Market Overview

TiVo Corporation Reports Second Quarter Financial Results

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Provides Update on Progress of Strategic Alternatives

Raghu Rau To Remain CEO Until Conclusion of Strategic Process

Three Service Providers Deploying Next-Gen TiVo Experience 4

Expecting Annualized Cost Efficiencies of $25 Million by the End of
2018

TiVo Corporation (NASDAQ:TIVO) today reported financial results for the
second quarter ended June 30, 2018.

"We delivered a solid second quarter and we continue to stay ahead of
our internal plan, including optimizing our costs. Additionally, the CEO
transition has gone smoothly and we continue to make progress in our
strategic review and have narrowed our focus in terms of the strategic
alternatives we are evaluating," said Raghu Rau, Interim President and
Chief Executive Officer. "The company has a strong foundation to deliver
profitable growth and stockholder value and we remain focused on
execution and meeting our customers' needs."

Mr. Rau added, "I am committed to remain as CEO as long as it takes to
drive the strategic process to a logical, successful conclusion that
maximizes stockholder value."

UPDATE ON STRATEGIC ALTERNATIVES TO MAXIMIZE VALUE FOR SHAREHOLDERS

As announced in our Q4 2017 earnings release and its related earnings
call, TiVo is exploring a range of strategic alternatives to maximize
the value of the Company and best deliver value to shareholders. While
this review remains in process, progress has been made and the Company's
focus has begun to narrow. An update on the process is as follows:

First, while always open to strategic acquisitions that can deliver
stockholder value, TiVo does not believe, at this time, that utilizing
capital for a significant acquisition would be the best way to deliver
value for shareholders.

Second, the strategic review process has reaffirmed that TiVo has
valuable assets and strong market positions in both the product and IP
licensing businesses. TiVo remains committed to developing compelling
and relevant solutions that can deliver customer value. The Company will
continue to invest in offerings aligned with current and emerging market
needs.

Third, the Company has learned that potential parties also recognize the
strategic value of the product and IP businesses individually. It
appears clear that there is a real opportunity in the marketplace for a
well scaled, next generation video products business, with good growth
potential that revolutionizes how we watch TV and effectively enables
monetization of the experience. TiVo's installed base of 22 million
subscribers serves as a strategic asset as we bring a great brand and
platform to power the next generation of entertainment experiences and
advanced, targeted advertising solutions. Further, with one of the
leading portfolios of intellectual property in the linear TV and OTT
markets, TiVo also believes there are strategic opportunities for the IP
business that will enable the business to continue growing profitably in
both existing and adjacent markets.

In the meantime, TiVo continues to develop compelling and relevant
solutions aligned with our current customer needs and emerging market
opportunities. Additionally, in connection with TiVo's continued focus
on optimizing the business, the Company's previously identified $10
million in additional current year cost improvements are almost all
implemented. The Company now expects to produce annualized savings of
$25 million by the end of 2018 from these actions.

BUSINESS OUTLOOK

TiVo's management and board are still conducting an in-depth review of
its businesses, cost structure and strategic options to maximize
shareholder value. Due to the broad range of potential outcomes, the
Company is not currently providing financial estimates for fiscal 2018.

CURRENT PERIOD FINANCIAL RESULTS

Informed by the strategic alternatives review process, TiVo is providing
detail on the results of operations for its two business segments -
Products and Intellectual Property Licensing ("IP Licensing") - in the
body of this earnings release and in its prepared remarks on today's
earnings call.

Additionally, as discussed in detail last quarter, the Company adopted
Accounting Standards Update No. 2014-09, Revenue from Contracts with
Customers
, which superseded the previous revenue recognition
requirements on January 1, 2018 using the modified retrospective
transition approach. The Company's results for 2017 are reported under
the prior standard and results for 2018 are reported under the new
standard. While there is no change in either the nature of our business
operations or our cash flows, revenue recognition in 2018 is
considerably different than in 2017. For instance, in the second quarter
of 2018, TiVo recognized approximately $14.0 million less in revenue
than it would have under the previous requirements.

 

SECOND QUARTER 2018 FINANCIAL HIGHLIGHTS

   
Quarterly Financial Information (In thousands)
Three Months Ended June 30,  
2018   2017 % Change
GAAP Consolidated Results
Total Revenues, net $ 172,860 $ 208,558 (17 )%
Total costs and expenses 181,623 199,815 (9 )%
Operating (loss) income (8,763 ) 8,743 (200 )%
Loss from continuing operations before income taxes (18,549 ) (863 ) 2,049 %
Loss from continuing operations, net of tax (22,868 ) (4,771 ) 379 %
 
GAAP Diluted weighted average shares outstanding 122,713 120,209
 
Total Revenues, net $ 172,860 $ 208,558 (17 )%
Legacy TiVo Solutions IP Licenses (8,384 ) (23,661 ) (65 )%
Hardware (3,306 ) (9,594 ) (66 )%
Other Products   (960 )   (1,640 ) (41 )%

Core Revenue (excludes revenue from Legacy TiVo Solutions IP
Licenses, Hardware and Other Products)

$ 160,210   $ 173,663   (8 )%
 

Total Revenues, net and Core Revenue include $10.1 million and
$16.3 million of revenue from out-of-license settlements in Q2
2018 and Q2 2017, respectively. Core Revenue decreased $4.2
million as a result of adopting the amended revenue recognition
guidance on January 1, 2018. The reduction in Total costs and
expenses is the result of the Company's continuing cost reduction
efforts.

 

(In thousands)

Three Months Ended June 30,  
2018 2017 % Change
Non-GAAP Consolidated Results
Adjusted EBITDA $ 51,909 $ 80,854 (36 )%
Non-GAAP Pre-tax Income 37,547 66,410 (43 )%
Cash Taxes 5,694 5,113 11 %
 
Non-GAAP Diluted Weighted Average Shares Outstanding 123,295 121,008
 

Adjusted EBITDA, Non-GAAP Pre-tax Income, Non-GAAP Diluted
Weighted Average Shares Outstanding and Cash Taxes are defined
below in the section entitled "Non-GAAP Financial Information."
Reconciliations between GAAP and Non-GAAP amounts are provided in
the tables below. In accordance with the SEC's interpretations on
the use of non-GAAP financial measures, TiVo does not report net
income or EPS on a non-GAAP basis. However, TiVo does provide the
financial metrics, including Non-GAAP Pre-tax Income, Non-GAAP
Diluted Weighted Average Shares Outstanding and Cash Taxes, that
TiVo had used to calculate these financial measures on a Non-GAAP
basis.

 
 

SEGMENT RESULTS AND OPERATING HIGHLIGHTS - PRODUCT

 
  (In thousands)  
Three Months Ended June 30,  
2018   2017 % Change
Platform Solutions $ 72,208 $ 82,971 (13 )%
Software and Services 19,619 19,752 (1 )%
Other 960   1,640   (41 )%
Total Product Revenue, net 92,787 104,363 (11 )%
Adjusted Operating Expenses 81,467   92,011   (11 )%
Adjusted EBITDA $ 11,320   $ 12,352   (8 )%
Adjusted EBITDA Margin 12.2 % 11.8 %
 
Total Product Revenue, net $ 92,787 $ 104,363 (11 )%
Hardware (3,306 ) (9,594 ) (66 )%
Other Products (960 ) (1,640 ) (41 )%
Core Product Revenue (excludes revenue from Hardware and Other
Products)
$ 88,521   $ 93,129   (5 )%
 

The $10.8 million decrease in Platform Solutions revenue was largely
attributable to a $6.3 million decrease Hardware revenue due to a
planned transition away from the hardware business and a $3.8 million
decrease in revenue, primarily from two international MSO software
customers, as a result of adopting the amended revenue recognition
guidance on January 1, 2018. Hardware revenue is expected to continue to
decline due to the planned transition away from the business and as MSO
partners continue to shift to deploying the TiVo service on third-party
hardware resulting in a decrease in the number of TiVo set-top boxes
sold to MSO partners. The reduction in revenue from these two
international MSO customers is expected to continue for the remainder of
2018.

The decrease in Adjusted Operating Expenses primarily relates to a $6.8
million decrease in the Cost of hardware revenues and benefits from cost
savings initiatives.

The increase in Adjusted EBITDA Margin primarily relates to a shift in
the Product business mix toward higher margin products as hardware
becomes a smaller portion of the Product business as a result of the
planned transition away from the hardware business and benefits from
cost savings initiatives, partially offset by the effects of adopting
the amended revenue recognition standard.

Product Segment Operating Highlights:

  • Approximately 22 million subscriber households around the world use
    TiVo's advanced television experiences.
  • TDS Telecommunications, the seventh largest local exchange telephone
    company in the U.S., chose TiVo's Next-Gen Platform, to
    bring innovative entertainment solutions to its customers.
  • RCN Telecom Services, Atlantic Broadband and Service Electric have
    begun deploying TiVo's Next-Gen TiVo Experience 4.
  • TiVo Experience 4 won the award for "Most Innovative Design or User
    Interface" at Interactive TV Today's 15th Annual Awards for Leadership
    in Interactive and Multiplatform Television.
  • K-Opticom will be the first Fiber-To-The-Home (FTTH) service provider
    to utilize TiVo's G-Guide xD mobile application, available on iOS and
    Android, for the delivery of advanced search functions and enhanced
    user experiences in Japan.
  • Launched voice integration with Amazon's virtual assistant, Alexa, to
    TiVo's retail products.
  • Astro, the leading content and consumer company in Malaysia, selected
    TiVo for its video metadata enrichment services.
  • A pan European Service Provider selected TiVo Metadata to power their
    new OTT video service launching in multiple European countries.
  • CBS renewed its TiVo's Video and Music Metadata agreement and expanded
    it to include Showtime properties.
  • Sirius XM Radio deployed TiVo's Music Metadata across its entire
    installed base.
  • A well-known automotive manufacturer selected TiVo Music metadata to
    power the new media experience in its connected car lineup.
  • TiVo Personalized Content Discovery Conversation solution is now
    available in German, Italian and Portuguese.
  • A leading pharmaceutical company selected TiVo's Audience Discovery
    ("TAD") analytics to improve the audience reach and targeting of its
    advertising campaigns.
  • Deep Root, a media analytics company, chose viewership data from TAD,
    to improve targeting of advertising campaigns.
  • Influential, a social data technology company, selected TAD segments
    and analytics to target and measure the impact of social media
    advertising campaigns.
 

SEGMENT RESULTS AND OPERATING HIGHLIGHTS - IP LICENSING

 
  (In thousands)  
Three Months Ended June 30,  
2018   2017 % Change
US Pay TV Providers $ 49,217 $ 68,733 (28 )%
CE Manufacturers 8,927 11,974 (25 )%
New Media, International Pay TV Providers and Other 21,929   23,488   (7 )%
Total IP Licensing Revenue, net 80,073 104,195 (23 )%
Adjusted Operating Expenses 24,972   20,817   20 %
Adjusted EBITDA $ 55,101   $ 83,378   (34 )%
Adjusted EBITDA Margin 68.8 % 80.0 %
 
Total IP Licensing Revenue, net $ 80,073 $ 104,195 (23 )%
Legacy TiVo Solutions IP Licenses (8,384 ) (23,661 ) (65 )%
Core Intellectual Property Licensing Revenue (excludes revenue from
Legacy TiVo Solutions IP Licenses)
$ 71,689   $ 80,534   (11 )%
 

Intellectual Property Licensing revenue decreased 23% in the second
quarter. The $19.5 million decline in revenue from US Pay TV Providers
is primarily due to a $15.2 million decrease in revenue from TiVo
Solutions agreements entered into prior to the TiVo Acquisition Date as
a result of adopting the amended revenue recognition guidance on January
1, 2018 and contract expirations, and a $4.3 million decrease in revenue
from catch-up payments intended to make us whole for the pre-license
period of use. The decrease in revenue from CE Manufacturers was
primarily attributable to a customer being out-of-license. We anticipate
this customer will eventually execute a new license.

The increase in Adjusted Operating Expenses relates to a $5.6 million
increase in patent litigation costs, which primarily relates to the
ongoing Comcast litigation, partially offset by benefits from cost
savings initiatives.

The decrease in Adjusted EBITDA Margin for the second quarter is
primarily the result of a decrease in Intellectual Property Licensing
revenue and a $5.6 million increase in patent litigation costs,
partially offset by benefits from cost savings initiatives.

Intellectual Property Licensing Segment Operating Highlights:

  • Altice Portugal renewed its IP license with TiVo to deliver advanced
    entertainment products across its brands in Portugal.
  • Fnac Darty Group, a European retailer of entertainment and leisure
    products, consumer electronics and household appliances, signed a
    multi-year patent license agreement covering its consumer electronics
    brands.
  • CBS renewed its patent license agreement.
  • Strong International, a set-top box manufacturer in Europe, renewed
    its patent license agreement.

CAPITAL ALLOCATION

On August 7, 2018, TiVo's Board of Directors declared a cash dividend of
$0.18 per common share, to be paid on September 20, 2018 to stockholders
of record as of the close of business on September 6, 2018.

CONFERENCE CALL INFORMATION

TiVo management will host a conference call today, August 8, 2018, at
2:00 p.m. PT/5:00 p.m. ET to discuss the financial and operational
results. Investors and analysts interested in participating in the
conference are welcome to call (866) 621-1214 (or international
+1-706-643-4013) and reference conference ID 7187675. The conference
call may also be accessed via live webcast in the Investor Relations
section of TiVo's website at http://www.tivo.com.

A replay of the audio webcast will be available on TiVo's website
shortly after the live call ends, and we currently plan for it to remain
on TiVo's website until the next quarterly earnings call. Additionally,
a telephonic replay of the call may be accessible shortly after the live
call ends through August 15, 2018 by dialing (855) 859-2056 (or
international +1-404-537-3406) and entering conference ID 7187675.

NON-GAAP FINANCIAL INFORMATION

TiVo Corporation provides Non-GAAP information to assist investors in
assessing its operations in the way that its management evaluates those
operations. Non-GAAP Pre-Tax Income, Non-GAAP Cost of Licensing,
Services and Software Revenues, Non-GAAP Cost of Hardware Revenues,
Non-GAAP Research and Development Expenses, Non-GAAP Selling, General
and Administrative Expenses, Non-GAAP Depreciation, Non-GAAP Total OpEx,
Non-GAAP Total COGS and OpEx, Adjusted EBITDA and Non-GAAP Interest
Expense are supplemental measures of the Company's performance that are
not required by, and are not determined in accordance with, GAAP.
Non-GAAP financial information is not a substitute for any financial
measure determined in accordance with GAAP.

Non-GAAP Pre-tax Income is defined as GAAP income (loss) from continuing
operations before income taxes, as adjusted for the effects of items
such as amortization of intangible assets, equity-based compensation,
accretion of contingent consideration, amortization or write-off of note
issuance costs and discounts on convertible debt and mark-to-market
adjustments for interest rate swaps; as well as items which impact
comparability that are required to be recorded under GAAP, but that the
Company believes are not indicative of its core operating results such
as restructuring and asset impairment charges, transaction, transition
and integration costs, retention earn-outs payable to former
shareholders of acquired businesses, earn-out settlements, CEO
transition cash costs, remeasurement of contingent consideration, TiVo
acquisition litigation, expenses in connection with the extinguishment
or modification of debt, gain on settlement of acquired receivable,
additional depreciation resulting from facility rationalization actions,
other-than temporary impairment losses on strategic investments, gains
on the sale of strategic investments and changes in franchise tax
reserves.

Non-GAAP Cost of Licensing, Services and Software Revenues is defined as
GAAP Cost of licensing, services and software revenues, excluding
depreciation and amortization of intangible assets, excluding
equity-based compensation and transaction, transition and integration
expenses.

Non-GAAP Cost of Hardware Revenues is defined as GAAP Cost of hardware
revenues, excluding depreciation and amortization of intangible assets,
excluding transition and integration expenses.

Non-GAAP Research and Development Expenses is defined as GAAP research
and development expenses excluding equity-based compensation, transition
and integration expenses and retention earn-outs payable to former
shareholders of acquired businesses.

Non-GAAP Selling, General and Administrative Expenses is defined as GAAP
selling, general and administrative expenses excluding equity-based
compensation, transaction, transition and integration expenses,
retention earn-outs payable to former shareholders of acquired
businesses, earn-out settlements, CEO transition cash costs,
remeasurement of contingent consideration, gain on settlement of
acquired receivable and changes in franchise tax reserves. Included in
transition costs in the second quarter of 2018 was a $4.5 million loss
associated with a legacy TiVo Solutions legal matter for which a
settlement was agreed to in the third quarter of 2018.

Non-GAAP Depreciation is defined as GAAP depreciation expenses excluding
the impact of additional depreciation resulting from changes in the
estimated useful lives of assets involved in facility rationalization
actions.

Non-GAAP Total OpEx is defined as the sum of GAAP research and
development and selling, general and administrative expenses,
depreciation and gain on sale of patents excluding equity-based
compensation, transaction, transition and integration expenses,
retention earn-outs payable to former shareholders of acquired
businesses, earnout settlements, CEO transition cash costs,
remeasurement of contingent consideration, gain on settlement of
acquired receivable, additional depreciation resulting from facility
rationalization actions and changes in franchise tax reserves.

Non-GAAP Total COGS and OpEx is defined as GAAP Total Operating costs
and expenses, excluding amortization of intangible assets, restructuring
and asset impairment charges, equity-based compensation, transaction,
transition and integration expenses, retention earn-outs payable to
former shareholders of acquired businesses, earnout settlements, CEO
transition cash costs, remeasurement of contingent consideration, gain
on settlement of acquired receivable, depreciation and changes in
franchise tax reserves.

Adjusted EBITDA is defined as GAAP operating income (loss) excluding
depreciation, amortization of intangible assets, restructuring and asset
impairment charges, equity-based compensation, transaction, transition
and integration costs, retention earn-outs payable to former
shareholders of acquired businesses, earn-out settlements, CEO
transition cash costs, remeasurement of contingent consideration, gain
on settlement of acquired receivable and changes in franchise tax
reserves.

Non-GAAP Interest Expense is defined as GAAP interest expense, excluding
accretion of contingent consideration, amortization or write-off of
issuance costs, discounts on convertible debt and interest on franchise
tax reserves, plus the reclassification of the current period benefit
(cost) of the interest rate swaps from gain (loss) on interest rate
swaps.

Cash Taxes are defined as GAAP current income tax expense excluding
changes in reserves for unrecognized tax benefits.

Non-GAAP Diluted Weighted Average Shares Outstanding is defined as GAAP
diluted weighted average shares outstanding except for periods of a GAAP
loss. In periods of a GAAP loss, GAAP diluted weighted average shares
outstanding are adjusted to include dilutive common share equivalents
outstanding that were excluded from GAAP diluted weighted average shares
outstanding because the Company had a loss and therefore these shares
would have been anti-dilutive.

The Company's management evaluates and makes decisions about its
business operations primarily based on Non-GAAP financial information.
Management uses Non-GAAP financial measures as the basis for
decision-making as they exclude items management does not consider to be
"core costs" or "core proceeds". For each Non-GAAP financial measure,
the adjustment provides management with information about the Company's
underlying operating performance that enables a more meaningful
comparison to its historical and projected financial performance in
different reporting periods. For example, since the Company does not
acquire businesses on a predictable cycle, management excludes the
amortization of intangible assets, transaction, transition and
integration costs, retention earn-outs payable to former shareholders of
acquired businesses, earnout settlements, CEO transition cash costs,
remeasurement of contingent consideration, TiVo Acquisition litigation,
and gain on settlement of acquired receivables from its Non-GAAP
financial measures in order to make more consistent and meaningful
evaluations of the Company's operating expenses as these items may be
significantly impacted by the timing and magnitude of acquisitions.
Management also excludes the effect of restructuring and asset
impairment charges, expenses in connection with the extinguishment or
modification of debt, gain on the settlement of acquired receivable,
additional depreciation resulting from facility rationalization actions,
other-than-temporary impairment losses on strategic investments, gains
on the sale of strategic investments and changes in franchise tax
reserves. Management excludes the impact of equity-based compensation to
provide meaningful supplemental information that allows investors
greater visibility to the underlying performance of our business
operations, facilitates comparison of our results with other periods,
and may facilitate comparison with the results of other companies in our
industry, as well as to provide the Company's management with an
important tool for financial and operational decision-making and for
evaluating the Company's performance over different periods of time. Due
to varying valuation techniques, reliance on subjective assumptions and
the variety of award types and features that may be in use, we believe
that providing Non-GAAP financial measures excluding equity-based
compensation allows investors to make more meaningful comparisons
between our operating results and those of other companies. Management
excludes the accretion of contingent consideration, amortization or
write-off of note issuance costs and discounts on convertible debt and
mark-to-market adjustments for interest rate swaps when management
evaluates the Company's expenses. Management reclassifies the current
period benefit (cost) of the interest rate swaps from gain (loss) on
interest rate swaps to interest expense in order for Non-GAAP Interest
Expense to reflect the effects of the interest rate swaps as these
interest rate swaps were entered into to control the effective interest
rate the Company pays on its debt.

Management uses these Non-GAAP financial measures to help it make
decisions, including decisions that affect operating expenses and
operating margin. Management believes that making Non-GAAP financial
information available to investors, in addition to GAAP financial
information, may facilitate more consistent comparisons between the
Company's performance over time with the performance of other companies
in our industry, which may use similar financial measures to supplement
their GAAP financial information.

Management recognizes that these Non-GAAP financial measures have
limitations as analytical tools, including the fact that management must
exercise judgment in determining which types of items to exclude from
the Non-GAAP financial information. In addition, as other companies,
including companies similar to TiVo Corporation, may calculate their
Non-GAAP financial measures differently than the Company calculates its
Non-GAAP financial measures, these Non-GAAP financial measures may have
limited usefulness to investors when comparing financial performance
among companies. Management believes, however, that providing Non-GAAP
financial information, in addition to GAAP financial information,
facilitates consistent comparison of the Company's financial performance
over time. The Company provides Non-GAAP financial information to the
investment community, not as an alternative, but as an important
supplement to GAAP financial information; to enable investors to
evaluate the Company's core operating performance in the same way that
management does. Reconciliations for each Non-GAAP financial measure to
its most directly comparable GAAP financial measure are provided in the
tables below.

About TiVo Corporation

TiVo (NASDAQ:TIVO) is a global leader in entertainment technology and
audience insights. From the interactive program guide to the DVR, TiVo
delivers innovative products and licensable technologies that
revolutionize how people find content across a changing media landscape.
TiVo enables the world's leading media and entertainment providers to
deliver the ultimate entertainment experience. Explore the next
generation of entertainment at tivo.com, forward.tivo.com or follow us
on Twitter @tivo or @tivoforbusiness.

Forward Looking Statements

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, the Company's annual run rate savings,
future growth and success of the Company's Product and IP Licensing
businesses, future revenues to be recognized following adoption of the
amended revenue recognition guidance, the timing of results and the
Company's exploration of strategic alternatives, as well as future
business strategies, future product offerings and deployments, and
technology and intellectual property licenses with various customers.
These forward-looking statements are based on TiVo's current
expectations, estimates and projections about its business and industry,
management's beliefs and certain assumptions made by the company, all of
which are subject to change. Forward-looking statements generally can be
identified by the use of forward-looking terminology such as, "future",
"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, whether inside or outside the
Company's control, in the Company's exploration of its strategic
alternatives, delays in development, the failure to deliver competitive
service offerings and lack of market acceptance of any offerings
delivered, as well as the other potential factors described under "Risk
Factors" included in TiVo's Quarterly Report on Form 10-Q for the three
months ended June 30, 2018 and Annual Report on Form 10-K for the year
ended December 31, 2017 and other documents of TiVo Corporation on file
with the Securities and Exchange Commission (available at www.sec.gov).
TiVo 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 assumes no obligation to update any forward-looking
statements in order to reflect events or circumstances that may arise
after the date of this release, except as required by law.

 
TIVO CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
 
  Three Months Ended June 30,   Six Months Ended June 30,
2018   2017 2018   2017
Revenues, net:
Licensing, services and software $ 169,554 $ 198,964 $ 355,712 $ 389,514
Hardware 3,306   9,594   6,985   24,808  
Total Revenues, net 172,860 208,558 362,697 414,322
Costs and expenses:
Cost of licensing, services and software revenues, excluding
depreciation and amortization of intangible assets
42,583 39,281 85,798 81,587
Cost of hardware revenues, excluding depreciation and amortization
of intangible assets
4,989 11,767 10,040 25,988
Research and development 43,411 46,592 91,841 95,514
Selling, general and administrative 42,957 45,741 94,039 99,690
Depreciation 5,773 5,382 10,914 10,854
Amortization of intangible assets 40,809 41,678 82,221 83,378
Restructuring and asset impairment charges 1,101   9,374   5,647   13,913  
Total costs and expenses 181,623   199,815   380,500   410,924  
Operating (loss) income (8,763 ) 8,743 (17,803 ) 3,398
Interest expense (12,171 ) (10,573 ) (23,805 ) (20,837 )
Interest income and other, net 544 2,823 2,110 2,760
Gain (loss) on interest rate swaps 1,841 (1,856 ) 6,152 (1,335 )
TiVo Acquisition litigation (12,906 )
Loss on debt extinguishment (108 )
Loss on debt modification       (929 )
Loss from continuing operations before income taxes (18,549 ) (863 ) (33,346 ) (29,957 )
Income tax expense 4,319   3,908   8,536   9,475  
Loss from continuing operations, net of tax (22,868 ) (4,771 ) (41,882 ) (39,432 )
Income from discontinued operations, net of tax 2,298     3,595    
Net loss $ (20,570 ) $ (4,771 ) $ (38,287 ) $ (39,432 )
 
Basic loss per share:
Continuing operations $ (0.19 ) $ (0.04 ) $ (0.34 ) $ (0.33 )
Discontinued operations 0.02     0.03    
Basic loss per share $ (0.17 ) $ (0.04 ) $ (0.31 ) $ (0.33 )
Weighted average shares used in computing basic per share amounts 122,713 120,209 122,399 119,515
 
Diluted loss per share:
Continuing operations $ (0.19 ) $ (0.04 ) $ (0.34 ) $ (0.33 )
Discontinued operations 0.02     0.03    

Diluted loss per share

$ (0.17 ) $ (0.04 ) $ (0.31 ) $ (0.33 )
Weighted average shares used in computing diluted per share amounts 122,713 120,209 122,399 119,515
 
Dividends declared per share $ 0.18 $ 0.18 $ 0.36 $ 0.36
 

See notes to the Condensed Consolidated Financial Statements in our
Quarterly Report on Form 10-Q.

 
TIVO CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
 
 

    June 30,    

  December 31,
2018 2017
ASSETS (Unaudited)
Current assets:
Cash and cash equivalents $ 132,190 $ 128,965
Short-term marketable securities 165,118 140,866
Accounts receivable, net 190,167 180,768
Inventory 10,234 11,581
Prepaid expenses and other current assets 39,251   40,719  
Total current assets 536,960 502,899
Long-term marketable securities 57,981 82,711
Property and equipment, net 53,672 55,244
Intangible assets, net 561,092 643,924
Goodwill 1,813,314 1,813,227
Other long-term assets 57,646   65,673  
Total assets $ 3,080,665   $ 3,163,678  
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 99,780 $ 135,852
Unearned revenue 45,050 55,393
Current portion of long-term debt 7,000   7,000  
Total current liabilities 151,830 198,245
Taxes payable, less current portion 3,936 3,947
Unearned revenue, less current portion 53,966 58,283
Long-term debt, less current portion 980,516 976,095
Deferred tax liabilities, net 51,328 50,356
Other long-term liabilities 14,555   23,736  
Total liabilities 1,256,131 1,310,662
Stockholders' equity:
Preferred stock
Common stock 125 123
Treasury stock (28,925 ) (24,740 )
Additional paid-in capital 3,257,093 3,273,022
Accumulated other comprehensive loss (4,233 ) (2,738 )
Accumulated deficit (1,399,526 ) (1,392,651 )
Total stockholders' equity 1,824,534   1,853,016  
Total liabilities and stockholders' equity $ 3,080,665   $ 3,163,678  
 

See notes to the Condensed Consolidated Financial Statements in our
Quarterly Report on Form 10-Q.

 
TIVO CORPORATION AND SUBSIDIARIES
REVENUE DETAILS
(In thousands)
(Unaudited)
 
  Three Months Ended June 30,   Six Months Ended June 30,
2018   2017 2018   2017
Total Revenues, net $ 172,860 $ 208,558 $ 362,697 $ 414,322
Legacy TiVo Solutions IP Licenses (8,384 ) (23,661 ) (17,268 ) (47,545 )
Hardware (3,306 ) (9,594 ) (6,985 ) (24,808 )
Other Products (960 ) (1,640 ) (3,393 ) (3,231 )
Core Revenue (excludes revenue from Legacy TiVo Solutions IP
Licenses, Hardware and Other Products)
$ 160,210   $ 173,663   $ 335,051   $ 338,738  
 
   
Three Months Ended June 30, Six Months Ended June 30,
2018   2017 2018   2017
Product Revenue
Platform Solutions $ 72,208 $ 82,971 $ 168,148 $ 171,154
Software and Services 19,619 19,752 38,098 45,021
Other 960   1,640   3,393   3,231
Total Product Revenue, net 92,787 104,363 209,639 219,406
 
IP Licensing Revenue
US Pay TV Providers 49,217 68,733 99,132 132,077
CE Manufacturers 8,927 11,974 17,895 22,817
New Media, International Pay TV Providers and Other 21,929   23,488   36,031   40,022
Total IP Licensing Revenue, net 80,073 104,195 153,058 194,916
       
Total Revenues, net $ 172,860   $ 208,558   $ 362,697   $ 414,322
 
   
Three Months Ended June 30, Six Months Ended June 30,
2018   2017 2018   2017
Total Product Revenue, net $ 92,787 $ 104,363 $ 209,639 $ 219,406
Hardware (3,306 ) (9,594 ) (6,985 ) (24,808 )
Other Products (960 ) (1,640 ) (3,393 ) (3,231 )
Core Product Revenue (excludes revenue from Hardware and Other
Products)
$ 88,521   $ 93,129   $ 199,261   $ 191,367  
 
Total IP Licensing Revenue, net $ 80,073 $ 104,195 $ 153,058 $ 194,916
Legacy TiVo Solutions IP Licenses (8,384 ) (23,661 ) (17,268 ) (47,545 )
Core Intellectual Property Licensing Revenue (excludes revenue from
Legacy TiVo Solutions IP Licenses)
$ 71,689   $ 80,534   $ 135,790   $ 147,371  
 
 

TIVO CORPORATION AND SUBSIDIARIES

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL INFORMATION
(In
thousands)

(Unaudited)

  Three Months Ended June 30,   Six Months Ended June 30,  
  2018       2017     2018       2017  
GAAP loss before income taxes from continuing operations $ (18,549 ) $ (863 )

 

$ (33,346 ) $ (29,957 )
Amortization of intangible assets 40,809 41,678 82,221 83,378
Restructuring and asset impairment charges 1,101 9,374 5,647 13,913
Equity-based compensation 6,731 11,749 18,755 25,774
Transition and integration costs 7,041 5,108 9,451 12,307
Earnout amortization 536 959 1,494 1,917
CEO transition cash costs (1,600 ) (975 )
Remeasurement of contingent consideration 281 398 1,171 74
TiVo Acquisition litigation 12,906
Loss on debt extinguishment 108
Loss on debt modification 929
Gain on settlement of acquired receivable (2,537 ) (2,537 )
Accelerated depreciation 213 213
Gain on sale of strategic investments (3,143 ) (3,143 )
Accretion of contingent consideration 114 213 192 368
Amortization of note issuance costs 570 528 1,129 1,050
Amortization of convertible note discount 3,292 3,143 6,546 6,249
Mark-to-market loss (income) related to interest rate swaps   (2,779 )   (410 )   (8,473 )   (3,172 )
Non-GAAP Pre-tax Income $ 37,547   $ 66,410   $ 83,812   $ 120,377  
 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

2018

 

 

 

2017

   

2018

 

 

2017

 
GAAP Diluted weighted average shares outstanding 122,713 120,209

122,399

119,515

Dilutive effect of equity-based compensation awards   582     799    

547

   

1,151

Non-GAAP Diluted Weighted Average Shares Outstanding   123,295     121,008    

122,946

   

120,666

 
Three Months Ended June 30, Six Months Ended June 30,
  2018     2017     2018     2017  
GAAP Cost of licensing, services and software revenues, excluding
depreciation and amortization of intangible assets
$ 42,583 $ 39,281 $ 85,798 $ 81,587
Equity-based compensation (1,001 ) (991 ) (2,110 ) (2,035 )
Transition and integration costs   (27 )   (174 )   (55 )   (273 )
Non-GAAP Cost of Licensing, Services and Software Revenues $ 41,555   $ 38,116   $ 83,633   $ 79,279  
 
Three Months Ended June 30, Six Months Ended June 30,
  2018     2017     2018     2017  
GAAP Cost of hardware revenues, excluding depreciation and
amortization of intangible assets
$ 4,989 $ 11,767 $ 10,040 $ 25,988
Transition and integration costs       338         (1,021 )
Non-GAAP Cost of Hardware Revenues $ 4,989   $ 12,105   $ 10,040   $ 24,967  
 
Three Months Ended June 30, Six Months Ended June 30,
  2018     2017     2018     2017  
GAAP Research and development expenses $ 43,411 $ 46,592 $ 91,841 $ 95,514
Equity-based compensation (3,364 ) (4,059 ) (6,946 ) (8,056 )
Transition and integration costs (704 ) (1,535 ) (1,420 ) (2,775 )
Earnout amortization   (103 )   (184 )   (287 )   (368 )
Non-GAAP Research and Development Expenses $ 39,240   $ 40,814   $ 83,188   $ 84,315  
 

Three Months Ended June 30,

Six Months Ended June 30,
  2018     2017     2018     2017  
GAAP Selling, general and administrative expenses $ 42,957 $ 45,741 $ 94,039 $ 99,690
Equity-based compensation (2,366 ) (6,699 ) (9,699 ) (15,683 )
Transition and integration costs (6,310 ) (3,737 ) (7,976 ) (8,238 )
Earnout amortization (433 ) (775 ) (1,207 ) (1,549 )
CEO transition cash costs 1,600 975
Remeasurement of contingent consideration (282 ) (398 ) (1,172 ) (74 )
Gain on settlement of acquired receivable       2,537         2,537  
Non-GAAP Selling, General and Administrative Expenses $ 35,166   $ 36,669   $ 74,960   $ 76,683  
 
Three Months Ended June 30, Six Months Ended June 30,
  2018     2017     2018     2017  
GAAP Total operating costs and expenses $ 181,623 $ 199,815 $ 380,500 $ 410,924
Depreciation (5,773 ) (5,382 ) (10,914 ) (10,854 )
Amortization of intangible assets (40,809 ) (41,678 ) (82,221 ) (83,378 )
Restructuring and asset impairment charges (1,101 ) (9,374 ) (5,647 ) (13,913 )
Equity-based compensation (6,731 ) (11,749 ) (18,755 ) (25,774 )
Transition and integration costs (7,041 ) (5,108 ) (9,451 ) (12,307 )
Earnout amortization (536 ) (959 ) (1,494 ) (1,917 )
CEO transition cash costs 1,600 975
Remeasurement of contingent consideration (281 ) (398 ) (1,171 ) (74 )
Gain on settlement of acquired receivable       2,537         2,537  
Non-GAAP Total COGS and OpEx $ 120,951   $ 127,704   $ 251,822   $ 265,244  
 
Three Months Ended June 30, Six Months Ended June 30,
  2018     2017     2018     2017  
GAAP Operating (loss) income $ (8,763 ) $ 8,743 $ (17,803 ) $ 3,398
Depreciation 5,773 5,382 10,914 10,854
Amortization of intangible assets 40,809 41,678 82,221 83,378
Restructuring and asset impairment charges 1,101 9,374 5,647 13,913
Equity-based compensation 6,731 11,749 18,755 25,774
Transition and integration costs 7,041 5,108 9,451 12,307
Earnout amortization 536 959 1,494 1,917
CEO transition cash costs (1,600 ) (975 )
Remeasurement of contingent consideration 281 398 1,171 74
Gain on settlement of acquired receivable       (2,537 )       (2,537 )
Adjusted EBITDA $ 51,909   $ 80,854   $ 110,875   $ 149,078  
 
Three Months Ended June 30, Six Months Ended June 30,
  2018     2017     2018     2017  
GAAP Interest expense $ (12,171 ) $ (10,573 ) $ (23,805 ) $ (20,837 )
Accretion of contingent consideration 114 213 192 368
Amortization of note issuance costs 569 528 1,128 1,050
Amortization of convertible note discount 3,292 3,143 6,546 6,249
Reclassify current period cost of interest rate swaps   (938 )   (2,266 )   (2,321 )   (4,508 )
Non-GAAP Interest Expense $ (9,134 ) $ (8,955 ) $ (18,260 ) $ (17,678 )
 

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