Form 8-K

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 OR 15(d) of

The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported) May 27, 2009

TIVO INC.

(Exact name of registrant as specified in its charter)

 

Delaware   000-27141   77-0463167
(State or other jurisdiction
of incorporation)
 

(Commission

File Number)

  (IRS Employer
Identification No.)

 

2160 Gold Street,

Alviso, California

  95002
(Address of principal executive offices)   (Zip Code)

Registrant’s telephone number, including area code (408)519-9100

  

 

(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 


ITEM 8.01 OTHER EVENTS.

On May 27, 2009, we announced financial results for our first quarter ended April 30, 2009. Net service revenues were $42.1 million in the first quarter of fiscal year 2010, a decrease from the $48.4 million in the same prior year period. Net technology revenues were $6.4 million for the first quarters ended April 30, 2009 and 2008, respectively. Included in the first quarter ended April 30, 2009, was recognition of Comcast development revenues of $4.8 million. The net loss for the quarter was ($4.1) million or ($0.04) per basic and diluted share, compared to a net income of $3.6 million or $0.04 per basic and diluted share, for the quarter ended April 30, 2008. We ended this quarter with approximately $215 million in cash and short term investments, compared to approximately $207 million in cash and short term investments in the prior quarter. Additionally, we continue to have no debt.

During the quarter, we continued to make progress on our distribution efforts as demonstrated by our recent agreements with Blockbuster, to deliver premium video content through the TiVo service and to sell TiVo DVRs in Blockbuster retail stores, and Evolution Broadband, to resell TiVo products and services to independent cable operators. As of April 30, 2009 our total subscriptions were approximately 3.2 million. TiVo-Owned subscription gross additions were 37,000 for the quarter, compared to 48,000 in the first quarter fiscal year 2009. TiVo-Owned net subscription losses were 30,000 compared to 17,000 in the first quarter of fiscal year 2009. Our monthly churn rate increased to 1.4% for the quarter ended April 30, 2009 as compared to 1.3% in the year ago period, but improved as the quarter progressed. The installed base of MSO/Broadcasters’ TiVo subscriptions has declined to approximately 1.6 million from 2.1 million a year ago.

 

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TIVO INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share and share amounts)

(unaudited)

 

     Three Months Ended April 30,  
     2009     2008  

Revenues

    

Service revenues

   $ 42,129     $ 48,443  

Technology revenues

     6,386       6,407  

Hardware revenues

     6,376       5,945  
                

Net revenues

     54,891       60,795  

Cost of revenues

    

Cost of service revenues (1)

     10,150       11,194  

Cost of technology revenues (1)

     4,483       3,920  

Cost of hardware revenues

     10,576       10,365  
                

Total cost of revenues

     25,209       25,479  
                

Gross margin

     29,682       35,316  
                

Research and development (1)

     15,066       14,748  

Sales and marketing (1)

     5,695       5,936  

Sales and marketing, subscription acquisition costs

     982       1,159  

General and administrative (1)

     12,242       10,336  
                

Total operating expenses

     33,985       32,179  
                

Income (loss) from operations

     (4,303 )     3,137  

Interest income

     190       579  

Interest expense and other

     —         (87 )
                

Income (loss) before income taxes

     (4,113 )     3,629  

Provision for income taxes

     (16 )     (13 )
                

Net income (loss)

   $ (4,129 )   $ 3,616  
                

Net income (loss) per common share - basic

   $ (0.04 )   $ 0.04  
                

Net income (loss) per common share - diluted

   $ (0.04 )   $ 0.04  
                

Weighted average common shares used to calculate basic net income (loss) per share

     102,278,944       99,386,826  
                

Weighted average common shares used to calculate diluted net income (loss) per share

     102,278,944       102,709,583  
                

(1)    Includes stock-based compensation expense as follows:

    

Cost of service revenues

   $ 263     $ 191  

Cost of technology revenues

     557       606  

Research and development

     2,491       1,982  

Sales and marketing

     685       540  

General and administrative

     3,074       2,158  

 

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TIVO INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share amounts)

 

     April 30, 2009     January 31, 2009  
     (unaudited)        
ASSETS     

CURRENT ASSETS

    

Cash and cash equivalents

   $ 150,167     $ 162,337  

Short-term investments

     65,010       44,991  

Accounts receivable, net of allowance for doubtful accounts of $875 and $770

     11,645       14,283  

Inventories

     6,926       13,027  

Prepaid expenses and other, current

     3,577       4,896  
                

Total current assets

     237,325       239,534  

LONG-TERM ASSETS

    

Property and equipment, net

     10,220       10,285  

Purchased technology, capitalized software, and intangible assets, net

     11,295       10,597  

Prepaid expenses and other, long-term

     1,515       1,268  

Long-term investments

     3,684       3,944  
                

Total long-term assets

     26,714       26,094  
                

Total assets

   $ 264,039     $ 265,628  
                
LIABILITIES AND STOCKHOLDERS’ EQUITY     

LIABILITIES

    

CURRENT LIABILITIES

    

Accounts payable

   $ 8,073     $ 9,844  

Accrued liabilities

     21,447       25,054  

Deferred revenue, current

     44,300       47,560  
                

Total current liabilities

     73,820       82,458  

LONG-TERM LIABILITIES

    

Deferred revenue, long-term

     26,965       28,557  

Deferred rent and other long-term liabilities

     126       126  
                

Total long-term liabilities

     27,091       28,683  
                

Total liabilities

     100,911       111,141  

COMMITMENTS AND CONTINGENCIES

    

STOCKHOLDERS’ EQUITY

    

Preferred stock, par value $0.001:

    

Authorized shares are 10,000,000;

    

Issued and outstanding shares - none

     —         —    

Common stock, par value $0.001:

    

Authorized shares are 275,000,000;

    

Issued shares are 104,982,528 and 103,604,015, respectively and outstanding shares are 104,479,782 and 103,370,523, respectively

     105       104  

Additional paid-in capital

     844,299       829,273  

Accumulated deficit

     (676,325 )     (672,196 )

Treasury stock, at cost - 502,746 shares and 233,492 shares, respectively

     (3,666 )     (1,659 )

Accumulated other comprehensive loss

     (1,285 )     (1,035 )
                

Total stockholders’ equity

     163,128       154,487  
                

Total liabilities and stockholders’ equity

   $ 264,039     $ 265,628  
                

 

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TIVO INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(unaudited)

 

     Three Months Ended April 30,  
     2009     2008  

CASH FLOWS FROM OPERATING ACTIVITIES

    

Net income (loss)

   $ (4,129 )   $ 3,616  

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

    

Depreciation and amortization of property and equipment and intangibles

     2,310       2,572  

Stock-based compensation expense

     7,070       5,477  

Amortization of trade credits

     11       —    

Allowance for doubtful accounts

     97       25  

Changes in assets and liabilities:

    

Accounts receivable

     2,541       9,567  

Inventories

     6,101       3,859  

Prepaid expenses and other

     1,061       66  

Accounts payable

     (2,382 )     (15,649 )

Accrued liabilities

     (3,588 )     (5,557 )

Deferred revenue

     (4,852 )     (5,356 )

Deferred rent and other long-term liabilities

     —         (82 )
                

Net cash provided by (used in) operating activities

   $ 4,240     $ (1,462 )
                

CASH FLOWS FROM INVESTING ACTIVITIES

    

Purchases of short-term and long-term investments

     (99,936 )     —    

Sales of short-term investments

     79,927       13,496  

Acquisition of property and equipment

     (800 )     (1,649 )

Acquisition of intangibles

     (1,532 )     —    
                

Net cash provided by (used in) investing activities

   $ (22,341 )   $ 11,847  
                

CASH FLOWS FROM FINANCING ACTIVITIES

    

Proceeds from issuance of common stock related to exercise of common stock options

     7,957       4,057  

Proceeds from issuance of common stock related to employee stock purchase plan

     —         —    

Treasury Stock - repurchase of stock for tax withholding

     (2,007 )     (454 )

Payment under capital lease obligation

     (19 )     —    
                

Net cash provided by financing activities

   $ 5,931     $ 3,603  
                

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

   $ (12,170 )   $ 13,988  
                

CASH AND CASH EQUIVALENTS:

    

Balance at beginning of period

     162,337       78,812  
                

Balance at end of period

   $ 150,167     $ 92,800  
                

 

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TIVO INC.

OTHER DATA

Subscriptions

 

     Three Months Ended April 30,  

(Subscriptions in thousands)

   2009     2008  

TiVo-Owned Subscription Gross Additions

   37     48  

Subscription Net Additions/(Losses):

    

TiVo-Owned

   (30 )   (17 )

MSOs/Broadcasters

   (109 )   (128 )
            

Total Subscription Net Additions/(Losses)

   (139 )   (145 )

Cumulative Subscriptions:

    

TiVo-Owned

   1,624     1,728  

MSOs/Broadcasters

   1,572     2,073  
            

Total Cumulative Subscriptions

   3,196     3,801  

% of TiVo-Owned Cumulative Subscriptions paying recurring fees

   59 %   61 %

Included in the 1,624,000 TiVo-Owned subscriptions are approximately 215,000 lifetime subscriptions that have reached the end of the period TiVo uses to recognize lifetime subscription revenue. These lifetime subscriptions no longer generate subscription revenue.

Subscriptions. Management reviews this metric, and believes it may be useful to investors, in order to evaluate our relative position in the marketplace and to forecast future potential service revenues. The TiVo-Owned lines refer to subscriptions sold directly or indirectly by TiVo to consumers who have TiVo-enabled DVRs and for which TiVo incurs acquisition costs. The MSOs/Broadcasters lines refer to subscriptions sold to consumers by MSOs/Broadcasters such as DIRECTV, Cablevision Mexico, Seven (Australia), and Comcast for which TiVo expects to incur little or no acquisition costs. Additionally, we provide a breakdown of the percent of TiVo-Owned subscriptions for which consumers pay recurring fees, including on a monthly and a prepaid one, two, or three year basis, as opposed to a one-time prepaid product lifetime fee.

We define a “subscription” as a contract referencing a TiVo-enabled DVR for which (i) a consumer has committed to pay for the TiVo service and (ii) service is not canceled. We count product lifetime subscriptions in our subscription base until both of the following conditions are met: (i) the period we use to recognize product lifetime subscription revenues ends; and (ii) the related DVR has not made contact to the TiVo service within the prior six month period. Product lifetime subscriptions past this period which have not called into the TiVo service for six months are not counted in this total. Effective November 1, 2008, we extended the period we use to recognize product lifetime subscription revenues from 54 months to 60 months for all product lifetime subscriptions acquired on or before October 31, 2007. We now amortize all product lifetime subscriptions over a 60 month period. We are not aware of any uniform standards for defining subscriptions and caution that our presentation may not be consistent with that of other companies. Additionally, the subscription fees that some of our MSOs/Broadcasters pay us may be based upon a specific contractual definition of a subscriber or subscription which may not be consistent with how we define a subscription for our reporting purposes.

 

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TIVO INC.

OTHER DATA - KEY BUSINESS METRICS

 

     Three Months Ended April 30,  

TiVo-Owned Churn Rate

   2009     2008  
     (In thousands, except churn rate per month)  

Average TiVo-Owned subscriptions

   1,639     1,737  

TiVo-Owned subscription cancellations

   (67 )   (65 )
            

TiVo-Owned Churn Rate per month

   -1.4 %   -1.3 %
            

TiVo-Owned Churn Rate per Month. Management reviews this metric, and believes it may be useful to investors, in order to evaluate our ability to retain existing TiVo-Owned subscriptions (including both monthly and product lifetime subscriptions) by providing services that are competitive in the market. Management believes factors such as service enhancements, service commitments, higher customer satisfaction, and improved customer support may improve this metric. Conversely, management believes factors such as increased competition, lack of competitive service features such as high definition television recording capabilities in our lowest cost product offerings, current economic conditions, and increased price sensitivity may cause our TiVo-Owned Churn Rate per month to increase.

We define the TiVo-Owned Churn Rate per month as the total TiVo-Owned subscription cancellations in the period divided by the Average TiVo-Owned subscriptions for the period (including both monthly and product lifetime subscriptions), which then is divided by the number of months in the period. We calculate Average TiVo-Owned subscriptions for the period by adding the average TiVo-Owned subscriptions for each month and dividing by the number of months in the period. We calculate the average TiVo-Owned subscriptions for each month by adding the beginning and ending subscriptions for the month and dividing by two. We are not aware of any uniform standards for calculating churn and caution that our presentation may not be consistent with that of other companies.

 

     Three Months Ended April 30,     Twelve Months Ended April 30,  

Subscription Acquisition Costs

   2009     2008     2009     2008  
     (In thousands, except SAC)  

Sales and marketing, subscription acquisition costs

   $ 982     $ 1,159     $ 5,861     $ 26,419  

Hardware revenues

     (6,376 )     (5,945 )     (41,564 )     (45,450 )

Less: MSOs/Broadcasters-related hardware revenues

     (27 )     698       8,608       698  

Cost of hardware revenues

     10,576       10,365       57,953       91,677  

Less: MSOs/Broadcasters-related cost of hardware revenues

     (6 )     (581 )     (8,015 )     (581 )
                                

Total Acquisition Costs

     5,149       5,696       22,843       72,763  
                                

TiVo-Owned Subscription Gross Additions

     37       48       176       267  

Subscription Acquisition Costs (SAC)

   $ 139     $ 119     $ 130     $ 273  
                                

Subscription Acquisition Cost or SAC. Management reviews this metric, and believes it may be useful to investors, in order to evaluate trends in the efficiency of our marketing programs and subscription acquisition strategies. We define SAC as our total TiVo-Owned acquisition costs for a given period divided by TiVo-Owned subscription gross additions for the same period. We define total acquisition costs as sales and marketing, subscription acquisition costs less net TiVo-Owned related hardware revenues (defined as TiVo-Owned related gross hardware revenues less rebates, revenue share and market development funds paid to retailers) plus TiVo-Owned related cost of hardware revenues. The sales and marketing, subscription acquisition costs line item includes advertising expenses and promotion-related expenses directly related to subscription acquisition activities, but does not include expenses related to advertising sales. We do not include third parties subscription gross additions, such as MSOs/Broadcasters’ gross additions with TiVo subscriptions, in our calculation of SAC because we typically incur limited or no acquisition costs for these new subscriptions, and so we also do not include

 

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MSOs/Broadcasters’ sales and marketing, subscription acquisition costs, hardware revenues, or cost of hardware revenues in our calculation of TiVo-Owned SAC. We are not aware of any uniform standards for calculating total acquisition costs or SAC and caution that our presentation may not be consistent with that of other companies.

 

     Three Months Ended April 30,  

TiVo-Owned Average Revenue per Subscription

   2009     2008  
     (In thousands, except ARPU)  

Total Service revenues

   $ 42,129     $ 48,443  

Less: MSOs/Broadcasters-related service revenues

     (4,522 )     (5,699 )
                

TiVo-Owned-related service revenues

     37,607       42,744  

Average TiVo-Owned revenues per month

     12,536       14,248  

Average TiVo-Owned per month subscriptions

     1,639       1,737  
                

TiVo-Owned ARPU per month

   $ 7.65     $ 8.20  
                
     Three Months Ended April 30,  

MSOs/Broadcasters Average Revenue per Subscription

   2009     2008  
     (In thousands, except ARPU)  

Total Service revenues

   $ 42,129     $ 48,443  

Less: TiVo-Owned-related service revenues

     (37,607 )     (42,744 )
                

MSOs/Broadcasters-related service revenues

     4,522       5,699  

Average MSOs/Broadcasters revenues per month

     1,507       1,900  

Average MSOs/Broadcasters per month subscriptions

     1,625       2,136  
                

MSOs/Broadcasters ARPU per month

   $ 0.93     $ 0.89  
                

Average Revenue Per Subscription or ARPU. Management reviews this metric, and believes it may be useful to investors, in order to evaluate the potential of our subscription base to generate revenues from a variety of sources, including subscription fees, advertising, and audience research measurement. ARPU does not include rebates, revenue share, and other payments to channel that reduce our GAAP revenues. As a result, you should not use ARPU as a substitute for measures of financial performance calculated in accordance with GAAP. Management believes it is useful to consider this metric excluding the costs associated with rebates, revenue share, and other payments to channel because of the discretionary and varying nature of these expenses and because management believes these expenses, which are included in hardware revenues, net, are more appropriately monitored as part of SAC. We are not aware of any uniform standards for calculating ARPU and caution that our presentation may not be consistent with that of other companies.

We calculate ARPU per month for TiVo-Owned subscriptions by subtracting MSOs/Broadcaster-related service revenues (which includes MSOs/Broadcasters’ subscription service revenues and MSOs/Broadcasters’-related advertising revenues) from our total reported net service revenues and dividing the result by the number of months in the period. We then divide by Average TiVo-Owned subscriptions for the period, calculated as described above for churn rate. The above table shows this calculation.

We calculate ARPU per month for MSOs/Broadcasters’ subscriptions by first subtracting TiVo-Owned-related service revenues (which includes TiVo-Owned subscription service revenues and TiVo-Owned related advertising revenues) from our total reported service revenues. Then we divide average revenues per month for MSOs/Broadcasters’-related service revenues by the average MSOs/Broadcasters’ subscriptions for the period.

 

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Forward-Looking Statements

This report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements relate to, among other things, TiVo’s future business and growth strategies including TiVo’s mass distribution strategy and the timing of additional mass distribution deals, profitability and financial guidance, distribution of the TiVo service domestically with Comcast and Cox and internationally in Australia, New Zealand and other regions, growth and innovation in TiVo’s advertising and audience research measurement business, the timing and availability of broadband content and service offerings, such as from Blockbuster, Amazon, SeaChange, Comcast and tru2way, future distribution of TiVo DVRs with Blockbuster, the results of TiVo’s litigation with EchoStar, how TiVo intends to exploit its intellectual property, TiVo’s future marketing spend and related activities, and financial performance. Forward-looking statements generally can be identified by the use of forward-looking terminology such as, “believe,” “expect,” “may,” “will,” “intend,” “estimate,” “continue,” or similar expressions or the negative of those terms or expressions. Such statements involve risks and uncertainties, which could cause actual results to vary materially from those expressed in or indicated by the forward-looking statements. Factors that may cause actual results to differ materially include delays in development, competitive service offerings and lack of market acceptance, as well as the other potential factors described under “Risk Factors” in the Company’s public reports filed with the Securities and Exchange Commission, including the Company’s Annual Report on Form 10-K for the fiscal year ended January 31, 2009 and Current Reports on Form 8-K. The Company cautions you not to place undue reliance on forward-looking statements, which reflect an analysis only and speak only as of the date hereof. TiVo disclaims any obligation to update these forward-looking statements.

 

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

    TIVO INC.
Date: May 27, 2009     By:    /s/ Anna Brunelle
       

Anna Brunelle

Chief Financial Officer

(Principal Financial and Accounting Officer)

 

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