TiVo Inc. (TIVO, Financial) provides television and Cloud-based software-as-a-service, or SaaS, solutions that enable viewing video content on various screens. It is a software and solutions provider for set-top boxes, smartphones and tablets. The company posted better-than-expected first-quarter fiscal 2016 results, beating both on top- and bottom-line estimates.
Strong performance
Consolidated revenues surged 7.2% year-over-year to $114.7 million and beat consensus estimate of $112 million. The growth in top-line was on the back of strong performance of the 7.5% year-over-year growth in the service and technology segments.
The segment constitutes 81% of revenue, and the growth was fueled by growth in multiple system operators, or MSO, and Digitalsmiths' service revenues in addition to higher subscriber base. During the reported quarter, the subscriber base grew 27% year-over-year to 285,000. Also, the MSO services grew 81% year over year.
The hardware revenues, which constitute 19% of total, surged up 6% year-over-year to $22.3 million.
During the quarter, TiVo repurchased 21.5 million of its common stock for $266 million. On the back of solid top-line growth and reduced share count, earnings came in at $0.08 per share, ahead of consensus estimate by $0.01 per share.
TiVo exited the first quarter with cash, cash equivalents and short-term investments of $686.3 million.
International market potential
TiVo announced acquisition of Cubiware, a Polish developer of innovative and cost-effective software solutions provider for emerging market Pay-TV operators.
"Cubiware immediately accelerates our global Pay-TV efforts and enables us to more rapidly reach an even larger portion of the international market, which is expected to grow to more than a billion subscribers by 2020," said Tom Rogers, TiVo's President and CEO.
TiVo currently has almost 6 million subscribers globally, almost three times what it had in 2012. This acquisition will help in expansion of TiVo’s international presence to 40 operators In 25 countries and will act as a catalyst for growth globally in the long run.
Market potential in North America
The market potential in North America is about 15 million homes. Currently, TiVo caters to about seven million homes. For the balance eight million, the company is in discussions with a number of operators covering them. The company estimates that it is slightly less than 10% penetrated today among those North American homes under contract. So, the market potential is huge and this offers growth opportunities. going forward.
Looking ahead
Going forward, for the second quarter of fiscal 2016, TiVo expects Service and Technology revenues in the range of $94 million–$97 million and net income is expected to be in the range of $7 million–$10 million.
Wrapping up
TiVo has a strong balance sheet, and it can go shopping for growth, if needed, and also repurchase shares to drive bottom-line growth. Also, with the acquisition of Cubiware, the company has expanded its visibility in international market through 40 operators in 25 countries. The growth opportunities in Western Europe and Latin America are significant, in addition to North America.
However, it does face credible threats from peers like Dish Network (DISH, Financial) and Cablevision Systems Corporation (CVC, Financial). But, given its strong performance and sustained focus on product innovations and subscriber acquisition, the stock is a buy for the long term.
