Rovi Corporation (NASDAQ:ROVI) today reported financial results
for the second quarter ended June 30, 2015.
The Company reported second quarter revenue of $127.8 million, a
decrease of 7% compared to $137.1 million in the second quarter of
2014. Revenues were lower than in the comparable period of the
prior year, which benefited from higher Consumer Electronics
revenues, in part due to one-time revenues from Samsung. Second
quarter 2015 Income from continuing operations, net of tax, was
$3.3 million, compared to $2.7 million Loss from continuing
operations, net of tax, for the second quarter of 2014. Second
quarter Diluted income per share from continuing operations was
$0.04, compared to $0.03 Diluted loss per share from continuing
operations in the second quarter of 2014. After taking into
consideration discontinued operations, the Company reported second
quarter Net income of $3.3 million, compared to a Net loss of $2.6
million for the same quarter of 2014. Second quarter Diluted income
per share was $0.04, compared to $0.03 Diluted loss per share in
the second quarter of 2014.
On a Non-GAAP basis, second quarter Non-GAAP Net Income was
$32.7 million, compared to $39.5 million in the second quarter of
2014, and second quarter Non-GAAP Diluted Income Per Share was
$0.38, compared to $0.43 in the second quarter of 2014.
Non-GAAP Net Income and Non-GAAP Diluted Income Per Share are
defined below in the section entitled “Non-GAAP Information.”
Reconciliations between GAAP and Non-GAAP results from operations
are provided in the tables below.
“During the second quarter, Rovi continued to advance its IP
license renewal negotiations with the big-four and we licensed our
advanced search and recommendation technology to two major service
providers. We continued to advance our analytics business, improved
our data operational performance and advanced discussions with
operators for our Fan TV solution. I am also pleased with the
efforts to contain spending during a quarter of softer sales,” said
Tom Carson, President and CEO of Rovi.
“While we are disappointed with the Netflix ruling, we continue
to believe in our broader IP licensing business. Our second half
focus is on achieving our sales and profit objectives, continuing
our big-four renewal negotiations, securing meaningful design wins
for our products and continuing to pursue our Netflix
litigation.”
Rovi believes its stock is currently undervalued, and the
Company intends to repurchase an additional $50 million of the
Company’s shares in the third quarter of 2015, under the existing
stock repurchase authorization from the Board of Directors.
Business Outlook
Rovi now anticipates fiscal year 2015 revenue of $500 million to
$530 million and fiscal year 2015 non-GAAP diluted income per share
of $1.35 to $1.60. The low-end of this range assumes no new or
one-time revenues are recognized in the second-half of 2015, which
the Company considers unlikely. The midpoint of this range assumes
approximately the same level of new or one-time revenues in the
second half of the year as the Company achieved in the first half
of 2015.
Conference Call Information
Rovi management will host a conference call today, July 30,
2015, at 1:30 p.m. PT/4:30 p.m. ET to discuss the financial
results. Investors and analysts interested in participating in the
conference are welcome to call 1-866-621-1214 (or international
+1-706-643-4013) and reference conference ID 79563945. The
conference call can also be accessed via live webcast in the
Investor Relations section of Rovi's website at
http://www.rovicorp.com/.
A telephonic replay of the conference call will be available
through August 5, 2015 and can be accessed by calling
1-800-585-8367 (or international +1-404-537-3406) and entering
conference ID 79563945. A replay of the audio webcast will be
available on Rovi Corporation's website shortly after the live call
ends and will remain on Rovi Corporation's website until its next
quarterly earnings call.
Non-GAAP Information
Rovi Corporation provides Non-GAAP information to assist
investors in assessing its current and future operations in the way
that its management evaluates those operations. Non-GAAP Net
Income, Non-GAAP Diluted Income Per Share, Non-GAAP COGS, Non-GAAP
Research and Development Expenses, Non-GAAP Selling, General and
Administrative Expenses, Non-GAAP Total OpEx and Non-GAAP Total
COGS and OpEx are supplemental measures of the Company's
performance that are not required by, and are not presented in
accordance with GAAP. Non-GAAP information is not a substitute for
any performance measure derived in accordance with GAAP.
Non-GAAP Net Income is defined as GAAP income (loss) from
continuing operations, net of tax, adding back non-cash items such
as equity-based compensation, amortization of intangibles,
amortization or write-off of note issuance costs, non-cash interest
expense recorded on convertible debt under Accounting Standards
Codification (“ASC”) 470-20 (formerly known as FSP APB 14-1),
mark-to-market fair value adjustments for interest rate swaps and
the reversals of discrete tax items including reserves; 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 changes in the fair value of
contingent consideration, gains from the release of Sonic payroll
tax withholding liabilities related to a stock option review,
transaction, transition and integration costs, contested proxy
election costs, restructuring and asset impairment (benefit)
charges, payments to note holders and for expenses in connection
with the early redemption or modification of debt and gains on sale
of strategic investments. While depreciation expense is a non-cash
item, it is included in Non-GAAP Net Income as a reasonable proxy
for capital expenditures.
Non-GAAP Diluted Income Per Share is calculated using Non-GAAP
Net Income.
Non-GAAP COGS is defined as GAAP cost of revenues excluding
equity-based compensation and transition and integration
expenses.
Non-GAAP Research and Development Expenses is defined as GAAP
research and development expenses excluding equity-based
compensation and transition and integration expenses.
Non-GAAP Selling, General and Administrative Expenses is defined
as GAAP selling, general and administrative expenses excluding
equity-based compensation, contested proxy election costs, changes
in the fair value of contingent consideration, and transaction,
transition and integration expenses.
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, contested proxy election costs, changes in the fair
value of contingent consideration, and transaction, transition and
integration expenses.
Non-GAAP Total COGS and OpEx is defined as GAAP Total Operating
costs and expenses, excluding equity-based compensation, contested
proxy election costs, changes in the fair value of contingent
consideration, amortization of intangible assets, restructuring and
asset impairment (benefit) charges, and transaction, transition and
integration expenses.
The Company's management has evaluated and made operating
decisions about its business operations primarily based upon
Non-GAAP Net Income and Non-GAAP Diluted Income Per Share.
Management uses Non-GAAP Income and Non-GAAP Diluted Income Per
Share as measures as they exclude items management does not
consider to be “core costs” or “core proceeds” when making business
decisions. Therefore, management presents these Non-GAAP financial
measures along with GAAP measures. For each such Non-GAAP financial
measure, the adjustment provides management with information about
the Company's underlying operating performance that enables a more
meaningful comparison of its financial results in different
reporting periods. For example, since Rovi Corporation does not
acquire businesses on a predictable cycle, management excludes
amortization of intangibles from acquisitions, transaction costs
and transition and integration costs in order to make more
consistent and meaningful evaluations of the Company's operating
expenses. Management also excludes the effect of restructuring and
asset impairment (benefit) charges, expenses in connection with the
early redemption or modification of debt and gains on sale of
strategic investments. Management excludes the impact of
equity-based compensation to help it compare current period
operating expenses against the operating expenses for prior periods
and to eliminate the effects of this non-cash item, which, because
it is based upon estimates on the grant dates, may bear little
resemblance to the actual values realized upon the future exercise,
expiration, termination or forfeiture of the equity-based
compensation, and which, as it relates to stock options and stock
purchase plan shares, is required for GAAP purposes to be estimated
under valuation models, including the Black-Scholes model used by
Rovi Corporation. Management excludes non-cash interest expense
recorded on convertible debt under ASC 470-20, mark-to-market fair
value adjustments for interest rate swaps, caps, foreign currency
collars, and the reversals of discrete tax items including reserves
as they are non-cash items and not considered “core costs” or
meaningful when management evaluates the Company's operating
expenses. Management reclassifies the current period benefit or
cost of the interest rate swaps from gain or loss on interest rate
swaps and caps, net to interest expense in order for interest
expense to reflect the swap rates, as these instruments were
entered into to control the interest rate the Company effectively
pays on its debt.
Management is using these Non-GAAP measures to help it make
budgeting decisions, including decisions that affect operating
expenses and operating margin. Further, Non-GAAP financial
information helps management track actual performance relative to
financial targets. Making Non-GAAP financial information available
to investors, in addition to GAAP financial information, may also
help investors compare the Company's performance with the
performance of other companies in our industry, which may use
similar financial measures to supplement their GAAP financial
information.
Management recognizes that the use of Non-GAAP measures has
limitations, including the fact that management must exercise
judgment in determining which types of charges should be excluded
from the Non-GAAP financial information. Because other companies,
including companies similar to Rovi Corporation, may calculate
their non-GAAP financial measures differently than the Company
calculates its Non-GAAP measures, these Non-GAAP measures may have
limited usefulness in comparing 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 between historical and Non-GAAP results of
operations are provided in the tables below.
About Rovi Corporation
Rovi is leading the way to a more personalized entertainment
experience. The Company’s pioneering guides, data, and
recommendations continue to drive program search and navigation on
millions of devices on a global basis. With a new generation of
cloud-based discovery capabilities and emerging solutions for
interactive advertising and audience analytics, Rovi is enabling
premier brands worldwide to increase their reach, drive consumer
satisfaction and create a better entertainment experience across
multiple screens. The Company holds over 5,000 issued or pending
patents worldwide and is headquartered in Santa Clara, California.
Discover more about Rovi at Rovicorp.com.
Forward Looking Statements
All statements contained herein, including the quotations
attributed to Mr. Carson, that are not statements of historical
fact, including statements that use the words “will,” “believes,”
“anticipates,” “estimates,” “expects,” “intends” or similar words
that describe the Company's or its management's future plans,
objectives, or goals, are “forward-looking statements” and are made
pursuant to the Safe-Harbor provisions of the Private Securities
Litigation Reform Act of 1995. These forward-looking statements
include, but are not limited to, the Company's estimates of future
revenues, earnings and expenses, business strategies, anticipated
contract signings, and stock repurchases.
Such forward-looking statements involve known and unknown risks,
uncertainties and other factors that could cause the actual results
of the Company to be materially different from the historical
results and/or from any future results or outcomes expressed or
implied by such forward-looking statements. Such factors include,
among others, the risks associated with the Company’s ongoing sales
reorganization, adverse rulings in litigations such as Netflix, the
Company's ability to successfully execute on its strategic plan and
customer demand for and industry acceptance of the Company's
technologies and integrated solutions. Such factors are further
addressed in the Company's Quarterly Report on Form 10-Q for the
period ended June 30, 2015 and such other documents as are filed
with the Securities and Exchange Commission from time to time
(available at www.sec.gov). The Company assumes no obligation,
except as required by law, to update any forward-looking statements
in order to reflect events or circumstances that may arise after
the date of this release.
ROVI BUSINESS AND OPERATING
HIGHLIGHTS:
IP Licensing:
- Worldwide, approximately 181 million
subscription Pay-TV households either use a Rovi guide or use a
guide under a license from Rovi. Excluding pre-paid Pay-TV
licensees, total Rovi Pay-TV subscribers were approximately 131
million.
- As previously announced, Charter
Communications, the fourth-largest cable operator in the United
States, signed a new multi-year IP license and licensed i-Guide,
Passport Guide, Rovi Metadata, Rovi Search, Recommendation &
Conversation Services, and Rovi Analytics.
- VIZIO, a leading TV manufacturer,
renewed a multi-year patent license agreement with Rovi.
- Funai, a leading consumer electronics
manufacturer, extended its product and entertainment discovery
patent license agreement with Rovi.
- SK Broadband, one of the main IPTV
providers in Korea delivering TV everywhere (TVE) and video on
demand (VOD), signed an entertainment discovery patent license
agreement with Rovi. SK Broadband provides mobile TV service to
subscribers of SK Telecom, Korea’s largest telecommunications
company.
Discovery:
- Approximately 19 million subscription
Pay-TV households use Rovi’s cable television set-top box and
digital terminal adapter (DTA) guide products.
- As previously announced, DISH licensed
Rovi’s Search and Conversation Services, allowing for voice
recognition inputs.
- As previously announced, Verizon, the
largest U.S. wireless communications service provider, licensed
Rovi’s Advanced Search technologies.
- J:COM (Jupiter Telecommunications),
Japan’s largest cable television operator, will deploy new features
for G-Guide HTML to power seamless entertainment discovery across
live TV programming and video-on-demand (VOD) content, including
rich metadata information for catch-up TV.
- Enhanced Rovi Cloud Platform and
Services with additional APIs that include video discovery, remote
management, search and recommendation and Metadata
distribution.
Metadata:
- Made Rovi Knowledge Graph available to
North American customers to enhance their search and
recommendations capabilities with popularity, local data, trending
data, and semantic and contextual links.
- Launched the Rovi Popularity Package in
North America offering crowdsourced ratings, as well as trending
and all-time popularity data for people and programs.
- Rovi moved toward real-time data
delivery by offering multiple updates per day to address live-event
programming changes.
- A major provider of streaming services
expanded its license to use Rovi Music metadata.
Analytics:
- Continuing multiple commercial
deployments and trials of our Rovi Ad Optimizer and Promo Optimizer
solutions with service providers and major broadcast and network
families.
Other:
- James E. Meyer was unanimously elected
as independent Chairman of Rovi’s Board of Directors.
- Rovi’s Board of Directors unanimously
elected the members of each of its Audit, Compensation, Strategy,
and Corporate Governance & Nominating committees.
ROVI 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, 2015
2014 2015 2014 Revenues $
127,820 $ 137,062 $ 261,845 $ 279,512 Costs and expenses: Cost of
revenues, excluding amortization of intangible assets 25,669 26,040
53,799 58,536 Research and development 27,017 28,933 55,142 54,490
Selling, general and administrative 39,494 37,494 77,854 72,404
Depreciation 4,448 4,550 8,818 8,951 Amortization of intangible
assets 19,236 19,330 38,600 38,020 Restructuring and asset
impairment (benefit) charges (178 ) 3,505 1,539 5,682
Total costs and expenses 115,686 119,852
235,752 238,083 Operating income from continuing
operations 12,134 17,210 26,093 41,429 Interest expense (11,715 )
(13,196 ) (24,073 ) (26,759 ) Interest income and other, net (183 )
1,597 503 1,835 Income (loss) on interest rate swaps 4,399 (4,701 )
(5,319 ) (7,336 ) Loss on debt extinguishment (20 ) — (120 )
— Income (loss) from continuing operations before income
taxes 4,615 910 (2,916 ) 9,169 Income tax expense 1,277
3,624 9,216 10,200 Income (loss) from
continuing operations, net of tax 3,338 (2,714 ) (12,132 ) (1,031 )
Income (loss) from discontinued operations, net of tax — 74
— (55,874 ) Net income (loss) $ 3,338 $ (2,640
) $ (12,132 ) $ (56,905 ) Basic earnings (loss) per share:
Continuing operations $ 0.04 $ (0.03 ) $ (0.14 ) $ (0.01 )
Discontinued operations — — — (0.61 ) Basic
earnings (loss) per share $ 0.04 $ (0.03 ) $ (0.14 ) $ (0.62
) Weighted average shares used in computing basic earnings (loss)
per share 85,248 91,019 86,767 92,246
Diluted earnings (loss) per share: Continuing operations $ 0.04 $
(0.03 ) $ (0.14 ) $ (0.01 ) Discontinued operations — —
— (0.61 ) Diluted earnings (loss) per share $ 0.04
$ (0.03 ) $ (0.14 ) $ (0.62 ) Weighted average shares used
in computing diluted earnings (loss) per share 85,487 91,019
86,767 92,246
See notes to the Condensed Consolidated
Financial Statements in our Quarterly Report on Form 10-Q.
ROVI CORPORATION AND SUBSIDIARIES CONDENSED
CONSOLIDATED BALANCE SHEETS (In thousands)
June 30, December 31, 2015 2014
ASSETS (unaudited) Current assets: Cash and cash equivalents
$ 115,940 $ 154,568 Short-term marketable securities 100,896
183,074 Accounts receivable, net 83,847 83,514 Deferred tax assets,
net 10,553 18,553 Prepaid expenses and other current assets 14,638
12,851 Total current assets 325,874 452,560 Long-term
marketable securities 164,533 131,378 Property and equipment, net
34,563 37,227 Intangible assets, net 424,864 463,348 Goodwill
1,343,543 1,343,652 Other long-term assets 22,961 17,225
Total assets $ 2,316,338 $ 2,445,390
LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities:
Accounts payable and accrued expenses $ 68,776 $ 83,208 Deferred
revenue 19,922 18,399 Current portion of long-term debt 7,000
302,375 Total current liabilities 95,698 403,982
Taxes payable, less current portion 9,483 10,100 Deferred revenue,
less current portion 14,755 15,722 Long-term debt, less current
portion 1,042,582 804,557 Long-term deferred tax liabilities, net
76,062 80,751 Other long-term liabilities 27,106 24,014
Total liabilities
1,265,686 1,339,126 Stockholders' equity: Preferred stock — —
Common stock 131 131 Treasury stock (1,113,386 ) (1,013,218 )
Additional paid-in capital 2,397,069 2,339,817 Accumulated other
comprehensive loss (5,871 ) (5,307 ) Accumulated deficit (227,291 )
(215,159 ) Total stockholders’ equity 1,050,652 1,106,264
Total liabilities and stockholders’ equity $ 2,316,338
$ 2,445,390
See notes to the Condensed Consolidated
Financial Statements in our Quarterly Report on Form 10-Q.
ROVI CORPORATION AND SUBSIDIARIES REVENUE BY
SEGMENT (In thousands) (Unaudited)
Three Months Ended June 30, Six Months
Ended June 30, 2015 2014 2015 2014
Intellectual Property Licensing Revenues: Service Provider
$
51,301
$
49,762
$
98,454
$
99,842
Consumer Electronics 18,431 22,922 36,297
45,768 Total Intellectual Property Licensing Revenues 69,732
72,684 134,751 145,610 Product Revenues: Service Provider
50,298 54,291 101,323 102,812 Consumer Electronics 5,368 5,559
10,761 11,687 Other 2,422 4,528 15,010
19,403 Total Product Revenues 58,088 64,378 127,094 133,902
Total Revenues
$
127,820
$
137,062
$
261,845
$
279,512
ROVI CORPORATION AND SUBSIDIARIES REVENUE
BY SALES VERTICAL (In thousands) (Unaudited)
Three Months Ended June 30, Six Months Ended June
30, 2015 2014 2015 2014 Service
Provider
$
101,599
$
104,053
$
199,777
$
202,654
Consumer Electronics 23,799 28,481 47,058 57,455 Other 2,422
4,528 15,010 19,403 Total Revenues
$
127,820
$
137,062
$
261,845
$
279,512
ROVI CORPORATION AND SUBSIDIARIES RECONCILIATION
OF GAAP TO NON-GAAP FINANCIAL INFORMATION (In thousands,
except per share amounts) (Unaudited)
Three Months Ended June 30, Six Months Ended June
30, 2015 2014 2015
2014 GAAP Income (loss) from continuing operations, net of
tax $ 3,338 $ (2,714 ) $ (12,132 ) $ (1,031 ) Amortization of
intangible assets 19,236 19,330 38,600 38,020 Restructuring and
asset impairment (benefit) charges (178 ) 3,505 1,539 5,682
Equity-based compensation 10,653 11,980 22,716 22,160 Contested
proxy election costs 3,941 — 4,346 — Transaction, transition and
integration expenses — 1,210 — 1,839 Amortization of note issuance
costs 663 932 1,310 1,902 Amortization of convertible note discount
2,864 3,454 5,676 6,843 Mark-to-market (gain) loss related to
interest rate swaps (5,410 ) 3,998 3,447 6,505 Loss on debt
extinguishment 20 — 120 — Release of Sonic payroll tax withholding
liabilities related to stock option review — (1,182 ) — (1,182 )
Income tax (benefit) expense (1) (2,440 ) (1,010 ) 1,732 839
Non-GAAP Net Income $ 32,687 $ 39,503 $ 67,354
$ 81,577 GAAP Diluted income (loss) per share
from continuing operations $ 0.04 $ (0.03 ) $ (0.14 ) $
(0.01 ) Non-GAAP Diluted Income Per Share (2) $ 0.38
$ 0.43 $ 0.77 $ 0.88 (1) Adjusts tax
expense to the Non-GAAP cash tax rate. (2) Since the Non-GAAP
adjustments resulted in Non-GAAP Net earnings, 91,601 shares,
93,011 shares and 87,318 shares were used in computing Non-GAAP
Diluted Income Per Share, which includes the dilutive effect of
common equivalent shares outstanding for the three and six months
ended June 30, 2014, and the six months ended June 30, 2015,
respectively.
Three Months Ended June 30,
Six Months Ended June 30, 2015
2014 2015 2014 GAAP Total Operating
costs and expenses
$
115,686
$
119,852
$
235,752
$
238,083
Amortization of intangible assets (19,236 ) (19,330 ) (38,600 )
(38,020 ) Restructuring and asset impairment benefit (charges) 178
(3,505 ) (1,539 ) (5,682 ) Equity-based compensation (10,653 )
(11,980 ) (22,716 ) (22,160 ) Contested proxy election costs (3,941
) — (4,346 ) — Transaction, transition and integration expenses
— (1,210 ) — (1,839 )
Non-GAAP Total COGS and OpEx
$
82,034
$
83,827
$
168,551
$
170,382
Three Months Ended June 30, Six
Months Ended June 30, 2015 2014 2015
2014 GAAP Cost of revenues, excluding amortization of
intangible assets
$
25,669
$
26,040
$
53,799
$
58,536
Equity-based compensation (1,253 ) (1,302 )
(2,835 ) (2,774 ) Non-GAAP COGS
$
24,416
$
24,738
$
50,964
$
55,762
Three Months Ended June 30, Six
Months Ended June 30, 2015 2014 2015
2014 GAAP Research and development expenses
$
27,017
$
28,933
$
55,142
$
54,490
Equity-based compensation (2,911 ) (3,601 ) (5,004 ) (5,814 )
Transition and integration expenses — (165 )
— (175 ) Non-GAAP Research and Development
Expenses
$
24,106
$
25,167
$
50,138
$
48,501
Three Months Ended June 30, Six
Months Ended June 30, 2015 2014 2015
2014 GAAP Selling, general and administrative expenses
$
39,494
$
37,494
$
77,854
$
72,404
Equity-based compensation (6,489 ) (7,077 ) (14,877 ) (13,572 )
Contested proxy election costs (3,941 ) — (4,346 ) — Transaction,
transition and integration expenses — (1,045 )
— (1,664 ) Non-GAAP Selling, General and
Administrative Expenses
$
29,064
$
29,372
$
58,631
$
57,168
View source
version on businesswire.com: http://www.businesswire.com/news/home/20150730006379/en/
Rovi CorporationPeter Halt, +1 818-295-6800CFOPeter Ausnit, +1
818-565-5200VP IRPeter.Ausnit@RoviCorp.com
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