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TiVo Reports Results for the Third Quarter Ended October 31, 2014

SAN JOSE, CA--(Marketwired - Nov 25, 2014) - TiVo Inc. ( NASDAQ : TIVO )

  • Service & Technology revenue of $88.1 million
  • Net revenue of $118.4 million; a record for the Company
  • Adjusted EBITDA of $27.7 million, up 16% year-over-year 
  • Net income of $6.3 million, which included $0.8 million of after-tax incremental interest expense associated with the Company's recent convertible debt offering
  • MSO service revenue grew 37% year-over-year; on track to almost double Fiscal 2013
  • Added 328,000 TiVo subscriptions, bringing total subscriptions to over 5.1 million, a 32% year-over-year increase
  • Cogeco launched a TiVo platform in Canada in a little over three months after a partnership announced
  • TiVo-Owned gross additions were up 9% year-over-year in third quarter and net additions were positive in October
  • Broadening TiVo's retail product line, introduced TiVo® Roamio OTA as an Over-the-Air (OTA) solution and TiVo Mega for the high end home installation market
  • Launched Amazon Instant Video, including Prime Instant Video, Vudu, and Home Shopping Network applications on our TiVo Roamio platform
  • Repurchased $128 million or 9.9 million shares in the quarter; over $400 million worth of stock remaining to be repurchased under current authorization

TiVo Inc. ( NASDAQ : TIVO ), a leader in the advanced television entertainment market, today reported financial results for the third quarter ended October 31, 2014.

Tom Rogers, President and CEO of TiVo, said, "This was a strong quarter for TiVo, highlighted by continued organic growth as well as significant progress establishing a more efficient capital structure. Adjusted EBITDA increased 16% over last year, and our growing relationships with operator partners led to the net addition of 328,000 total TiVo subscriptions, bringing total subscriptions to over 5.1 million, and 37% year-over-year growth in MSO revenue. Further, we repurchased $128 million or 9.9 million shares in the quarter and issued a new convertible debt offering with the intention to use the proceeds to repurchase the shares underlying our existing convertible security in order to reduce the dilution related to our existing convertible debt. We believe that our operational progress and our improving capital structure should translate into increased shareholder value."

For the third quarter, service and technology revenues were $88.1 million. This compared to guidance in the range of $86 million to $89 million, and $81.7 million for the same quarter last year. TiVo reported Adjusted EBITDA of $27.7 million, compared to Adjusted EBITDA guidance of $25 million to $28 million, and compared to Adjusted EBITDA of $23.8 million in the same quarter last year. Net income was $6.3 million, compared to guidance of $6 million to $9 million. Impacting net income was $ 0.8 million of incremental interest expense associated with the Company's recent convertible debt offering and a slightly higher than anticipated tax expense during the quarter. Year-ago net income was $12.5 million and included a GAAP tax benefit of $2 million versus a tax expense of $7.1 million this past quarter.

Rogers continued, "The 337,000 MSO subscription additions in the quarter are on top of the approximately 624,000 we added during the first two quarters of the fiscal year. We have now reached over four million total MSO subscriptions, proof that our operator relationships are thriving. The 37% increase in MSO revenue in the third quarter sets us on a course to almost double our MSO service revenue in Fiscal 2015 compared to where we were just two years ago. We expect that this positive momentum will continue as existing relationships scale, many of which are still in the early phases of deployment, and as we anticipate forming new distribution relationships.

"In terms of existing distribution relationships, this quarter we showed how quickly TiVo can be deployed to an operator's customer base. In just a little more than three months after announcing our agreement, Cogeco Cable Canada began the rollout of TiVo to its customers in Canada. This is in addition to Wave and Blue Ridge which both launched TiVo during the third quarter.

"In our Digitalsmiths business, we drove 21% sequential quarter-over-quarter revenue growth as we continued to roll out our industry leading video discovery platform to current operator partners. We expect this growth to continue as we drive further penetration within existing distribution partners, sign additional distribution deals in the future, both in emerging lower ARPU international markets and with consumer electronics manufacturers, and through new Digitalsmiths' products which we expect to launch over the course of the next year.

"On the TiVo-Owned front, TiVo Roamio continues to receive strong critical acclaim from both consumers and industry experts.  In the quarter, we delivered a 9% year-over-year increase in TiVo-Owned gross additions and were net positive in October, the first time in seven years, which we believe is an indication of the improving dynamics in our retail business. Further, our focus on addressing additional market segments such as the 15 million home Over-the-Air (OTA) market through TiVo Roamio OTA, and the high end home installation market through TiVo Mega, should help drive incremental improvements in our TiVo-Owned business. To this point, we're seeing positive initial interest for the TiVo OTA offering and are hopeful that this will meaningfully contribute to our fourth quarter gross subscription additions.

"Additionally, we recently announced the new Amazon Instant Video app to give subscribers access to Amazon's entire Prime Instant Video library. That was in addition to the launch of Vudu, Walmart's subscription-free, video-on-demand movie service, which is now available on TiVo devices. And we announced that TiVo subscribers can now use the Home Shopping Network: Shop by Remote application to purchase products using their TiVo remotes.

"In addition to the improving trends in our operating business, we're highly focused on driving value through capital allocation. In August, we announced our intention to repurchase $350 million of stock over a two and half year timeframe. Following that announcement, in September, we issued $230 million of new convertible debt, which included the use of convertible note hedge and warrant transactions.  The strike price on the warrant transaction related to the notes is initially $24.00 per share, which is 75% above the closing price of TiVo's stock on September 16, 2014. We intend to use these proceeds to repurchase the shares underlying our existing convertible security at prices much lower than the effective conversion premium connected with our new convertible debt issuance. Between the previously announced share repurchase plan and the new repurchases related to the convertible debt, we have committed to repurchase $550 million of stock, which equates to approximately a third of our current weighted average common diluted shares outstanding based on our current stock price. Further, we repurchased $128 million or 9.9 million shares during the quarter."

Rogers concluded, "This was a solid quarter with improving financial results, strong operator growth, and continued innovation. We are pleased with where the business currently stands, and believe strongly in the prospects for growth in the coming quarters through incremental MSO distribution deals, continued improvements in our retail business supported by our best-in-class retail product offerings, and continued strategic allocations of capital to drive further meaningful value for shareholders."

Management Provides Financial Guidance

For the fourth quarter of Fiscal Year 2015, TiVo anticipates service and technology revenues in the range of $87 million to $90 million.

TiVo expects Adjusted EBITDA to be in the range of $21 million to $24 million and net income to be in the range of $2 million to $5 million.

Included in the fourth quarter financial guidance is an expected increase in TiVo-Owned acquisition/marketing expenditure compared to the third quarter, relating to the typical seasonal efforts to drive subscriptions during the holiday season. This increased expenditure is expected to yield additional gross subscription additions. Additionally, TiVo anticipates lower hardware revenue and absolute margin compared to the third quarter due to the continuing trend of MSO partners opting for the TiVo Service on third-party hardware.

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 third quarter ended October 31, 2014 financial and operating results as well as guidance outlook for the fourth quarter at 2:00 pm PT (5:00 pm ET), today, November 25, 2014. To listen to the discussion, please visit http://www.tivo.com/ir and click on the link provided for the Webcast or dial (877) 618-4505 (conference ID number is 34313303). The Webcast will be archived and available through December 10, 2014 at http://www.tivo.com/ir or by calling (404) 537-3406; and entering the conference ID number 34313303.

About TiVo Inc.

TiVo Inc. ( NASDAQ : TIVO ) is a global leader in next-generation television services. TiVo's innovative cloud-based Software-as-a-Service solutions enable viewers to consume content across all screens in and out-of-the home, providing an all-in-one approach for navigating the 'content chaos' by seamlessly combining live, recorded, on-demand and over-the-top television into one intuitive user interface. The TiVo experience provides TV viewers with simple universal search, discovery, viewing and recording from any device, creating the ultimate viewing experience. TiVo products and services are available at retail or through a growing number of Pay TV operators world-wide. TiVo's multiple subsidiary companies provide the broader television industry and consumer electronics manufacturers, cloud-based video discovery and recommendation options, interactive advertising solutions and audience research and measurement services. More information at: www.TiVo.com.

TiVo, the TiVo logo, WishList, Season Pass, Roamio, Media TRAnalytics and The Right Audience are trademarks or registered trademarks of TiVo Inc. or its subsidiaries. All other trademarks are the property of their respective owners.

This release 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 future distribution agreements as well as revenue and subscription growth from MSO customers (both domestically and internationally), financial guidance for TiVo's fourth quarter and full fiscal year ending January 31, 2015, future growth in TiVo's overall subscription base including both TiVo-Owned and MSO subscriptions, future improvements in TiVo's retail business from TiVo Roamio and TiVo Roamio OTA products, future revenues, products, and distribution deals from Digitalsmiths, and future capital allocation initiatives including the amount, timing and sufficient availability of shares in the marketplace for future share repurchases. 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, including the Company's Annual Report on Form 10-K for the fiscal year ended January 31, 2014, our Quarterly Reports on Form 10-Q for the periods ended April 30, 2014 and July 31, 2014, 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.

   
TIVO INC.  
CONDENSED CONSOLIDATED STATEMENTS OF INCOME  
(In thousands, except per share and share amounts)  
(unaudited)  
   
    Three Months Ended October 31,   Nine Months Ended October 31,  
    2014   2013   2014   2013  
Revenues                          
    Service revenues     36,705     33,526     109,509     102,518  
    Technology revenues     51,359     48,133     151,182     117,914  
    Hardware revenues     30,366     35,597     76,656     79,487  
Net revenues     118,430     117,256     337,347     299,919  
Cost of revenues                          
    Cost of service revenues     14,970     11,233     42,570     33,446  
    Cost of technology revenues     6,567     5,612     16,780     21,190  
    Cost of hardware revenues     28,176     33,017     70,464     73,470  
  Total cost of revenues     49,713     49,862     129,814     128,106  
          Gross margin     68,717     67,394     207,533     171,813  
    Research and development     25,546     27,242     76,944     80,009  
    Sales and marketing     10,544     10,189     31,143     27,765  
    Sales and marketing, subscription acquisition costs     2,734     2,628     5,451     6,483  
    General and administrative     14,292     15,839     45,406     60,850  
    Litigation proceeds     --     --     --     (108,102 )
      Total operating expenses     53,116     55,898     158,944     67,005  
          Income from operations     15,601     11,496     48,589     104,808  
    Interest income     1,070     1,133     3,178     3,455  
    Interest expense and other expense, net     (3,197 )   (2,165 )   (7,139 )   (6,104 )
      Income before income taxes     13,474     10,464     44,628     102,159  
      Benefit (provision) for income taxes     (7,129 )   2,023     (20,852 )   168,947  
    Net income   $ 6,345   $ 12,487   $ 23,776   $ 271,106  
                           
    Net income per common share                          
        Basic   $ 0.06   $ 0.11   $ 0.22   $ 2.28  
        Diluted   $ 0.06   $ 0.10   $ 0.21   $ 1.98  
                           
    Income for purposes of computing net income per share:                          
        Basic   $ 6,345   $ 12,487   $ 23,776   $ 271,106  
        Diluted   $ 6,345   $ 13,739   $ 27,530   $ 274,863  
                           
    Weighted average common and common equivalent shares:                          
        Basic     107,497,734     116,760,061     110,303,789     118,913,986  
        Diluted     111,870,407     136,736,001     130,278,425     139,124,386  
                           
   
   
   
TIVO INC.  
CONDENSED CONSOLIDATED BALANCE SHEETS  
(In thousands, except per share and share amounts)  
(unaudited)  
   
    October 31, 2014     January 31, 2014  
ASSETS                
CURRENT ASSETS                
  Cash and cash equivalents   $ 148,208     $ 253,713  
  Short-term investments     707,166       748,759  
  Accounts receivable, net of allowance for doubtful accounts of $464 and $429, respectively     42,339       35,151  
  Inventories     16,878       22,316  
  Deferred cost of technology revenues, current     4,777       9,103  
  Deferred tax asset, current     122,993       113,621  
  Prepaid expenses and other, current     14,698       10,922  
      Total current assets     1,057,059       1,193,585  
LONG-TERM ASSETS                
    Property and equipment, net of accumulated depreciation of $50,547 and $52,819, respectively     11,116       10,687  
    Developed technology and intangible assets, net of accumulated amortization of $29,166 and $23,059, respectively     53,921       7,328  
    Deferred cost of technology revenues, long-term     16,144       18,108  
    Deferred tax asset, long-term     48,189       57,492  
    Goodwill     99,364       12,266  
    Prepaid expenses and other, long-term     7,837       2,325  
      Total long-term assets     236,571       108,206  
          Total assets   $ 1,293,630     $ 1,301,791  
LIABILITIES AND STOCKHOLDERS' EQUITY                
LIABILITIES                
      CURRENT LIABILITIES                
      Accounts payable   $ 27,804     $ 22,918  
      Accrued liabilities     46,935       50,204  
      Deferred revenue, current     173,845       174,739  
        Total current liabilities     248,584       247,861  
      LONG-TERM LIABILITIES                
      Deferred revenue, long-term     282,484       331,534  
      Convertible senior notes     351,035       172,500  
      Other long-term liabilities     4,994       811  
        Total long-term liabilities     638,513       504,845  
          Total liabilities     887,097       752,706  
      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 138,010,253 and 134,588,456, respectively, and outstanding shares are 105,410,103 and 120,617,939, respectively     138       134  
      Treasury stock, at cost: 32,600,150 and 13,970,517 shares, respectively     (397,311 )     (154,071 )
      Additional paid-in capital     1,190,483       1,112,957  
      Accumulated deficit     (386,736 )     (410,512 )
      Accumulated other comprehensive income (loss)     (41 )     577  
          Total stockholders' equity     406,533       549,085  
          Total liabilities and stockholders' equity   $ 1,293,630     $ 1,301,791  
   
   
   
TIVO INC.  
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  
(In thousands)  
(unaudited)  
   
    Nine Months Ended October 31,  
    2014     2013  
CASH FLOWS FROM OPERATING ACTIVITIES                
  Net income   $ 23,776     $ 271,106  
  Adjustments to reconcile net income to net cash provided by operating activities:                
    Depreciation and amortization of property and equipment and intangibles     10,270       7,778  
    Stock-based compensation expense     25,577       27,453  
    Amortization of discounts and premiums on investments     8,204       5,591  
    Deferred income taxes     (2,131 )     (171,764 )
    Amortization of debt issuance costs and debt discount     1,439       721  
    Excess tax benefits from employee stock-based compensation     (12,289 )     (515 )
    Allowance for doubtful accounts     183       199  
  Changes in assets and liabilities:                
    Accounts receivable     (4,128 )     1,965  
    Inventories     5,438       (4,014 )
    Deferred cost of technology revenues     5,975       1,499  
    Prepaid expenses and other     (761 )     (3,049 )
    Accounts payable     3,604       8,961  
    Accrued liabilities     2,994       (2,307 )
    Deferred revenue     (50,914 )     354,577  
    Other long-term liabilities     (239 )     (121 )
      Net cash provided by operating activities   $ 16,998     $ 498,080  
CASH FLOWS FROM INVESTING ACTIVITIES                
  Purchases of short-term investments     (608,052 )     (747,404 )
  Sales or maturities of short-term investments     639,635       378,095  
  Acquisition of business, net of cash acquired     (128,387 )     --  
  Acquisition of property and equipment     (4,668 )     (5,406 )
      Net cash used in investing activities   $ (101,472 )   $ (374,715 )
CASH FLOWS FROM FINANCING ACTIVITIES                
  Proceeds from issuance of common stock related to exercise of common stock options     4,886       6,783  
  Proceeds from issuance of common stock related to employee stock purchase plan     3,649       3,791  
  Excess tax benefits from employee stock-based compensation     12,289       515  
  Proceeds from issuance of convertible senior notes, net of issuance costs     224,537       --  
  Proceeds from issuance of common stock warrants     30,167       --  
  Purchase of convertible note hedges     (54,018 )     --  
  Treasury stock - repurchase of stock     (242,541 )     (95,299 )
      Net cash used in financing activities   $ (21,031 )   $ (84,210 )
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS   $ (105,505 )   $ 39,155  
CASH AND CASH EQUIVALENTS:                
  Balance at beginning of period     253,713       157,104  
  Balance at end of period   $ 148,208     $ 196,259  
 
 
 
TIVO INC.
OTHER DATA
                   
      Three Months Ended     Guidance Reconciliation
      Oct 31,     Three Months Ending
      2014     2013     January 31, 2015
      (In thousands)     (In millions)
Net Income   $ 6,345   $ 12,487     $2 - $5
Add back:                  
  Depreciation & amortization     3,532     2,459     $4 - $5
  Interest income & expense, other     2,113     1,032     $4
  Provision (Benefit) for income tax     7,129     (2,023 )   $2 - $3
    EBITDA     19,119     13,955     $12 - $17
  Stock-based compensation     8,549     9,843     $8 - $9
    Adjusted EBITDA   $ 27,668   $ 23,798     $21 - $24
  Litigation expenses     1,247     1,408     $1 - $2
  Litigation proceeds (past damage awards)     --     --     --
  Adjusted EBITDA excluding litigation expense and litigation proceeds (past damage awards)   $ 28,915   $ 25,206     $22 - $26
                   

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 and TiVo's "Adjusted EBITDA excluding litigation expenses and proceeds (past damage awards)" is Adjusted EBITDA less litigation related expenses and litigation proceeds attributable to past damage awards, but includes litigation proceeds recognized as technology licensing revenue. EBITDA and Adjusted EBITDA are not measures of financial performance under generally accepted accounting principles, which we refer to as GAAP. 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. 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 to evaluate our operating performance over multiple periods. Management does not use EBITDA or Adjusted EBITDA as a measure of liquidity because, among other things, they do not exclude the impact of deferred revenue from IP settlements nor 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.

       
    Three Months Ended  
(Subscriptions and Households in thousands)   Oct 31,
 2014
    Oct 31,
 2013
 
TiVo-Owned Gross Additions:   36     33  
Net Additions/(Losses):            
  TiVo-Owned   (9 )   (21 )
  MSOs   337     295  
Total Net Additions/(Losses)   328     274  
Cumulative Subscriptions:            
  TiVo-Owned   928     960  
  MSOs   4,204     2,930  
Total Cumulative Subscriptions   5,132     3,890  
Average Subscriptions:            
  TiVo-Owned Average Subscriptions   930     974  
  MSO Average Subscriptions   4,035     2,775  
Total Average Subscriptions:   4,965     3,749  
Total MSO Households   3,651     2,664  
MSO Average Households   3,521     2,535  
TiVo-Owned Fully Amortized Active Product Lifetime Subscriptions   152     169  
% of TiVo-Owned Cumulative Subscriptions paying recurring fees   48 %   51 %
             

Subscriptions and Households. Management reviews these metrics, and believes they may be useful to investors, in order to evaluate our relative position in the marketplace and to forecast future potential service revenues. Above is a table that details the change in our TiVo-Owned and MSO Subscription and MSO Household bases as of October 31, 2014 compared to October 31, 2013. The TiVo-Owned Subscription lines refer to subscriptions sold directly or indirectly by TiVo to consumers who have TiVo-enabled devices (such as a DVR or TiVo Mini) and for which TiVo incurs acquisition costs. The MSO Subscription lines refer to subscriptions sold to consumers by MSOs such as Virgin, ONO, RCN, Com Hem, and Suddenlink, among others, and for which TiVo expects to incur little or no acquisition costs. Additionally, we provide a breakdown of the average monthly subscriptions for the quarter, the total MSO households and the MSO average households for the quarter, the number of fully amortized active product lifetime subscriptions, and percent of TiVo-Owned Subscriptions for which consumers pay recurring fees as opposed to a one-time prepaid product lifetime fee.

We define a "subscription" as a contract referencing a TiVo-enabled device such as a DVR or TiVo Mini for which (i) a consumer has paid or committed to pay for the TiVo service and (ii) service is not canceled. Each TiVo-Owned Subscription represents a single TiVo-enabled device (as defined above) and therefore one or more TiVo-Owned subscriptions may be present in a single household. MSO Subscriptions are a count of the number of devices that connect to the TiVo service and one or more devices may be present in a single MSO Household. TiVo-Owned subscriptions currently pay for the TiVo service on a recurring payment plan (such as a monthly or annual payment plan) or on a one-time basis for the life of TiVo-enabled device (product lifetime subscriptions). Beginning in October 2014, each TiVo Mini sale includes a product lifetime subscription for that TiVo Mini device. Subscriptions do not include soft-clients (i.e. iPad application or web portal) or digital tuning adapter users. 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 TiVo-enabled device 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.

We define a "household" as one or more devices associated with the same contract or customer number. We currently do not report TiVo-Owned households as we currently receive incremental revenue for each new TiVo-Owned Subscription in the TiVo-Owned business whereas, in some cases, our MSO customers pay us on a per household basis.

We calculate average subscriptions for the period by adding the average subscriptions for each month and dividing by the number of months in the period. We calculate the average subscriptions for each month by adding the beginning and ending subscriptions for the month and dividing by two. We calculate Average MSO Households for the period by adding the average households for each month and dividing by the number of months in the period. We calculate the average households for each month by adding the beginning and ending households for the month and dividing by two. We are not aware of any uniform standards for defining subscriptions or households and caution that our presentation may not be consistent with that of other companies. Additionally, the subscription fees that our MSOs pay us are typically based upon a specific contractual definition of a subscriber, subscription, household or a TiVo-enabled device which may not be consistent with how we define a subscription or household for our reporting purposes nor be representative of how such subscription fees are calculated and paid to us by our MSOs. Our MSO Subscription and MSO Household data is dependent in part on reporting from our third-party MSO partners.

   
TIVO INC.  
OTHER DATA - KEY BUSINESS METRICS  
             
    Three Months Ended October 31,  
TiVo-Owned Churn Rate   2014     2013  
    (In thousands, except churn rate per month)  
Average TiVo-Owned subscriptions   930     974  
TiVo-Owned subscription cancellations   (45 )   (54 )
  TiVo-Owned Churn Rate per month   (1.6 )%   (1.8 )%
             

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 older model DVRs or access to certain digital television channels or MSO Video On Demand services, as well as increased price sensitivity, CableCARD™ installation issues, and CableCARD™ technology limitations, 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 Oct 31,     Twelve Months Ended Oct 31,  
    2014     2013     2014     2013  
Subscription Acquisition Costs   (In thousands, except SAC)  
Sales and marketing, subscription acquisition costs   $ 2,734     $ 2,628     $ 11,489     $ 9,954  
Hardware revenues     (30,366 )     (35,597 )     (98,957 )     (102,616 )
Less: MSOs'-related hardware revenues     23,997       25,759       72,761       78,698  
Cost of hardware revenues     28,176       33,017       93,627       95,317  
Less: MSOs'-related cost of hardware revenues     (18,973 )     (20,530 )     (55,389 )     (58,029 )
  Total Acquisition Costs     5,568       5,277       23,531       23,324  
  TiVo-Owned Subscription Gross Additions     36       33       144       112  
  Subscription Acquisition Costs (SAC)   $ 155     $ 160     $ 163     $ 208  
                                   

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' 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 MSOs' 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.

TiVo-Owned 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. Investors 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 TiVo-Owned service revenues by subtracting MSOs'-related service revenues and Media services and other service revenues (includes Advertising, Research, and Digitalsmiths revenues), from our total reported net Service revenues. The table below provides a more detailed breakdown of our Service revenues, and reconciles to our total Service revenues in our Statement of Operations as reported (or previously reported):

     
    Three Months Ended
Service Revenues   Oct 31,
 2014
  Oct 31,
 2013
    (In thousands)
TiVo-Owned-related service revenues   $ 21,810   $ 23,462
MSOs'-related service revenues     10,563     7,734
Media services and other service revenues     4,332     2,330
Total Service Revenues   $ 36,705   $ 33,526
             

We calculate ARPU per month for TiVo-Owned Subscriptions by taking total reported net TiVo-Owned service revenues and dividing the result by the number of months in the period. We then divide the resulting average service revenue by Average TiVo-Owned Subscriptions for the period, calculated as described above for churn rate. The following table shows this calculation:

     
    Three Months Ended
TiVo-Owned Average Revenue per Subscription   Oct 31,
 2014
  Oct 31,
 2013
    (In thousands, except ARPU)
TiVo-Owned-related service revenues     21,810     23,462
Average TiVo-Owned revenues per month     7,270     7,821
Average TiVo-Owned subscriptions per month     930     974
TiVo-Owned ARPU per month   $ 7.82   $ 8.03
             

Technology Revenues. Revenue and cash from the contractual minimums (i.e., the following amounts do not include any additional revenues from our AT&T agreement) under our licensing agreements with EchoStar, AT&T, Verizon, and Cisco and Google/Motorola Mobility through October 31, 2014 have been:

         
    Technology Revenues   Cash Receipts
Fiscal Year Ended January 31,   (In thousands)
2012   $ 35,275   $ 117,679
2013     76,841     86,356
2014     136,532     464,725
Nine month period from February 1, 2014 to October 31, 2014     127,109     71,017
Total   $ 375,757   $ 739,777
             

Based on current GAAP, revenue and cash from the contractual minimums under all our licensing agreements with EchoStar, AT&T, Verizon, and Cisco and Motorola is expected to be recognized (revenues) and received (cash) for the remainder of the fiscal year 2015 and on an annual basis for the fiscal years thereafter as follows:

         
    Technology Revenues   Cash Receipts
    (In thousands)
Three month period from November 1, 2014 to January 31, 2015   $ 42,532   $ 12,562
Fiscal Year Ending January 31,            
2016     171,563     83,579
2017     173,129     83,579
2018     174,411     83,579
2019     88,629     31,139
2020 - 2024     8,193     --
Total   $ 658,457   $ 294,438