Devices

TiVO CEO: Company’s Exploring ‘Broad Range of Strategic Alternatives’

TiVo will continue to focus on growth areas of its business that take advantage of increased video content consumption and over-the-top (OTT) platform opportunities as it explores a “broad range of strategic alternatives” that could include going private, acquisitions, or even a merger, according to new company CEO and president Enrique Rodriguez.

“The market landscape for TiVo is going through a meaningful transition and these shifting industry dynamics are an opportunity for us,” he said Feb. 27 on an earnings call for TiVo’s fourth quarter and fiscal year (ended Dec. 31). It was his first earnings call as TiVo CEO, he noted.

TiVo shares were trading more than 12% higher at $15.20 in early afternoon trading Feb. 28.

The company’s technologies are “well-suited for” the “new market opportunities” that are being presented by expanding content consumption and “rapidly growing OTT distribution,” Rodriguez said, pointing to the company’s “long tradition of leadership in content discovery from having invented many aspects of the program guide and the DVR all the way to developing an innovative discovery experience that combines linear television with OTT content in a single user experience.”

As the industry “transforms to deliver more content over the Internet, we are capitalizing on our expertise and technology leadership to address our customers’ needs” and “what differentiates us is the company’s cloud-based, device-agnostic solution that allows viewers to seamlessly navigate between traditional and streaming media on any device, whenever they want,” he said.

TiVo continues to grow relationships with consumer electronics manufacturers and pay-TV service providers, and 90% of all smart TVs that shipped in North America last year were covered by a TiVo IP license, he told analysts. Samsung recently expanded its use of TiVo’s metadata to include TiVo’s sports package, “powering sports discovery in the European market on their smart TVs,” TiVo noted in its earnings news release.

But TiVo is also “focused on addressing the emerging markets for virtual service providers” (VSPs) that provide skinny OTT TV bundles, content and new media companies, as well as advertisers, he said. It already has licensing deals with four of the top five VSPs, Rodriguez said, citing AT&T’s DirecTV Now, Dish Network’s Sling TV, Sony’s PlayStation Vue and the pact TiVo recently signed with Google for YouTube TV. TiVo’s is, meanwhile, “seeing strong demand” for its data and advertising solutions that make it easier for advertisers to reach their targeted audiences, he said.

The company has also “made substantial progress” towards its TiVo-Rovi financial integration goals, he said, noting: “We are not only ahead of pace, but are now targeting achieving $110 million in annual run-rate synergies by mid-2018, an increase of $10 million from our previously stated goal.”

TiVo currently provides content discovery platforms to more than 20 million pay-TV households, and it’s “focused on expanding our presence globally, particularly” with Canadian and European operators, he said.

The new TiVo Experience 4, integrating the company’s OTT and linear TV solutions, was released in Q4 to the retail market and it “displays the advantages of our content discovery experience and software and services,” he told analysts. The company combined solutions from Rovi and TiVo to develop a cloud-based solution providing voice control with a natural language understanding engine, advanced search and recommendation, including predictive analytics, and also “image-rich metadata,” he said.

TiVo Experience 4 will be available for multiple system operator (MSO) customers in 2018 and it’s “already resonating in the market,” he said, pointing to TiVo’s recently-announced deal with Service Electric, which will be replacing legacy Rovi guides with the new, next-generation TiVo offering.

“We also anticipate announcing a deal in the first half of the year to deploy our next-generation TiVo service on the Android TV platform for the very first time, as well as deals where this solution replaces a third-party guide,” he went on to say. There are now more than 15 million households using Rovi legacy guides and ‘’we see their transition to newer TiVo experiences as a great business opportunity,” he said.

He predicted that 2018 will be “a transformational year for TiVo, a year where we will focus on execution that drives growth,” but he conceded: “We have a lot of hard work to do.”

Noting that TiVo’s stock price is “at a level that we do not believe reflects the true value of our business,” he said the company and its board “feel strongly that we have a duty to our shareholders to maximize the value of the company and, as such, we have decided to explore” various strategic alternatives. “These options range from transformative acquisitions that would accelerate our growth, to combining our business with other leading players, to becoming a private company,” he said, adding: “We need to determine the optimal path to maximize our value proposition, so we can best deliver value to our shareholders.”

During the Q&A that followed, he declined to provide a specific timetable for the process.

We can also expect TiVo to move even further away from its legacy hardware business. “On the MSO side, we are largely out of the hardware business,” CFO Peter Halt said on the call. “It’s our anticipation that sometime in the first half of the year we would be doing a deal to be out of the hardware business largely for the consumer side too,” he said.

TiVo reported Q4 revenue grew to $18.4 million (15 cents a share) from $9.8 million (8 cents a share). But Q4 revenue slipped to $214.2 million from $252.3 million a year earlier. Licensing, services and software revenue slid to $206.5 million from $238.5 million, while hardware revenue fell to $7.7 million from $13.9 million.

Revenue, meanwhile, grew to $826.5 million for fiscal 2017 from $649.1 million in 2016. Licensing, services and software revenue increased to $784.1 million from $629.5 million, while hardware revenue widened to $42.4 million from $19.6 million. But TiVo swung to a $38 million loss (-32 cents a share) for the year from a $32.7 million profit (35 cents a share).