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Why Is TiVo (TIVO) Down 1.3% Since its Last Earnings Report?

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A month has gone by since the last earnings report for TiVo Corporation TIVO. Shares have lost about 1.3% in that time frame.

Will the recent negative trend continue leading up to its next earnings release, or is TIVO due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

TiVo Q1 Results

TiVo reported dismal results for first-quarter 2018, wherein its revenues declined year over year and earnings were flat.

It should be noted that TiVo Corporation was formerly known as Rovi Corporation. Upon successful completion of the acquisition of TiVo Inc. in early September 2016, Rovi adopted the iconic TiVo brand name. Notably, the company has completed synergy actions of $100 million out of the total $110 million and the remained is expected to be completed by the end of the second quarter.

Quarter in Detail

TiVo’s revenues decreased 7.7% year over year to $189.8 million and also missed the zacks Consensus Estimate of $193 million. The decline in the revenues was primarily pertaining to the lowering revenues from the Legacy TiVo Time Warp IP deals that slipped 62.8% from the year-ago quarter.

The company’s revenues from the Licensing, services and software division dropped 2.3% year over year to $186.2 million. The division contributed 98.1% to total revenues.

Hardware division’s revenues declined to $3.7 million from $15.2 million recorded in the year-ago quarter and contributed 1.9% to total revenues. Owing to the expiration of the Time Warp deal, the company is trying to transition away from analog and hardware products. This quarter was the last one in which the company recorded MSO hardware revenues as it has fulfilled the orders that were placed last year.

Excluding the impact of the Time Warp deal, hardware revenues and other revenues, the company’s top line came in at $174.8 million, up 5.9% from the year-ago quarter when the same items were excluded.

In terms of business segments, Product revenues were up 1.6% to $116.8 million. Revenues from Platform Solutions increased 8.8% to $95.9 million. However, Software and Services declined 26.9% to $18.5 million and Other categories surged 52.9% to $2.4 million.

Notably, Product revenues were up owing to the company’s shift to ASC 606 revenue standard that per management resulted in an “$18.1 million net increase in revenue from our [its] European MSO customers.”

However, the company’s exit from hardware manufacturing and the absence of Comcast as a metadata customer partially offset the benefits gained from the adoption of the new accounting standard.

IP Licensing revenues declined approximately 19.6% year over year to $72.9 million. Under the IP Licensing segment, revenues of the U.S. Pay TV Providers, New Media, International Pay TV Providers and Other and Consumer Electronics Manufacturers decreased 21.2% to $49.9 million, 14.7% to $14.1 million and 17.36% year over year to $8.9 million.

IP Licensing revenues were negatively impacted by the adoption of ASC 606, mostly related to the Legacy TiVo Time Warp deal. Consumer Electronics manufacturing revenues declined due to expiration of license with a customer. Additionally, its new licenses with Google’s YouTube TV and Starz were offset by lower revenues from existing licenses.

The company’s total cost and expenses decreased 4.8% to $130.8 million from $137.5 million incurred in the year-ago quarter. Adjusted EBITDA was $58.9 million compared with $68.2 million registered in the year-ago quarter.

Non-GAAP pre-tax income was $46.3 million compared with $53.9 million in the same period last year.

TiVo exited the reported quarter with cash, cash equivalents and short-term investments of $140.3 million compared with $269.8 million at the end of the previous quarter.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month. There has been one revision higher for the current quarter compared to three lower. In the past month, the consensus estimate has shifted downward by 60% due to these changes.

TiVo Corporation Price and Consensus

TiVo Corporation Price and Consensus | TiVo Corporation Quote

VGM Scores

At this time, TIVO has an average Growth Score of C, a grade with the same score on the momentum front. Following the exact same course, the stock was also allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Based on our scores, the stock is equally suitable for value, growth and momentum investors.

Outlook

Estimates have been broadly trending downward for the stock and the magnitude of these revisions indicates a downward shift. It's no surprise TIVO has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.


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