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TiVo Records Initial Quarterly Profit

Alviso, Calif. — TiVo chalked up its first quarterly profit over its eight-year run in America’s living rooms, as well as recorded a hefty increase in revenue for its fiscal second quarter.

Net income for the three months, ended July 31, came in at $240,000, or break-even per share, compared with a loss of $10.8 million in the year-ago period.

Service and technology revenue in the second quarter soared 46 percent, hitting $40.7 million, up from $27.8 million in the same period the prior year.

Total subscriptions for the quarter reached nearly 3.6 million, compared with 1.9 million at the same time in 2004.

TiVo-owned gross subscriptions were 77,000 in the second quarter, compared with 78,000 year-over-year. TiVo-owned net subscriptions were 40,000, down from 63,000 in the same three months a year ago.

The company’s installed base of DirecTV subscriptions has risen to over 2.3 million in the second three months, up from 1.1 million in the second quarter last year. DirecTV accounted for 214,000 net new subscriptions in the quarter, compared with 225,000 last year.

“Driving growth in the number of subscriptions at TiVo is the biggest critical challenge we face,” said Tom Rogers, CEO. “Given the increasingly competitive environment, approaching this area more aggressively than we have in the past requires additional investment in subscription acquisition.” To this end, TiVo said it will be offering new promotional initiatives in the fall, one of which combines a hardware and service offer pointed at the holiday buying season.

However, Rogers was not optimistic about TiVo continuing its profitability run into the coming months, with the company likely losing $20 million to $25 million in its fiscal third quarter, he said, on revenue of $41 million to $43 million.

“As the results of this quarter indicate, we can hit profitability by managing to a low subscription growth number,” continued Rogers, “but, we have elected to pursue a more aggressive marketing approach in keeping with building over time a broader-scale subscription base, and in so doing, we will forgo reaching our goal of sustainable profitability in the fourth quarter.

In the second quarter, TiVo managed to reduce total subscription acquisition costs to $15.5 million from a year-ago $16.7 million. TiVo-owned churn rate for the three months rose to -1.0 percent, compared with a year-earlier -0.7 percent.

Further dampening TiVo’s progress, earlier this summer DirecTV said it would no longer promote TiVo exclusively to its 14 million customers, supporting a digital recorder build by another company. However, Comcast, one of the largest cable companies in the United States, said it would begin offering TiVo service along with its own digital recording service later this year.

For the six months, TiVo service and technology revenue rose to $80.7 million, from $52.9 million in the first half of the prior year. Net loss for the first six months was $617,000, compared with a loss of $19.8 million in the same period last year.