EX-99.1 2 dex991.htm PRESS RELEASE OF TIVO INC. Press Release of TiVo Inc.

Exhibit 99.1

LOGO

 

Contacts:

   Investor Relations    Media Relations
   Derrick Nueman    Whit Clay – Sloane & Company
   408-519-9677    212-446-1864
   ir@tivo.com    wclay@sloanepr.com

TIVO REPORTS RESULTS FOR THE FOURTH QUARTER AND FISCAL YEAR

ENDED JANUARY 31, 2008

 

   

Adjusted EBITDA for the fourth quarter was $1.0 million compared to a loss of $15.0 million in the year-ago quarter, exceeding guidance

 

   

Fiscal year 2008 Adjusted EBITDA closes in on breakeven

 

   

Net loss for the fourth quarter was $6.4 million compared to a loss of $19.5 million in the year ago quarter

 

   

Fiscal year 2008 net loss significantly better than prior year

 

   

Favorable ruling in EchoStar patent infringement case; damages and injunction upheld

 

   

Announced today Cox tech trial underway; New England to be first market

 

   

Comcast fully launched in New England; integrated marketing has begun

 

   

Added Omnicom Media Group to list of major advertising agency research clients

 

   

Added CBS to list of networks and advertisers signing on to TiVo audience research

ALVISO, Calif. – March 5, 2008 – TiVo Inc. (NASDAQ: TIVO), the creator of and a leader in television services for digital video recorders (DVRs), today reported financial results for the fourth quarter and fiscal year ended January 31, 2008.

“This was a strong quarter and year for TiVo as we significantly improved our financial profile and made tremendous progress on the many elements driving our business forward,” said Tom Rogers, President and CEO of TiVo. “Our progress can be especially noted with our financial results for the full-year, as we neared breakeven for the year on an Adjusted EBITDA basis, exceeding our goals. These results really underscore the success of our strategy to effectively manage our TiVo-Owned business in a way that does not cloud the enthusiasm for the many long-term growth drivers we have in place.”

Mr. Rogers continued, “Importantly, just a few weeks ago we had a very big day at TiVo when the United States Court of Appeals for the Federal Circuit unanimously upheld the District Court’s ruling that EchoStar had infringed on our Multimedia Time Warp patent. The Appeals Court decision was clear, unambiguous and unanimous that EchoStar violated our patent. The Court upheld the full monetary award, as well as the injunction issued by the trial court. We view EchoStar’s latest attempt to appeal this ruling as merely a delay tactic that is intended to postpone the inevitable and we remain confident that the Federal Circuit will reject their rehearing request. We are very excited about this victory as it more significantly solidifies the strength of our intellectual property.”

 

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For the fourth quarter, service and technology revenues were $58.1 million, compared with $57.0 million for the same period last year. Note that during the quarter, the revenue recognition period of product lifetime subscriptions, primarily consisting of TiVo standard definition DVRs sold before November 1, 2007 was increased from 48 months to 54 months as these subscriptions are keeping the TiVo service longer than we originally estimated. This change to a longer estimated amortization period reduced service and technology revenues by approximately $2.5 million in the fourth quarter. We also increased the amortization period to 60 months for new product lifetime subscriptions which are offered on a limited basis and primarily related to the TiVo HD DVR.

TiVo reported a net loss of ($6.4) million and a net loss per share of ($0.06), compared to a net loss of ($19.5) million, or ($0.20) per share, for the fourth quarter of last year. Adjusted EBITDA was $1.0 million, compared to an Adjusted EBITDA loss of ($15.0) million in the year-ago period and guidance of a ($2) million to ($5) million Adjusted EBITDA loss. Both net loss and Adjusted EBITDA for the fourth quarter of fiscal year 2008 benefited from better than anticipated sales of our standard definition product as approximately $4.1 million of the previously recorded inventory reserve was utilized.

For the full fiscal year 2008, service and technology revenues were $230.9 million, compared with $217.3 million for the same period last year. TiVo reported a net loss of ($31.5) million and a net loss per share of ($0.32), compared to a net loss of ($47.8) million, or ($0.53) per share, for the full year of last year. Adjusted EBITDA loss was ($3.2) million, compared to an Adjusted EBITDA loss of ($29.9) million in the last fiscal year.

Mr. Rogers continued, “In terms of our mass distribution strategy, we continue to focus on increasing subscriptions through significant partnerships with leading MSOs in the U.S. and internationally. On that front, the TiVo service on Comcast is now operational in New England, Comcast’s largest market with almost two million subscribers. Comcast is marketing the services to these subscribers and we expect marketing of the product to increase as Comcast gains greater experience with the offering.

“In addition, we are announcing today that the TiVo service on Cox is currently in tech trials and we will be launching in Cox’s New England market. With both Comcast a reality and Cox in trial, our mass distribution strategy is making significant in-roads, effectively unleashing the power of TiVo beyond the confines of a dedicated hardware consumer electronic business.

“Along these lines, cable operators are beginning to realize the benefits of providing their customers with a feature set that goes beyond the applications that they have been offering to this point. In this regard, we are working in conjunction with CableLabs toward creating a standalone box that would be capable of providing the two way services provided by cable operators. In addition, we continue to stay ahead of the curve in this area, and have progressed on our work with the National Cable Television Association to make certain that not only will TiVo HD DVR users be able to access programming channels delivered using switched digital technology, but also that the cable industry is involved in making the TiVo installation process easier for consumers.

“On the international front, we began selling TiVo DVRs at key retailers in Canada and we continue to believe that there is a tremendous growth opportunity to drive TiVo’s differentiated offering internationally. Through our existing international work in Australia, Mexico and Taiwan, and our domestic work with Comcast and Cox, we have learned how to provide TiVo through a variety of platforms and can drive our distribution growth via multiple paths.

 

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“On the TiVo-Owned side of the business, we are very focused on effectively managing subscription acquisition costs, keeping a sharp eye on how all initiatives related to this part of the business impact profitability. It is important to note that it is difficult to compare this year’s holiday results with those from fiscal 2007. Compared to last year, we have pulled back our marketing spend substantially, we have significantly reduced our hardware subsidy, and our main offering is now our $299 TiVo HD box versus the free standard definition offer that was our focus during last year’s holiday season. We plan to maintain our more limited spend on marketing while we assess the speed with which consumers recognize the value and importance of broadband distribution of digital video. Subscription acquisition costs are the lowest they have been in almost two years. Looking ahead, we believe that our feature set of delivering digital content directly to the television is becoming rich and deep enough that there are opportunities to spark new growth in TiVo-Owned sales. We are also in the process of re-launching TiVo.com so that we can more effectively market TiVo in the most efficient way possible. We plan to continue our focus on managing acquisition costs and more efficient marketing spend.”

TiVo-Owned subscription gross additions for the fourth quarter were 109,000, compared to 163,000 gross additions for the year-ago period. Overall, TiVo-Owned subscriptions increased slightly from the prior quarter to 1.75 million. As expected, TiVo reported a net decline in MSO/Broadcaster subscriptions during the period as DIRECTV is no longer deploying new TiVo boxes and other mass distribution deals are still in early phases of deployment. Cumulative total subscriptions as of January 31, 2008 were 3.95 million. Additionally, the monthly churn rate was 1.5% up from 1.2% in the year-ago period and 1.3% in the prior quarter. This increase was the result of a number of factors including inactive lifetime subs that reached the end of their amortization period as well as from satellite standard definition subscribers migrating to HD offerings from satellite providers.

Mr. Rogers continued, “Whether music, movies, television shows, photos or home movies, our broadband strategy continues to focus on delivering consumers what they want, when they want it. Over the course of the year, TiVo has made major strides in building and developing features that can access and bring directly to the television a powerful repertoire of content that goes way beyond typical television broadcasting, thus making TiVo not just a digital video recorder, but also a digital video retriever. Already TiVo offers 20,000 titles from Amazon, four million songs from Rhapsody, the entire Music Choice library of music programming, photo sharing through Photobucket and Picasa web Albums, content from over 40 TiVoCast content partners, and soon thousands of independent films through Jaman.com. Importantly, as we announced at the Consumer Electronics Show, we are integrating broadband content into our Season Pass feature, which will make it possible for users to search, record and catalogue web-based content for delivery to their television, just as they do for their favorite broadcast television shows. Certainly our ability to offer this kind of differentiated content and the ability to easily find and retrieve it, is becoming increasingly important as most of our new HD subscriptions are connecting via broadband. TiVo continues to distinguish itself as the one box, one user interface, one remote, one stop shop for delivering all forms of broadband content to the television set.

 

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“On the advertising front, DVR viewing is becoming a more significant part of the advertising buying equation every day, and most industry experts expect DVR penetration to grow from 20 percent today to 35 percent in the next 18 months. As such, it will be critical for advertisers to become experts in consumption patterns in DVR homes and we are the only player out there providing them with both new forms of inventory as well as measurement and accountability tools that enable them to better assess how to reach the television audience increasingly looking to avoid commercials. Because we can provide a ratings measurement system with enough granularity and because we have developed unique ways for viewers to connect with advertising, over the course of the year we have broken through to many of the major players in the media world on both the research and advertising fronts, including: two of the largest broadcast networks in NBC and CBS; six of the world’s largest advertising companies including WPP, IPG, Publicis, Havas, Carat, a unit of Aegis Group, OMG, which we announced just today; and major advertisers such as American Express, Fox Broadcasting, Honda, IBM, Norwegian Cruise Lines, Sony Pictures, Toyota and many others.

Mr. Rogers concluded, “We continue to focus the company on the many major growth opportunities we see in front of us, specifically in our advertising solutions, our audience research, our software development for the cable industry, our ability to expand internationally, our approach to delivering all forms of digital content to the television, and how we will exploit our intellectual property. We are beginning to see the results of our work and believe that we enter fiscal 2009 with strong momentum and a business plan in place that will lead to additional growth.”

Management Provides Financial Guidance

For fiscal year 2009, TiVo anticipates continued improvement in Adjusted EBITDA and Net Loss as compared to fiscal year 2008.

For the first quarter of fiscal 2009, TiVo anticipates service and technology revenues in the range of $53 million to $55 million, a net loss in the range of ($1.0) million to ($3.0) million, and Adjusted EBITDA in the range of $5.0 million to $7.0 million. Note that first quarter service and technology revenues, net loss and Adjusted EBITDA will be impacted by the longer product lifetime amortization period.

This financial guidance is based on information available to management as of March 5, 2008. TiVo expressly disclaims any duty to update this guidance.

Management’s guidance includes Adjusted EBITDA, a non-GAAP financial measure as defined in Regulation G. TiVo has provided a reconciliation of EBITDA and Adjusted EBITDA to net income (loss) in the attached schedules solely for the purpose of complying with Regulation G and not as an indication that EBITDA or Adjusted EBITDA is a substitute measure for net income (loss).

Conference Call and Webcast

TiVo will host a conference call and Webcast to discuss the second quarter financial and operating results and guidance outlook at 2:00 pm PT 5:00 pm ET), today, March 5, 2008. To listen to the discussion, please visit www.tivo.com/ir and click on the link provided for the Webcast or dial (888) 239-5348 (no password required). The Webcast will be archived and available through March 12, 2008 at www.tivo.com/ir or by calling (719) 457-0820 and entering the conference ID number 4535346.

 

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About TiVo Inc.

Founded in 1997, TiVo (NASDAQ: TIVO) pioneered a brand new category of products with the development of the first commercially available digital video recorder (DVR). Sold through leading consumer electronic retailers and TiVo.com, TiVo has developed a brand which resonates boldly with consumers as providing a superior television experience. Through agreements with leading satellite and cable providers, TiVo also integrates its DVR service features into the set-top boxes of mass distributors. TiVo’s DVR functionality and ease of use, with such features as Season Pass™ recordings and WishList® searches and TiVo KidZone, have elevated its popularity among consumers and have created a whole new way for viewers to watch television. With a continued investment in its patented technologies, TiVo is revolutionizing the way consumers watch and access home entertainment. Rapidly becoming the focal point of the digital living room, TiVo’s DVR is at the center of experiencing new forms of content on the TV, such as broadband delivered video, music and photos. With innovative features, such as TiVoToGo™ transfers and online scheduling, TiVo is expanding the notion of consumers experiencing “TiVo, TV your way. ®” The TiVo® service is also at the forefront of providing innovative marketing solutions for the television industry, including a unique platform for advertisers and audience research measurement.

TiVo, ‘TiVo, TV your way.’ Season Pass, WishList, TiVoToGo, and the TiVo Logo are trademarks or registered trademarks of TiVo Inc.’s subsidiaries worldwide. © 2008 TiVo Inc. All rights reserved.

This release contains certain 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, profitability and financial guidance, distribution of the TiVo service domestically with Comcast and Cox and internationally in Australia, Mexico, Canada and Taiwan, growth and innovation in TiVo’s advertising and audience research measurement business, TiVo’s software development for the cable industry, 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, 2007, Quarterly Reports on Form 10-Q for the three months ended April 30, 2007, July 31, 2007, and October 31, 2007, 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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TIVO INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share and share amounts)

(unaudited)

 

     Three Months Ended January 31,     Twelve Months Ended January 31,  
     2008     2007     2008     2007  

Revenues

        

Service revenues

   $ 51,025     $ 53,543     $ 211,496     $ 198,924  

Technology revenues

     7,027       3,417       19,382       18,409  

Hardware revenues

     16,066       19,890       41,798       41,588  
                                

Net revenues

     74,118       76,850       272,676       258,921  

Cost of revenues

        

Cost of service revenues (1)

     12,019       12,445       42,976       43,328  

Cost of technology revenues (1)

     5,252       3,476       17,367       16,849  

Cost of hardware revenues

     23,885       43,534       91,918       112,212  
                                

Total cost of revenues

     41,156       59,455       152,261       172,389  
                                

Gross margin

     32,962       17,395       120,415       86,532  
                                

Research and development (1)

     15,416       12,755       58,780       50,728  

Sales and marketing (1)

     7,336       6,784       23,987       22,520  

Sales and marketing, subscription acquisition costs

     7,195       9,915       31,050       20,767  

General and administrative (1)

     10,234       8,852       42,954       44,813  
                                

Total operating expenses

     40,181       38,306       156,771       138,828  
                                

Loss from operations

     (7,219 )     (20,911 )     (36,356 )     (52,296 )

Interest income

     1,066       1,426       5,031       4,767  

Interest expense and other

     (183 )     (8 )     (102 )     (173 )
                                

Loss before income taxes

     (6,336 )     (19,493 )     (31,427 )     (47,702 )

Provision for income taxes

     (22 )     (17 )     (30 )     (52 )
                                

Net loss

   $ (6,358 )   $ (19,510 )   $ (31,457 )   $ (47,754 )
                                

Net loss per common share - basic and diluted

   $ (0.06 )   $ (0.20 )   $ (0.32 )   $ (0.53 )
                                

Weighted average common shares used to calculate basic and diluted net loss per share

     98,517,991       96,415,236       97,510,576       89,864,237  
                                

 

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

        

Cost of service revenues

   $ 216     $ 117     $ 729     $ 470  

Cost of technology revenues

     729       338       2,422       1,020  

Research and development

     1,934       1,419       7,326       5,596  

Sales and marketing

     737       385       2,205       1,649  

General and administrative

     2,081       1,720       10,157       5,977  

 

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TIVO INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share amounts)

(unaudited)

 

     January 31, 2008     January 31, 2007  
ASSETS     

CURRENT ASSETS

    

Cash and cash equivalents

   $ 78,812     $ 89,079  

Short-term investments

     20,294       39,686  

Accounts receivable, net of allowance for doubtful accounts of $1,194 and $271

     20,019       20,641  

Inventories

     17,748       29,980  

Prepaid expenses and other, current

     3,792       3,071  
                

Total current assets

     140,665       182,457  

LONG-TERM ASSETS

    

Property and equipment, net

     11,349       11,706  

Purchased technology, capitalized software, and intangible assets, net

     13,522       16,769  

Prepaid expenses and other, long-term

     1,513       1,018  
                

Total long-term assets

     26,384       29,493  
                

Total assets

   $ 167,049     $ 211,950  
                
LIABILITIES AND STOCKHOLDERS’ EQUITY     

LIABILITIES

    

CURRENT LIABILITIES

    

Accounts payable

   $ 23,615     $ 37,127  

Accrued liabilities

     27,050       36,542  

Deferred revenue, current

     59,341       64,872  
                

Total current liabilities

     110,006       138,541  

LONG-TERM LIABILITIES

    

Deferred revenue, long-term

     38,128       54,851  

Deferred rent and other

     309       1,562  
                

Total long-term liabilities

     38,437       56,413  
                

Total liabilities

     148,443       194,954  

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 150,000,000;

    

Issued shares are100,098,426 and 97,311,986, respectively and outstanding shares are 99,970,947 and 97,231,483, respectively

     100       97  

Additional paid-in capital

     792,654       759,314  

Accumulated deficit

     (773,302 )     (741,845 )

Less: Treasury stock, at cost - 127,479 and 80,503 shares, respectively

     (846 )     (570 )
                

Total stockholders’ equity

     18,606       16,996  
                

Total liabilities and stockholders’ equity

   $ 167,049     $ 211,950  
                

 

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TIVO INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(unaudited)

 

     Twelve Months Ended January 31,  
     2008     2007  

CASH FLOWS FROM OPERATING ACTIVITIES

    

Net loss

   $ (31,457 )   $ (47,754 )

Adjustments to reconcile net loss to net cash used in operating activities:

    

Depreciation and amortization of property and equipment and intangibles

     10,326       7,759  

Stock-based compensation expense

     22,839       14,712  

Inventory write-down

     5,892       —    

Loss on inventory barter transaction and utilization of trade credits

     1,331       —    

Allowance for doubtful accounts

     923       215  

Changes in assets and liabilities:

    

Accounts receivable

     (301 )     (745 )

Inventories

     3,566       (19,041 )

Prepaid expenses and other

     227       5,643  

Accounts payable

     (12,437 )     11,963  

Accrued liabilities

     (9,492 )     (663 )

Deferred revenue

     (22,254 )     (5,754 )

Deferred rent and other long-term liabilities

     (1,253 )     158  
                

Net cash used in operating activities

   $ (32,090 )   $ (33,507 )
                

CASH FLOWS FROM INVESTING ACTIVITIES

    

Purchases of short-term investments

     (30,808 )     (28,621 )

Sales of short-term investments

     50,200       7,850  

Acquisition of property and equipment

     (7,422 )     (7,341 )

Acquisition of capitalized software and intangibles

     (375 )     (13,125 )
                

Net cash provided by (used in) investing activities

   $ 11,595     $ (41,237 )
                

CASH FLOWS FROM FINANCING ACTIVITIES

    

Payment of financing expenses related to line of credit

     —         (641 )

Proceeds from issuance of common stock, net

     —         64,539  

Proceeds from issuance of common stock related to exercise of warrants

     —         3,330  

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

     7,107       9,075  

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

     3,397       2,792  

Treasury Stock - repurchase of stock for tax withholding

     (276 )     (570 )
                

Net cash provided by financing activities

   $ 10,228     $ 78,525  
                

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

   $ (10,267 )   $ 3,781  
                

CASH AND CASH EQUIVALENTS:

    

Balance at beginning of period

     89,079       85,298  
                

Balance at end of period

   $ 78,812     $ 89,079  
                

 

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TIVO INC.

OTHER DATA

 

     Three Months Ended January 31,     Twelve Months Ended January 31,  
     2008     2007     2008     2007  

Net income (loss)

   $ (6,358 )   $ (19,510 )   $ (31,457 )   $ (47,754 )

Add back:

        

Depreciation & amortization

     2,675       1,944       10,326       7,759  

Interest income & expense

     (1,050 )     (1,423 )     (4,975 )     (4,717 )

Provision for income tax

     22       17       30       52  
                                

EBITDA

     (4,711 )     (18,972 )     (26,076 )     (44,660 )

Stock-based compensation

     5,697       3,979       22,839       14,712  
                                

Adjusted EBITDA

   $ 986     $ (14,993 )   $ (3,237 )   $ (29,948 )
                                

EBITDA and Adjusted EBITDA Results. TiVo’s “EBITDA” means income before interest income and expense, provision for income taxes and depreciation and amortization. TiVo’s “Adjusted EBITDA” is EBITDA less expense for stock-based compensation. EBITDA and Adjusted EBITDA are not measures of financial performance under generally accepted accounting principles, which we refer to as GAAP. A table reconciling TiVo’s EBITDA and Adjusted EBITDA to GAAP net income is included with the condensed consolidated financial statements attached to this release. We have presented EBITDA and Adjusted EBITDA solely as supplemental disclosure because we believe they allow for a more complete analysis of our results of operations and we believe that EBITDA and Adjusted EBITDA are useful to investors because EBITDA and Adjusted EBITDA are commonly used to analyze companies on the basis of operating performance, leverage and liquidity. In addition, because of the variety of equity awards used by companies, the varying methodologies for determining stock-based compensation expense, and the subjective assumptions involved in those determinations, we believe excluding stock-based compensation enhances the ability of management and investors evaluate our operating performance over multiple periods. Management does not use EBITDA or AEBITDA as a measure of liquidity because, among other things, they do not exclude the impact of deferred revenues associated with the amortization of product lifetime subscriptions. We do not use stock-based compensation expense in our internal measures. A limitation associated with these non-GAAP measures is that they do not include any stock-based compensation expense related to hiring, retaining, and incentivizing the Company’s workforce. EBITDA and Adjusted EBITDA are not intended to represent, and should not be considered more meaningful than, or as an alternative to, measures of operating performance as determined in accordance with GAAP.

 

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TIVO INC.

OTHER DATA

Subscriptions

 

     Three Months Ended January 31,     Twelve Months Ended January 31,  

(Subscriptions in thousands)

   2008     2007     2008     2007  

TiVo-Owned Subscription Gross Additions

   109     163     276     429  

Subscription Net Additions/(Losses):

        

TiVo-Owned

   33     101     19     235  

MSOs/Broadcasters

   (155 )   (91 )   (518 )   (155 )
                        

Total Subscription Net Additions/(Losses)

   (122 )   10     (499 )   80  

Cumulative Subscriptions:

        

TiVo-Owned

   1,745     1,726     1,745     1,726  

MSOs/Broadcasters

   2,201     2,718     2,201     2,718  
                        

Total Cumulative Subscriptions

   3,946     4,444     3,946     4,444  

% of TiVo-Owned Cumulative Subscriptions paying recurring fees

   61 %   58 %   61 %   58 %

Included in the 3,946,000 subscriptions are approximately 175,000 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 MSO’s/Broadcasters lines refer to subscriptions sold to consumers by MSOs/Broadcasters such as DIRECTV Cablevision Mexico, and Comcast and in the future Cox and Seven and 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 have from time-to-time offered a product lifetime subscription for general sale, under which consumers could purchase a subscription that is valid for the lifetime of a particular DVR. We count these as subscriptions until both of the following conditions are met: (i) the period we use to recognize lifetime subscription revenues ends; and (ii) the related DVR has not made contact to the TiVo service within the prior six-month period. Lifetime subscriptions past this period which have not called into the TiVo service for six months are not counted in this total. During the quarter ended April 30, 2006, we discontinued general sale of the product lifetime service option. During the quarter ended January 31, 2008, we began offering product lifetime service subscriptions only to existing customers. Additionally, we have extended the period we use to recognize product lifetime subscription revenues from 48 months to 54 months for lifetime subscriptions acquired on or before October 31, 2007. Additionally, we also increased the amortization period to 60 months for new product lifetime subscriptions acquired on or after November 1, 2007 which are offered on a limited basis and primarily related to the TiVo HD DVR. 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 MSO/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 subscription for our reporting purposes.

 

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TIVO INC.

OTHER DATA - KEY BUSINESS METRICS

 

     Three Months Ended January 31,     Twelve Months Ended January 31,  

TiVo-Owned Churn Rate

   2008     2007     2008     2007  
     (In thousands)     (In thousands)  

Average TiVo-Owned subscriptions

   1,727     1,672     1,721     1,584  

TiVo-Owned subscription cancellations

   (76 )   (62 )   (257 )   (194 )
                        

TiVo-Owned Churn Rate per month

   -1.5 %   -1.2 %   -1.2 %   -1.0 %
                        

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 for our low cost product offerings, 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 January 31,     Twelve Months Ended January 31,  
     2008     2007     2008     2007  
     (In thousands, except SAC)     (In thousands, except SAC)  

Subscription Acquisition Costs

    

Sales and marketing, subscription acquisition costs

   $ 7,195     $ 9,915     $ 31,050     $ 20,767  

Hardware revenues

   $ (16,066 )   $ (19,890 )   $ (41,798 )   $ (41,588 )

Cost of hardware revenues

   $ 23,885     $ 43,534     $ 91,918     $ 112,212  
                                

Total Acquisition Costs

     15,014       33,559       81,170       91,391  
                                

TiVo-Owned Subscription Gross Additions

     109       163       276       429  

Subscription Acquisition Costs (SAC)

   $ 138     $ 206     $ 294     $ 213  
                                

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 acquisition costs for a given period divided by TiVo-Owned subscription gross additions for the same period. In the first fiscal quarter of 2008, we revised our definition of total acquisition costs. We now define total acquisition costs as sales and marketing, subscription acquisition costs less net hardware revenues (defined as gross hardware revenues less rebates, revenue share and market development funds paid to retailers) plus cost of hardware revenues. The sales and marketing,

 

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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 incur limited or no acquisition costs for these new subscriptions. 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 January 31,     Twelve Months Ended January 31,  

TiVo-Owned Average Revenue per Subscription

   2008     2007     2008     2007  
     (In thousands, except ARPU)  

Total Service revenues

   $ 51,025     $ 53,543     $ 211,496     $ 198,924  

Less: MSOs/Broadcasters-related service revenues

     (7,133 )     (8,452 )     (27,440 )     (32,257 )
                                

TiVo-Owned-related service revenues

     43,892       45,091       184,056       166,667  

Average TiVo-Owned revenues per month

     14,631       15,030       15,338       13,889  

Average TiVo-Owned per month subscriptions

     1,727       1,673       1,721       1,584  
                                

TiVo-Owned ARPU per month

   $ 8.47     $ 8.98     $ 8.91     $ 8.77  
                                
     Three Months Ended January 31,     Twelve Months Ended January 31,  

MSOs/Broadcasters Average Revenue per Subscription

   2008     2007     2008     2007  
     (In thousands, except ARPU)  

Total Service revenues

   $ 51,025     $ 53,543     $ 211,496     $ 198,924  

Less: TiVo-Owned-related service revenues

     (43,892 )     (45,091 )     (184,056 )     (166,667 )
                                

MSOs/Broadcasters-related service revenues

     7,133       8,452       27,440       32,257  

Average MSOs/Broadcasters revenues per month

     2,378       2,817       2,287       2,688  

Average MSOs/Broadcasters per month subscriptions

     2,279       2,767       2,481       2,836  
                                

MSOs/Broadcasters ARPU per month

   $ 1.04     $ 1.02     $ 0.92     $ 0.95  
                                

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. The decrease in ARPU per month for TiVo-Owned subscriptions during the fourth quarter ended January 31, 2008 as compared to the prior year period was the result of the recent change in amortization period for product lifetime subscriptions.

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

 

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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. The above table shows this calculation.

Beginning in February 2006, pursuant to the most recent amendment of our agreement with DIRECTV, TiVo defers a portion of the DIRECTV subscription fees equal to the fair value of the undelivered development services. Additionally, beginning in February 2007, DIRECTV began paying us a monthly fee for all DIRECTV households with DIRECTV receivers with TiVo service similar to the lower amount paid by DIRECTV for households with DIRECTV receivers with TiVo service deployed since March 15, 2002, subject to a monthly minimum payment by DIRECTV.

 

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