doubled Y/Y to $42.1M, fueling a big FQ2 revenue beat.
FQ2 subscriber net adds totaled 212K, down from FQ1's 255K. 238K MSO net subscriber adds offset the net loss of 26K TiVo-owned subs. Total subscriptions stand at 3.62M (2.64M from MSOs, 981K TiVo-owned). 52% of TiVo subs are paying recurring fees.
The monthly ARPU for TiVo-owned subs was $8.81, well above the $1.15 ARPU reported for MSO subs.
FQ2 hardware revenue jumped 108% Y/Y to $23.1M. Service revenue +8% to $34.9M.
TiVo expects to report $83.6M in licensing/settlement revenue from its existing deals in the remainder of FY14 (ends Jan. '14), $169.6M in FY15, $171M-$174M/year from FY16-FY18, $886M in FY19, and $8.2M in later years.
Shares +1.4% AH. Though Cisco/Motorola payments weren't factored into many analyst estimates, investors clearly baked them in.
The new DVRs represent TiVo's (TIVO +4.8%) first big refresh since 2011 (when the Premiere Elite was launched), and are priced at $200 (the base Roamio model), $400 (the Roamio Plus), and $600 (the Roamio Pro). (PR)
The Roamio line (specs) offers more storage (500GB-3TB) and tuners (4-6) than comparable models in the prior-gen Premiere line, as well as a revamped UI and (eventually) a Slingbox-like ability to stream live and recorded content to mobile devices that have a TiVo app installed.
Support for video downloads, and the streaming of mobile content to TVs (via the DIAL protocol), is also included.
The Verge gives the Roamio Pro a score of 8.0/10, and calls it "the ultimate DVR." Time: "Tthe Roamio models are a polished and powerful way to watch TV."
TiVo has been facing stiff competition from integrated set-top/DVR solutions offered by pay-TV providers, and from Internet-only boxes from the likes of Apple and Roku. But the company's own partnerships with pay-TV providers have been gaining traction lately. TiVo's MSO sub base rose by 277K in FQ1, aided by a 172K increase for the U.K.'s Virgin Media.
TIVO CEO Thomas Rogers took advantage of the stock's rough June, purchasing 10K shares at about $11.14 each yesterday. The buy, however, didn't add materially to his stake, which now totals nearly 1.8M shares.
TiVO (TIVO) announces that cable customers of Mediacom can now access content through the company's IP and VOD services on any screen in their house. Details of the program were unveiled at the NCTA 2013 Cable Show.
Tivo, Inc. develops and provides software, technology, in-home, and outside-of-the-home cloud-based video solutions for DVRs, non-DVR set-top boxes, tablets, smartphones, and other consumer electronics.