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) November 29, 2006

 


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 November 29, 2006 we announced financial results for our third quarter ended October 31, 2006. Service and technology revenues for the quarter, which included recognition of Comcast development revenue of $2.9 million, increased 22% to $52.6 million, compared with $43.2 million for the same prior year period. Net loss for the quarter was ($11.1) million or ($0. 12) per share, compared to a net loss of ($14.2) million, or ($0.17) per share, for the three months ended October 31, 2005, this decrease in net loss was due to improved service revenues gross margin coupled with a decrease in legal costs, which were offset by the expensing of stock options.

As of October 31, 2006 our total subscriptions were 4.4 million. TiVo-Owned subscription gross additions were 101,000 for the quarter, compared to 92,000 in the third quarter of last year. Our churn rate has remained flat year-over-year at 1% for the quarters ended October 31, 2006 and 2005. TiVo-Owned subscription net additions were slightly lower at 53,000 compared to 55,000 in the third quarter of last year. The installed base of DIRECTV TiVo subscriptions has declined to approximately 2.8 million.

TIVO INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(unaudited)

 

     Three Months Ended October 31,     Nine Months Ended October 31,  
     2006     2005     2006     2005  
             Adjusted               Adjusted    

Service revenues

   $ 49,000     $ 42,296     $ 145,381     $ 120,889  

Technology revenues

     3,616       901       15,224       3,002  
                                

Service and Technology revenues

     52,616       43,197       160,605       123,891  

Hardware revenues

     27,978       24,652       53,666       39,827  

Rebates, revenue share, and other payments to channel

     (14,934 )     (18,234 )     (32,932 )     (27,860 )
                                

Net revenues

     65,660       49,615       181,339       135,858  

Cost of service revenues (1)

     10,820       8,431       30,883       23,929  

Cost of technology revenues (1)

     3,006       77       13,373       903  

Cost of hardware revenues

     31,925       24,667       68,678       48,006  
                                

Gross margin

     19,909       16,440       68,405       63,020  
                                

Research and development (1)

     12,221       9,712       37,973       30,394  

Sales and marketing (1)

     10,123       10,006       25,856       24,410  

General and administrative (1)

     9,811       11,702       35,961       26,249  
                                

Loss from operations

     (12,246 )     (14,980 )     (31,385 )     (18,033 )
                                

Interest and other income (expense), net

     1,158       816       3,176       2,171  

Provision for taxes

     (4 )     —         (35 )     (51 )
                                

Net loss attributable to common stockholders

   $ (11,092 )   $ (14,164 )   $ (28,244 )   $ (15,913 )
                                

Net loss per common share - basic and diluted

   $ (0.12 )   $ (0.17 )   $ (0.32 )   $ (0.19 )
                                

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

     91,930       84,201       87,681       83,362  
                                

(1)    Includes stock-based compensation expense (benefit) as follows (FY 2007 increases are due primarily to the adoption of FAS 123(R))

       

Cost of service revenues

   $ 129     $ —       $ 353     $ —    

Cost of technology revenues

     236       —         682       —    

Research and development

     1,608       (6 )     4,177       (131 )

Sales and marketing

     474       20       1,264       (20 )

General and administrative

     1,636       151       4,257       199  

 

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TIVO INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share amounts)

(unaudited)

 

     October 31, 2006     January 31, 2006  
           Adjusted  
ASSETS     

CURRENT ASSETS

    

Cash and cash equivalents, and short-term investments

   $ 106,965     $ 104,213  

Accounts receivable

     27,300       20,111  

Finished goods inventories

     34,107       10,939  

Prepaid expenses and other, current

     4,327       8,744  
                

Total current assets

     172,699       144,007  

LONG-TERM ASSETS

    

Property and equipment, net

     10,874       9,448  

Purchased technology, capitalized software, and intangible assets, net

     17,580       5,206  

Prepaid expenses and other, long-term

     597       347  
                

Total long-term assets

     29,051       15,001  
                

Total assets

   $ 201,750     $ 159,008  
                
LIABILITIES AND STOCKHOLDERS’ DEFICIT     

LIABILITIES

    

CURRENT LIABILITIES

    

Accounts payable

   $ 28,278     $ 24,050  

Accrued liabilities

     32,553       37,449  

Deferred revenue, current

     56,596       57,902  
                

Total current liabilities

     117,427       119,401  

LONG-TERM LIABILITIES

    

Deferred revenue, long-term

     51,550       67,575  

Deferred rent and other

     2,208       1,404  
                

Total long-term liabilities

     53,758       68,979  
                

Total liabilities

     171,185       188,380  

COMMITMENTS AND CONTINGENCIES

    

STOCKHOLDERS’ DEFICIT

    

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 and outstanding shares are 96,761,289 and 85,376,191, respectively

     97       85  

Additional paid-in capital

     752,803       667,055  

Deferred compensation

     —         (2,421 )

Accumulated deficit

     (722,335 )     (694,091 )
                

Total stockholders’ deficit

     30,565       (29,372 )
                

Total liabilities and stockholders’ deficit

   $ 201,750     $ 159,008  
                

 

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TIVO INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(unaudited)

 

     Nine Months Ended October 31,  
     2006     2005  
           Adjusted  
CASH FLOWS FROM OPERATING ACTIVITIES     

Net loss

   $ (28,244 )   $ (15,913 )

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

    

Depreciation and amortization of property and equipment and intangibles

     5,815       4,591  

Recognition of stock-based compensation expense (benefit)

     10,733       48  

Changes in assets and liabilities:

    

Accounts receivable, net

     (7,189 )     (3,713 )

Finished goods inventories

     (23,168 )     (9,079 )

Prepaid expenses and other

     4,167       (2,000 )

Accounts payable

     3,853       16,111  

Accrued liabilities

     (4,652 )     (2,627 )

Deferred revenue

     (17,331 )     613  

Deferred rent and other long-term liabilities

     804       (293 )
                

Net cash used in operating activities

   $ (55,212 )   $ (12,262 )
                
CASH FLOWS FROM INVESTING ACTIVITIES     

Purchases of short-term investments

     (13,502 )     (5,375 )

Sales of short-term investments

     4,350       10,625  

Acquisition of property and equipment

     (6,115 )     (3,897 )

Acquisition of capitalized software and intangibles

     (13,125 )     (3,915 )
                

Net cash used in investing activities

   $ (28,392 )   $ (2,562 )
                
CASH FLOWS FROM FINANCING ACTIVITIES     

Borrowing under bank line of credit

     —         3,500  

Payments to bank line of credit

     —         (8,000 )

Proceeds from issuance of common stock

     65,000       —    

Payment of issuance costs for common stock

     (1,054 )     —    

Proceeds from issuance of common stock related to exercise of warrants

     3,329       —    

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

     8,639       6,443  

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

     1,290       2,242  
                

Net cash provided by financing activities

   $ 77,204     $ 4,185  
                
NET DECREASE IN CASH AND CASH EQUIVALENTS    $ (6,400 )   $ (10,639 )
                

 

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TIVO INC.

OTHER DATA

Subscriptions

 

     Three Months Ended October 31,  

(Subscriptions in thousands)

   2006     2005  

TiVo-Owned Subscription Gross Additions

   101     92  

Subscription Net Additions:

    

TiVo-Owned

   53     55  

DIRECTV

   (37 )   379  
            

Total Subscription Net Additions

   16     434  
Cumulative Subscriptions:     

TiVo-Owned

   1,625     1,308  

DIRECTV

   2,809     2,700  
            

Total Cumulative Subscriptions

   4,434     4,008  

% of TiVo-Owned Cumulative Subscriptions paying recurring fees

   55 %   51 %

Included in the 4,434,000 subscriptions are approximately 138,000 lifetime subscriptions that have reached the end of the 48-month period TiVo uses to recognize lifetime subscription revenue. These lifetime subscriptions no longer generate subscription revenue.

 

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TIVO INC.

OTHER DATA - KEY BUSINESS METRICS

 

     Three Months Ended October 31,  

TiVo-Owned Churn Rate

   2006     2005  
     (In thousands)  

Average TiVo-Owned subscriptions (for the quarter)

   1,596     1,275  

TiVo-Owned subscription cancellations (for the quarter)

   (48 )   (37 )
            

TiVo-Owned Churn Rate per month

   -1.0 %   -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, 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 October 31,     Twelve Months Ended October 31,  

Subscription Acquisition Costs

   2006     2005     2006     2005  
     (In thousands, except SAC)     (In thousands, except SAC)  
           Adjusted           Adjusted  

Sales and marketing expenses

   $ 10,123     $ 10,006     $ 36,493     $ 35,939  

Rebates, revenue share, and other payments to channel

     14,934       18,234       52,099       53,048  

Hardware revenues

     (27,978 )     (24,652 )     (85,932 )     (90,279 )

Cost of hardware revenues

     31,925       24,667       107,489       100,273  
                                

Total Acquisition Costs

     29,004       28,255       110,149       98,981  
                                

TiVo-Owned Subscription Gross Additions

     101       92       487       549  

Subscription Acquisition Costs (SAC)

   $ 287     $ 307     $ 226     $ 180  
                                

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. We define total acquisition costs as the sum of sales and marketing expenses, rebates, revenue share, and other payments to channel, minus hardware gross margin (defined as hardware revenues less cost of hardware revenues). We do not include DIRECTV subscription gross additions in our calculation of SAC because we incur limited or no acquisition costs for new DIRECTV 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.

 

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     Three Months Ended October 31,  

TiVo-Owned Average Revenue per Subscription

   2006     2005  
     (In thousands, except ARPU)  

Service and Technology revenues

   $ 52,616     $ 43,197  

Less: Technology revenues

     (3,616 )     (901 )
                

Total Service revenues

     49,000       42,296  

Less: DIRECTV-related service revenues

     (7,573 )     (8,637 )
                

TiVo-Owned-related service revenues

     41,427       33,659  

Average TiVo-Owned revenues per month

     13,809       11,220  

Average TiVo-Owned per month subscriptions

     1,596       1,275  
                

TiVo-Owned ARPU per month

   $ 8.65     $ 8.80  
                
     Three Months Ended October 31,  

DIRECTV Average Revenue per Subscription

   2006     2005  
     (In thousands, except ARPU)  

Service and Technology revenues

   $ 52,616     $ 43,197  

Less: Technology revenues

     (3,616 )     (901 )
                

Total Service revenues

     49,000       42,296  

Less: TiVo-Owned-related service revenues

     (41,427 )     (33,659 )
                

DIRECTV-related service revenues

     7,573       8,637  

Average DIRECTV revenues per month

     2,524       2,879  

Average DIRECTV per month subscriptions

     2,837       2,505  
                

DIRECTV ARPU per month

   $ 0.89     $ 1.15  
                

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 measurement research. ARPU does not include rebates, revenue share and other payments to channel that reduce our GAAP revenues. Additionally, under the accounting policy for our bundled sales program, revenues associated with these bundled sales transactions, which were previously recognized as hardware revenues, are now being recognized in service revenues, which we believe will over time increase our ARPU as currently presented. 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 nature of these expenses and because management believes these expenses 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.

 

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We calculate ARPU per month for TiVo-Owned subscriptions by subtracting DIRECTV-related service revenues (which includes DIRECTV subscription service revenues and DIRECTV-related advertising revenues) from our total reported 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 and reconciles ARPU for TiVo-Owned subscriptions to our reported service and technology revenues.

We calculate ARPU per month for DIRECTV 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 DIRECTV-related service revenues by average subscriptions for the period. The above table shows this calculation and reconciles ARPU for DIRECTV subscriptions to service and technology revenues.

For fiscal 2007, pursuant to the most recent amendment of our agreement with DIRECTV, TiVo now defers a portion of the DIRECTV subscription fees equal to the fair value of the undelivered development services. Otherwise, the recurring subscriptions fees in this agreement are similar to the fees for the DIRECTV receivers with TiVo service activated since 2002.

Forward-Looking Statements

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 business development strategies, current and future partnerships, the expected future deployment and availability of the TiVo service, future TiVo service features and advertising technologies, and other factors that may affect future earnings or financial results. 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, 2006 and the Quarterly Report on Form 10-Q for the quarter ended April 30, 2006 and July 31, 2006 and Current Reports on Form 8-K. We caution 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: November 29, 2006       By:  

/s/ Steven Sordello

        Steven Sordello
        Senior Vice President and
        Chief Financial Officer
        (Principal Financial and Accounting Officer)

 

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