TiVo (TIVO) Needs to Overcome 'Settlement Cliff' with Results - B. Riley

TiVo (NASDAQ: TIVO) is scheduled to report Q3 results after the close on Tuesday, 11/24 and while we are comfortable with our estimates, (which we believe has become necessary given the underperformance of TIVO shares in recent years).

B. Riley analyst, Eric Wold, sees service & technology consensus at $101.2MM, the lower end of the $100-103MM guidance range. However, the bigger issue than near term results, may be management’s ability to drive EBITDA growth to the point where the “settlement cliff” can be overcome. TIVO successfully litigated the ‘389 patent to the tune of $1.6B in proceeds, this has recently been viewed as more of a negative by investors given the difficult “settlement cliff” of EBITDA to overcome when those proceeds run out in FY19.

Two possible offsetting events that will be discussed on the call include:

The overseas license agreement with Millicom was announced after Q2 results so this call will represent the first opportunity for management to provide additional color on its significance. TIVO shares are mostly unchanged since its announcement, possibly due to the sparse 8-K. TiVo could begin deployments as soon as late 2016 and with 7.5MM HHs passed and a goal to reach 10.0MM “near-term”, Millicom represents the largest overseas licensee announced by TiVo and one that could accelerate growth beginning in FY18.

TIVO only announced the litigation with Samsung two months ago and movement in the case could be multiple quarters away, we believe investors have underappreciated the opportunity at hand. Not only does the litigation include two patents that have previously been successfully litigated by TIVO (driving $1.6B in settlement proceeds) – which we believe is a fairly positive indicator to the likely outcome of this case – but the additional patents included could help clear away any haze into TIVO’s post-2018 IP monetization opportunity.

TIVO is reporting results on Tuesday, 11/24 after the market close.

The firm maintained a Buy rating and $20 PT on TIVO.

For an analyst ratings summary and ratings history on TiVo click here. For more ratings news on TiVo click here.

Shares of TiVo closed at $8.70 yesterday.

You May Also Be Interested In

• Boston Beer Company (SAM) PT Lowered to $325 at Jefferies
• Spotify (SPOT) PT Raised to $340 at Evercore ISI following strong Q1 results
• Invesco (IVZ) PT Lowered to $17 at BMO Capital