TiVo Inc. (TIVO)

February 27, 2013 4:20 pm ET

Executives

Naveen Chopra - Chief Financial Officer and Senior Vice President

Presentation

Unknown Analyst

Okay. We're on, great. I'll get my legal obligation out of the way. Please note important disclosures including my personal holdings disclosures and Morgan Stanley disclosures all appears in the handout available and the registration area and on the Morgan Stanley public website. I'm pleased to welcome back to our conference, Naveen Chopra from TiVo, although he has been promoted since last year, so congratulations on that. He's the CFO at TiVo now. Naveen's responsible for TiVo's financial operations as well as formulating TiVo's overall strategy and expanding distribution of the TiVo service. He's been in corporate development and marketing roles over his course of his career there. Naveen, thanks for joining us.

Naveen Chopra

Thank you. Thanks for having me, great to be back. Great event.

Unknown Analyst

So nice and well-timed, you reported results yesterday after the close. Why don't I just give you a chance at the outset here to kind of tell the audience what the key takeaways were from your perspective on Q4 and your Q1 outlook?

Naveen Chopra

We appreciate you guys scheduling the conference around our earnings call.

Unknown Analyst

No problem.

Naveen Chopra

It's very convenient. It was a great end of the year for us. It was our Q4, the end of our Q4 '13, which was a very strong quarter. A couple of notable milestones actually, highest revenue quarter for TiVo in the company's history. We closed our overall subscriber base across to $3 million mark during the quarter. Obviously a lot of that comes on the back of progress we have made over the last few years with a number of pay television providers who are now major distributors of our service.

One of the key metrics that shareholders look at with respect to that part of our business also performed very well, which was growth. And the service provider-related revenue was up 88% year-over-year. So I think we are finally, have been able to put some financial results on paper that reflect the story that we've been telling people and where we see the future opportunity for our business. So that part was very strong in terms of looking forward.

We reaffirmed a picture that we think that, the quarter before, the most notable portion of that is that we believe that this fiscal year, we should be able to achieve adjusted EBITDA, profitability including our litigation expenses, which would represent significant improvement on the bottom line versus where we've been previously. And I think giving investors confidence that we're able to stick with that trend line has been very important in supporting some of the flat performance you've seen of late.

Question-and-Answer Session

Unknown Analyst

Great. I think another maybe key point that I'm sure you touched on yesterday but it's been in the news a lot, we had your friends at Liberty presenting over this week and, at least from my perspective, had nice things to say about you guys and Virgin. But can you update us now given that announcement on how your relationship with Virgin is and sort of the roadmap in that market for you guys?

Naveen Chopra

Sure. Well, I'm glad to hear that Liberty has good things to say about us. We've always had tremendous respect for Liberty's management team. I think what they've done in Europe is extremely impressive. We're also gratified that they clearly saw a lot of value in the Virgin Media property which we like to think that we've been a big part of, helping in hand over the last couple of years. Obviously, TiVo is now deployed to roughly 1/4 of the subscriber base at Virgin media, so it's a very good part of that. It's a extremely important partnership for us. And I think our success there has, in many ways, spoken for itself. We understand, based on what Liberty has indicated both publicly as well as the info they communicated to Virgin and to us, that they recognize the value of TiVo in that market but they expect continue taking advantage of the assets. And for that, I think in combination with the success we've had to date, makes us feel pretty good that it's kind of business as usual. We've got a lot of opportunity ahead of us in the U.K. and I expect to continue pursuing that as aggressively as we can. And as we said, I think the liberty guys are second to none. They have been very forward-thinking in terms of the maturation of the cable industry across Europe. And I think they can be great partners for us, going forward.

Unknown Analyst

Great. Well, I think step back and have you tell us about your vision for the set-top box businesses globally and where we're headed. This conference, we've had a lot with MSOs here, Time Warner Cable this morning, we talked about X1 and some of the next-generation set tops migrating to IP, TV Everywhere. There's a lot of stuff going on. What's the TiVo kind of vision for that and then what does that mean for your business?

Naveen Chopra

Well, I think the simple answer that we've learned having been engaged with operators around the globe and of all shapes and sizes is that there are some things that are consistent across all of those operators. But the way in which they are going to approach addressing those goals or those challenges varies a lot from one operator to another. The consistent part is that they all recognize that they need to have a significant upgrade in the consumer experience that there are some potential competitive threats looming on the horizon for them. I'm not sure that those are incredibly short term issues for them, but I think they see a lot of long-term trends are going. And they realize that they need to improve their product offering in order to make sure that they're adequately positioned. Now where things begin to differ a lot depending on whether you're looking at an operator in the United States, whether you're looking at one in Europe, whether you're looking at a small operator or a large operator, cable operator or satellite operator, really comes down to how they are going to go about doing that. I know some operators who believe that the fact that most cost-effective way of solving that problem is to utilize consumer electronic devices and to figure out how to distribute their content, their service into a device that's already in somebody's home and that already can support a very robust software environment. There are other operators who have looked at that and have to acknowledge that the reality of what they would need by way of infrastructure in their network to do that is really beyond their grasp, and they need something that is more moderate in terms of investment. And they are still very -- therefore, very committed to set-top boxes and QAM-based distribution, things of that nature. And we have seen other operators who believe that they don't need to do a whole lot in terms of the CapEx regardless and that there are ways to upgrade or modify software on existing plants and existing infrastructure in order to create a better consumer experience. So the consistency is everybody wants a better experience, they want functionality to enable a multiscreen video product. They want to embrace the world of over-the-top content in a controlled fashion. They want an experience that is more personalized, more social and practically they want something that's more dynamic, that can be more innovative and can change more at the pace of what we see happening in the mobile world and what has traditionally happened in the pay television world. But there's a lot of different ways we can implement it and the good news for us is I think we'd been able to prove that we can play ball with those operators regardless of the specific implementation approach.

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