UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 OR 15(d) of

The Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported)    November 29, 2005                    

 

TIVO INC.

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(Exact name of registrant as specified in its charter)

 

Delaware		000-27141		77-0463167
(State or other jurisdiction		(Commission		(IRS Employer
of incorporation)		File Number)		Identification No.)

 

2160 Gold Street,
Alviso, California				95002
(Address of principal executive offices)				(Zip Code)

 

Registrant’s telephone number, including area code (408)519-9100

 

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(Former name or former address, if changed since last report.)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

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ITEM 8.01

OTHER EVENTS.

 

On November 29, 2005 we announced financial results for our third quarter ended October 31, 2005.

 

Service and technology revenues for the quarter increased 52% to $43.2 million, compared with $28.4 million for the same prior year period. Net loss for the quarter was ($14.2) million or ($0.17) per share, compared to a net loss of ($26.4) million, or ($0.33) per share, for the three months ended October 31, 2004.

 

Our total subscriptions reached 4.0 million, with the addition of 434,000 total net new subscriptions in the quarter. TiVo-Owned gross subscription additions were 92,000 for the quarter, compared to 119,000 in the third quarter of last year. TiVo-Owned net subscription additions were 55,000 compared to 103,000 in the third quarter of last year. The installed base of DIRECTV subscriptions is now approximately 2.7 million with the addition of 379,000 net new DIRECTV subscriptions in the quarter.

 

TIVO INC.

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

(In thousands, except per share data)

(unaudited)

 

		Three Months Ended October 31,								Nine Months Ended October 31,
		2005				2004				2005				2004
Service revenues		$	42,296			$	27,678			$	120,889			$	74,170
Technology revenues			901				699				3,002				7,141
Service and Technology revenues			43,197				28,377				123,891				81,311
Hardware revenues			24,652				27,894				39,827				60,823
Rebates, revenue share, and other payments to channel			(18,234	)			(17,944	)			(27,860	)			(29,508	)
Net revenues			49,615				38,327				135,858				112,626
Cost of service revenues			8,431				6,505				23,929				18,934
Cost of technology revenues			77				1,465				903				6,135
Cost of hardware revenues			24,742				28,486				46,949				68,056
Gross margin			16,365				1,871				64,077				19,501
Research and development			9,712				9,291				30,394				26,428
Sales and marketing			10,006				14,212				24,410				25,838
General and administrative			11,702				4,366				26,249				12,399
Loss from operations			(15,055	)			(25,998	)			(16,976	)			(45,164	)
Interest and other income (expense), net			816				(274	)			2,171				(905	)
Provision for taxes			—				(78	)			(51	)			(108	)
Net loss attributable to common stockholders		$	(14,239	)		$	(26,350	)		$	(14,856	)		$	(46,177	)
Net loss per common share - basic and diluted		$	(0.17	)		$	(0.33	)		$	(0.18	)		$	(0.58	)
Weighted average common shares used to calculate basic and diluted net loss per share			84,201				80,267				83,362				80,088

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TIVO INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share amounts)

(unaudited)

 

		October 31, 2005				January 31, 2005
ASSETS
CURRENT ASSETS
Cash and cash equivalents, and short-term investments		$	90,456			$	106,345
Accounts receivable, net of allowance for doubtful accounts of $483 and $104			29,592				25,879
Finished goods inventories			21,182				12,103
Prepaid expenses and other, current			8,019				4,476
Total current assets			149,249				148,803
LONG-TERM ASSETS
Property and equipment, net			7,742				7,780
Capitalized software and intangible assets, net			5,490				2,231
Prepaid expenses and other, long-term			752				1,238
Total long-term assets			13,984				11,249
Total assets		$	163,233			$	160,052
LIABILITIES AND STOCKHOLDERS’ DEFICIT
LIABILITIES
CURRENT LIABILITIES
Bank line of credit		$	—			$	4,500
Accounts payable			34,847				18,736
Accrued liabilities			30,546				33,173
Deferred revenue, current			47,366				42,017
Total current liabilities			112,759				98,426
LONG-TERM LIABILITIES
Deferred revenue, long-term			58,395				63,131
Deferred rent and other			894				1,187
Total long-term liabilities			59,289				64,318
Total liabilities			172,048				162,744
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS’ DEFICIT
Preferred stock, par value $0.001:
Authorized shares are 10,000,000
Issued and outstanding shares - none			—				—
Common stock, par value $0.001:
Authorized shares are 150,000,000
Issued and outstanding shares are 85,041,261 and 82,280,876, respectively			85				82
Additional paid-in capital			665,807				654,746
Deferred compensation			(2,759	)			(428	)
Accumulated deficit			(671,948	)			(657,092	)
Total stockholders’ deficit			(8,815	)			(2,692	)
Total liabilities and stockholders’ deficit		$	163,233			$	160,052

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TIVO INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(unaudited)

 

		Nine Months Ended October 31,
		2005				2004
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss		$	(14,856	)		$	(46,177	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization of property and equipment and intangibles			4,589				3,289
Loss on disposal of fixed assets			2				375
Non-cash interest expense			—				1,416
Recognition of stock-based compensation expense (benefit)			48				803
Changes in assets and liabilities:
Accounts receivable, net (change includes $1,500 from related parties for the nine months ended October 31, 2004)			(3,713	)			(13,027	)
Finished goods inventories			(9,079	)			(27,868	)
Prepaid expenses and other, current (change includes $2,832 to related parties for the nine months ended October 31, 2004)			(3,543	)			(110	)
Prepaid expenses and other, long-term (change includes $3,268 to related parties for the nine months ended October 31, 2004)			486				2,165
Accounts payable			16,111				10,115
Accrued liabilities (change includes $(880) to related parties for the nine months ended October 31, 2004)			(2,627	)			8,935
Deferred revenue, current (change includes $(1,814) from related parties for the nine months ended October 31, 2004)			5,349				1,033
Deferred revenue, long-term			(4,736	)			4,138
Deferred rent and other long-term liabilities			(293	)			(88	)
Net cash used in operating activities		$	(12,262	)		$	(55,001	)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of short-term investments			(5,375	)			(19,750	)
Sales of short-term investments			10,625				7,050
Acquisition of property and equipment			(3,897	)			(3,501	)
Acquisition of capitalized software and intangibles			(3,915	)			—
Net cash used in investing activities		$	(2,562	)		$	(16,201	)
CASH FLOWS FROM FINANCING ACTIVITIES
Payments to bank line of credit			(4,500	)			—
Proceeds from issuance of common stock related to employee stock purchase plan			2,242				2,408
Proceeds from issuance of common stock related to exercise of common stock options			6,443				1,391
Net cash provided by financing activities		$	4,185			$	3,799
NET DECREASE IN CASH AND CASH EQUIVALENTS		$	(10,639	)		$	(67,403	)

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TIVO INC.

OTHER DATA

 

Subscriptions

 

		Three Months Ended October 31,

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(Subscriptions in thousands)		2005		2004

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TiVo-Owned Subscription Gross Additions		92		119
Subscription Net Additions:
TiVo-Owned		55		103
DIRECTV		379		316
Total Subscription Net Additions		434		419
Cumulative Subscriptions:
TiVo-Owned		1,308		890
DIRECTV		2,700		1,413
Total Cumulative Subscriptions		4,008		2,303
% of TiVo-Owned Cumulative Subscriptions paying recurring fees		51%		46%

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Included in the 4,008,000 subscriptions are approximately 89,000 lifetime subscriptions that have reached the end of the 48-month period TiVo uses to recognize lifetime subscription revenue. These lifetime subscriptions no longer generate subscription revenue.

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TIVO INC.

OTHER DATA - KEY BUSINESS METRICS

 

		Three Months Ended October 31,
TiVo-Owned Churn Rate		2005			2004
		(In thousands)
Average TiVo-Owned subscriptions (for the quarter)		1,275			835
TiVo-Owned subscription cancellations (for the quarter)		(37	)		(16	)
TiVo-Owned Churn Rate per month		-1.0%			-0.6%

 

TiVo-Owned Churn Rate. Management reviews this metric, and believes it may be useful to investors, in order to evaluate our ability to retain existing subscribers by providing compelling services that are competitive in the market. We define the TiVo-Owned Churn Rate as the TiVo-Owned subscription (including both monthly and product lifetime subscriptions) cancellations per month in the period divided by the average TiVo-Owned subscriptions for the period. We calculate average subscriptions by adding the average subscriptions for each month and dividing by the number of months in the period. We calculate average subscriptions for each month by adding the beginning and ending subscriptions for the month and dividing by two. We are not aware of any uniform standards for calculating churn and caution that our presentation may not be consistent with that of other companies.

 

		Three Months Ended October 31,								Twelve Months Ended October 31,
		2005				2004				2005				2004
Subscription Acquisition Costs		(In thousands, except SAC)
Sales and marketing expenses		$	10,006			$	14,212			$	35,939			$	30,580
Rebates, revenue share, and other payments to channel			18,234				17,944				53,048				33,622
Hardware revenues			(24,652	)			(27,894	)			(90,279	)			(86,360	)
Cost of hardware revenues			24,742				28,486				99,216				94,743
Total Acquisition Costs			28,330				32,748				97,924				72,585
TiVo-Owned Subscription Gross Additions			92				119				549				416
Subscription Acquisition Costs (SAC)		$	308			$	275			$	178			$	174

 

Subscription Acquisition Cost (“SAC”). Management reviews this metric, and believes it may be useful to investors, in order to evaluate trends in the efficiency of our marketing programs and subscription acquisition strategies. We define SAC as our total acquisition costs divided by TiVo-Owned subscription gross additions. We define total acquisition costs as the sum of sales and marketing expenses, rebates, revenue share, and other payments to channel, minus hardware gross margin (defined as hardware revenues less cost of hardware revenues). As a result of the seasonal nature of our subscription growth, our SAC varies significantly during the year. Management primarily reviews this metric on an annual basis due to the timing difference between our recognition of promotional program expense and the subsequent addition of the related subscription acquisition. Accordingly, we are presenting SAC on a trailing twelve months basis as well in order to show SAC over the longer-term. We do not include DIRECTV subscription gross additions in our calculation of SAC because we incur limited or no acquisition costs for new DIRECTV subscriptions. We are not aware of any uniform standards for calculating total acquisition costs or SAC and caution that our presentation may not be consistent with that of other companies.

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		Three Months Ended October 31,
		2005				2004
TiVo-Owned Average Revenue per Subscription		(In thousands, except ARPU)
Service and Technology revenues		$	43,197			$	28,377
Less: Technology revenues			(901	)			(699	)
Total Service revenues			42,296				27,678
Less: DIRECTV-related service revenues			(8,637	)			(5,782	)
TiVo-Owned-related service revenues			33,659				21,896
Average TiVo-Owned revenues per month			11,220				7,299
Average TiVo-Owned per month subscriptions			1,275				835
TiVo-Owned ARPU per month		$	8.80			$	8.74

 

		Three Months Ended October 31,
		2005				2004
DIRECTV Average Revenue per Subscription		(In thousands, except ARPU)
Service and Technology revenues		$	43,197			$	28,377
Less: Technology revenues			(901	)			(699	)
Total Service revenues			42,296				27,678
Less: TiVo-Owned-related service revenues			(33,659	)			(21,896	)
DIRECTV-related service revenues			8,637				5,782
Average DIRECTV revenues per month			2,879				1,927
Average DIRECTV per month subscriptions			2,505				1,238
DIRECTV ARPU per month		$	1.15			$	1.56

 

Average Revenue Per Subscription (“ARPU”). Management reviews this metric, and believes it may be useful to investors, in order to evaluate the potential of our subscription base to generate revenues from a variety of sources, including subscription fees, advertising, and audience measurement research. ARPU does not include rebates, revenue share and other payments to channel that reduce our GAAP revenues, and, as a result, you should not use ARPU as a substitute for measures of financial performance calculated in accordance with GAAP. Management believes it is useful to consider this metric excluding the costs associated with rebates, revenue share and other payments to channel because of the discretionary nature of these expenses and because management believes these expenses are more appropriately monitored as part of SAC. We are not aware of any uniform standards for calculating ARPU and caution that our presentation may not be consistent with that of other companies.

 

We calculate ARPU per month for TiVo-Owned subscriptions by subtracting DIRECTV-related service revenues (which includes DIRECTV subscription service revenues and DIRECTV-related advertising revenues) from our total reported service revenues and dividing by the number of months in the period. We then divide by average TiVo-Owned subscriptions for the period, calculated as described above for churn rate.

 

The decrease in ARPU per month for DIRECTV is the result of the large addition of new DIRECTV subscriptions. While these more recent DIRECTV subscription additions offer lower recurring revenues than subscriptions added during earlier phases of our DIRECTV relationship, they result in more attractive percent margins in our financial results because they generally involve limited or no acquisition costs and lower recurring expenses.

 

We calculate ARPU per month for DIRECTV subscriptions by first subtracting TiVo-Owned-related service revenues (which includes TiVo-Owned subscription service revenues and TiVo-Owned related

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advertising revenues) from our total reported service revenues. Then we divide average revenues per month for DIRECTV-related service revenues by average subscriptions for the period.

 

Forward-Looking Statements

 

This release contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements relate to, among other things, TiVo’s business development strategies, current and future partnerships, the expected future deployment and availability of the TiVo service, future TiVo service features and advertising technologies, and other factors that may affect future earnings or financial results. Forward-looking statements generally can be identified by the use of forward-looking terminology such as, “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 in development, competitive service offerings and lack of market acceptance, as well as the other potential factors described under “Factors That May Affect Future Operating Results” in the Company’s public reports filed with the Securities and Exchange Commission, including the Company’s Annual Report on Form 10-K for the fiscal year ended January 31, 2005 and Quarterly Report on Form 10-Q for the three months ended April 30, 2005 and July 31, 2005. We caution you not to place undue reliance on forward-looking statements, which reflect an analysis only and speak only as of the date hereof. TiVo disclaims any obligation to update these forward-looking statements.

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

						TIVO INC.
Date: November 29, 2005						By:		/s/    David H. Courtney
								David H. Courtney EVP & Group Executive, Corporate Products & Services Group Chief Financial Officer (Principal Financial and Accounting Officer)