Rovi Corporation Reports Third Quarter Financial Performance
(ENP Newswire Via Acquire Media NewsEdge) ENP Newswire - 02 November 2012
Release date- 01112012 - Santa Clara, Calif. - Rovi Corporation (NASDAQ: ROVI) today reported financial results for the third quarter ended September 30, 2012.
The Company reported GAAP revenues of $169.6 million, compared to $181.9 million for the third quarter of 2011. GAAP net loss was $13.3 million, compared to GAAP net income of $1.8 million for the third quarter of 2011. The year-over-year decline was primarily due to a reduction in revenues from the Company's consumer electronics customers.
During the quarter, Rovi took actions that will reduce current operating costs by approximately $31 million on an annual run-rate basis through product rationalization and targeted cost reductions. Largely as a result of these reductions, Non-GAAP Adjusted Pro Forma Income was $51.5 million in the third quarter of 2012 compared to $69.0 million in the third quarter of 2011 and $39.8 million in the second quarter of 2012. Adjusted Pro Forma Income Per Common Share for the third quarter of 2012 was $0.50, compared to $0.62 for the third quarter of 2011 and $0.37 for the second quarter of 2012.
Adjusted Pro Forma Income and Adjusted Pro Forma Income Per Common Share are defined below in the section entitled Non-GAAP or Adjusted Pro Forma Information. Reconciliations between GAAP pro forma and Adjusted Pro Forma results from operations are provided in the tables below.
'Last quarter I spoke about the need to improve execution and operational efficiency, and I am very pleased with the substantial progress we have made along these lines during the past three months,' said Tom Carson, President and CEO of Rovi. 'After undertaking comprehensive, product-by-product operational reviews across the business, we focused on product rationalization and cost reductions this quarter and eliminated almost $31 million in annualized costs. Additionally, we eliminated plans to add an additional $5 million dollars in annual spending. This frees up funds to invest in new value-creating strategic initiatives and puts us on the path to achieving an operating margin more appropriate for our business. These actions also drove a sequential increase in our quarterly Adjusted Pro Forma Income Per Common Share and allowed us to raise the midpoint of our Adjusted Pro Forma Income Per Common Share estimates for the year.'
Rovi repurchased approximately 6 million shares of its common stock during the third quarter for approximately $90 million. The Company now has approximately $223 million remaining in its existing share repurchase authorization.
Rovi now anticipates fiscal year 2012 revenue of between $660 million and $670 million, and Adjusted Pro Forma Income Per Common Share of between $1.80 and $1.90. Rovi will discuss its 2012 outlook in greater detail on the conference call set to take place today, November 1, 2012, starting at 2:00 p.m. PT.
Conference Call Information
Rovi management will host a conference call today, November 1, 2012, at 2:00 p.m. PT / 5:00 p.m. ET to discuss the financial results. Investors and analysts interested in participating in the conference are welcome to call 888-549-7750 (or international +1 480-629-9723) and reference the Rovi call. 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 replay of the conference call will be available through November 2, 2012 and can be accessed by calling 800-406-7325 (or international +1 303-590-3030) and entering passcode 4570852#. A replay of the audio webcast will be available on Rovi Corporation's website approximately 1-2 hours after the live webcast ends and will remain on Rovi Corporation's website until its next quarterly earnings call.
Non-GAAP or Adjusted Pro Forma Information
Rovi Corporation provides non-GAAP Adjusted Pro Forma information. References to Adjusted Pro Forma information are references to non-GAAP pro forma measures. The Company provides Adjusted Pro Forma information to assist investors in assessing its current and future operations in the way that its management evaluates those operations. Adjusted Pro Forma Revenue, Adjusted Pro Forma Income and Adjusted Pro Forma Income Per Common Share are supplemental measures of the Company's performance that are not required by, and are not presented in accordance with GAAP. Adjusted Pro Forma information is not a substitute for any performance measure derived in accordance with GAAP, including, but not limited to, GAAP pro forma information prepared in accordance with ASC 805, Business Combinations.
Adjusted Pro Forma and GAAP pro forma measures assume the Sonic Solutions business combination and the Roxio software business disposition both occurred on January 1, 2010. Adjusted Pro Forma Income is defined as GAAP pro forma 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, caps and foreign currency collars 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 transaction, transition and integration costs, restructuring and asset impairment 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 Adjusted Pro Forma Income as a reasonable proxy for capital expenditures.
Adjusted Pro Forma Income Per Common Share is calculated using Adjusted Pro Forma Income and taking into account the benefit of the convertible debt call option when it allows the Company to purchase shares of its own stock at a price below what those shares could be purchased for in the open market.
The Company's management has evaluated and made operating decisions about its business operations primarily based upon Adjusted Pro Forma Revenue, Adjusted Pro Forma Income and Adjusted Pro Forma Income Per Common Share. Management uses Adjusted Pro Forma Income and Adjusted Pro Forma Income Per Common 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 Adjusted Pro Forma financial measures along with GAAP measures. For each such Adjusted Pro Forma 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 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 convertible debt. Management includes the benefit of the convertible debt call option, which allows the Company to purchase shares of its own stock at approximately $28.28, and is excluded from GAAP EPS calculation as it is anti-dilutive, because the pragmatic reality is management would exercise this option rather than allow this dilution to occur. This convertible debt call option was exercised in August 2011.
Management is using these Adjusted Pro Forma measures to help it make budgeting decisions, including decisions that affect operating expenses and operating margin. Further, Adjusted Pro Forma financial information helps management track actual performance relative to financial targets. Making Adjusted Pro Forma 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 Adjusted Pro Forma measures has limitations, including the fact that management must exercise judgment in determining which types of charges should be excluded from the Adjusted Pro Forma financial information. Because other companies, including companies similar to Rovi Corporation, may calculate their non-GAAP financial measures differently than the Company calculates its Adjusted Pro Forma measures, these Non-GAAP measures may have limited usefulness in comparing companies. Management believes, however, that providing Adjusted Pro Forma financial information, in addition to GAAP financial information, facilitates consistent comparison of the Company's financial performance over time. The Company provides Adjusted Pro Forma 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 pro forma and Adjusted Pro Forma results of operations are provided in the tables below.
Rovi Business and Operating Highlights:
Continued to license new platforms, signing an agreement that covers Nintendo's TVii
Extended the term of its existing license agreement with BSkyB for interactive program guide (IPG) patents
Licensed another major European retailer for its own-branded CE brands
Licensed Korean digital satellite broadcaster SkyLife, putting all significant Korean pay-TV operators under license
Year-to-date patent applications almost double the same period last year
Renewed 39 North American MSOs
Signed first Latin America TotalGuide service provider customer
On track to deploy TotalGuide solutions at six MSOs during the first half of 2013
Signed DivX Plus Streaming agreements with two IC companies and four OEMs Over 780 million devices deployed with DivX technology Rovi Entertainment Store:
Announced agreement with Sainsbury's to power a new digital video service in the UK
Toys'R'Us Movies web store launched in the US
Launched Best Buy CinemaNow:
on Android tablets and phones in the US and Canada
iOS play-back app in the US and Canada for iPad, iPhone and iPod Touch
on PlayStation 3 in Canada
Dixon's KNOWHOW Movies live in the UK on connected LG TVs and on connected Samsung Blu-ray Players
Media Markt live in Germany on Western Digital WD TV Live Box, VideoWeb TV and certain Technisat Set-top Boxes
Total live storefronts now totals approximately 1.1 million, an 18% increase over last quarter
Repeat advertising campaigns, including Ford, Mattel, Hellmann's, GO RVing and Bank of Montreal in North America; and Red Bull in Europe
Launched a new polling feature for the Rovi Advertising Network
Extended the Rovi Advertising Network to include Sony Bravia TVs and connected Blu-Ray players in Europe
Renewed major handset manufacturer for data on mobile devices
Expanded relationship with major Korean CE manufacturer to include worldwide listings data
Added metadata services to an existing Canadian MSO customer
Expanded Rovi's entertainment database to include Brazilian TV, movie and celebrity information and announced plans to include similar data for Portugal and Russia
Enhanced Rovi Music by adding descriptive track-level attributes for 11M+ tracks to enable finely tuned recommendations and improved playlisting
Further enhanced social integration by adding thousands of links to Twitter handles and Facebook pages for celebrities, movies and TV shows
For additional business metrics, see our investor presentation located at: http://ir.rovicorp.com/presentations.aspx iid=4206196
Rovi Corporation is focused on revolutionizing the digital entertainment landscape by delivering solutions that enable consumers to intuitively connect to new entertainment from many sources and locations. The company also provides extensive entertainment discovery solutions for television, movies, music and photos to its customers in the consumer electronics, cable and satellite, entertainment and online distribution markets. These solutions, complemented by industry leading entertainment data, create the connections between people and technology, and enable them to discover and manage entertainment in an enjoyable form.
Rovi holds over 5,300 issued or pending patents worldwide and is headquartered in Santa Clara, California, with numerous offices across the United States and around the world including Japan, China, Luxembourg, and the United Kingdom. More information about Rovi can be found at http://www.rovicorp.com/.
Forward Looking Statements
All statements contained herein that are not statements of historical fact, including statements that use the words 'will,' 'believes,' 'anticipates,' 'estimates,' 'expects,' 'intends' or 'looking to the future' 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 and earnings, business strategies, and future opportunities for product, market or customer expansion.
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 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 September 30, 2012 and such other documents as are filed with the Securities and Exchange Commission from time to time (available at http://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.
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