Q4 2013 Earnings Call
February 26, 2013 5:00 pm ET
Derrick Nueman - Investor Relations Executive
Thomas S. Rogers - Chief Executive Officer, President and Director
Naveen Chopra - Chief Financial Officer and Senior Vice President
Matthew Zinn - Chief Privacy Officer, Senior Vice President and General Counsel
Brian Patrick Fitzgerald - Jefferies & Company, Inc., Research Division
David W. Miller - B. Riley & Co., LLC, Research Division
Perry Huang - Goldman Sachs Group Inc., Research Division
Barton E. Crockett - Lazard Capital Markets LLC, Research Division
Daniel Ernst - Hudson Square Research, Inc.
Alan S. Gould - Evercore Partners Inc., Research Division
Todd T. Mitchell - Brean Capital LLC, Research Division
Edward S. Williams - BMO Capital Markets U.S.
James C. Goss - Barrington Research Associates, Inc., Research Division
Andy Hargreaves - Pacific Crest Securities, Inc., Research Division
Mark Nicholas Argento - Lake Street Capital Markets, LLC, Research Division
Ladies and gentlemen, thank you for standing by, and welcome to the TiVo Fourth Quarter 2013 Earnings Call. [Operator Instructions] Thank you. I would now like to turn the conference over to Mr. Derrick Newman. Sir, you may begin.
Thank you, and good afternoon. I'm Derrick Nueman, TiVo's Head of Investor Relations. Welcome to TiVo's fourth quarter and fiscal year ending January 31, 2013, earnings call. With me today are Tom Rogers, CEO; Naveen Chopra, CFO and SVP of Business Development and Corporate Strategy; and Matt Zinn, General Counsel.
We just distributed a press release and 8-K detailing our fourth quarter and fiscal year financial results. We also posted a fourth quarter key metric trend sheet on our Investor Relations website that includes, among other information, a reconciliation of non-GAAP measures discussed in today's call. You may access a recording of this call on our website during the next week.
Our prepared remarks today will last roughly 25 to 30 minutes, followed by a question-and-answer session. Our discussion today includes forward-looking statements about TiVo's future business, products and growth strategies. We caution you not to put undue reliance on these forward-looking statements as they involve risks and uncertainties that may cause actual results to vary materially from the forward-looking statements as described in our Risk Factors in our reports filed with the SEC. Any forward-looking statements made on the call today reflect analysis as of today, and we have no plans or duty to update them.
With that, let me turn over the call to Tom Rogers. Tom?
Thomas S. Rogers
Thanks, Derrick. Good afternoon, everyone. This was a significant growth year for TiVo. Service & Technology revenue grew by 24% over fiscal year 2012; total TiVo subscriptions grew by 38%; our operator revenue grew by 48% over the prior year, with the fourth quarter growing even faster at 83% year-over-year; and we saw a material adjusted EBITDA improvement when excluding the impact of the past damages component of the litigation settlements.
At the beginning of fiscal 2013, we set out to make progress against 5 important goals for our business, and I'm pleased to say we were very successful in doing so. First, we drove expanded deployment in our current distribution deals, increasing the total number of TiVo subscriptions by almost 1 million over the course of fiscal 2013. Second, we continue to increase our operator distribution footprints, both internationally and domestically, forging important new operator deals with such players as Com Hem, Cable ONE, Midcontinent, Mediacom and GCI.
Third, we saw significant additional upside from litigation as we reached a favorable settlement with Verizon for $250 million, bringing total damages and consideration from our intellectual property actions to more than $1 billion to date. Fourth, we reduced our R&D in the second half of the year from its peak in the first quarter of fiscal 2013. And finally, we continued to define the future of television through the launch of new whole-home and multiscreen TiVo offerings. When you combine all this progress, it adds up to a stronger financial and operating model and very importantly, adjusted EBITDA profitability in the fourth quarter when excluding litigation expenses.
Let's take a more detailed look into what's put TiVo on its positive trajectory. The competitive landscape for pay-TV operators around the globe is intensifying and more than ever, operators find themselves in a situation where adopting an advanced television solution is a necessity. The significant increase in MSO revenue over last year, the year-over-year subscription growth and the 5 operator deals we signed this year alone underscore our strength in the market. Continued progress in our service provider business is a critical component to our growth. And given the upcoming launches of the deals we signed last year and the current rate of subscription additions on our currently deployed deals, we believe we remain on pace to drive significant subscription growth and before factoring in -- even before factoring in future deals. And we are progressing on the financial goals we outlined for you last quarter, including doubling the service provider revenue contribution as a percentage of total revenue and transitioning the service provider business from a negative contributor EBITDA to one that is a positive contributor, both over the next 2 years.
In the U.K., our offering is helping drive significantly improved pay-TV growth and market share gains for Virgin Media. This past year, Virgin Media added almost 900,000 TiVo subscriptions to reach a total of more than 1.3 million or 35% of their TV base. As the Virgin Media offering continues to evolve, including the delivery of live TV and video-on-demand through an IT network from the cloud to a TiVo user interface across a variety of devices, we believe even more fans of TV in the U.K. will seek our unique offering. We look forward to driving further success for Virgin in 2013 and as they become part of Liberty Global.
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