NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(1) Basis of Presentation and Summary of Significant Accounting Policies
Description of Business
On
April 28, 2016
, Rovi Corporation ("
Rovi
") and
TiVo Inc.
(renamed
TiVo Solutions Inc.
("
TiVo Solutions
")) entered into an Agreement and Plan of Merger (the “Merger Agreement”) for
Rovi
to acquire
TiVo Solutions
in a cash and stock transaction (the "
TiVo Acquisition
"). Following consummation of the
TiVo Acquisition
on
September 7, 2016
(the "
TiVo Acquisition Date
"),
TiVo Corporation
(the "Company"), a Delaware corporation founded in April 2016 as Titan Technologies Corporation and then a wholly-owned subsidiary of
Rovi
, owns both
Rovi
and
TiVo Solutions
. The common stocks of
Rovi
and
TiVo Solutions
were de-registered after completion of the
TiVo Acquisition
.
The Company is a global leader in media and entertainment products that power consumer entertainment experiences and enable its customers to deepen and further monetize their audience relationships. The Company provides a broad set of intellectual property, cloud-based services and set-top box solutions that enable people to find and enjoy online video, television, movies and music entertainment, including content discovery through device embedded and cloud-based interactive program guides (“IPGs”), digital video recorders ("DVRs"), natural language voice and text search, cloud-based recommendations services and our extensive entertainment metadata (i.e., descriptive information, promotional images or other content that describes or relates to television shows, videos, movies, sports, music, books, games or other entertainment content). The Company's integrated platform includes software and cloud-based services that provide an all-in-one approach for navigating a fragmented universe of content by seamlessly combining live, recorded, video-on-demand ("VOD") and over-the-top ("OTT") content into one intuitive user interface with simple universal search, discovery, viewing and recording, to create a unified viewing experience. The Company distributes its products through service provider relationships, integrated into third party devices and directly to retail consumers. The Company also offers data analytics solutions, including advertising and programming promotion optimizers, which enable advanced audience targeting in linear television advertising. Solutions are sold globally to cable, satellite, consumer electronics, entertainment, media and online distribution companies, and, in the United States, we sell a suite of DVR and whole home media products and services directly to retail consumers.
Basis of Presentation and Principles of Consolidation
Rovi
is the predecessor registrant to
TiVo Corporation
and therefore, for periods prior to the
TiVo Acquisition Date
, the
Condensed Consolidated Financial Statements
reflect the financial position, results of operations and cash flows of
Rovi
. As used herein, the “Company” refers to
Rovi
when referring to periods prior to and including the
TiVo Acquisition Date
and to
TiVo Corporation
when referring to periods subsequent to the
TiVo Acquisition Date
. The Company’s results of operations include the operations of
TiVo Solutions
after the
TiVo Acquisition Date
. See Note 2 for additional information on the
TiVo Acquisition
.
The accompanying unaudited
Condensed Consolidated Financial Statements
have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission. Certain information and disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") have been condensed or omitted in accordance with such rules and regulations. However, the Company believes the disclosures made are adequate to make the information not misleading. In the opinion of management, the accompanying unaudited
Condensed Consolidated Financial Statements
reflect all adjustments, consisting only of normal recurring adjustments, which in the opinion of management, are considered necessary to present fairly the results for the periods presented.
The information contained in this
Quarterly Report on Form 10-Q
should be read in conjunction with the audited financial statements and notes thereto and other disclosures contained in the Company’s
Annual Report on Form 10-K
for the year ended
December 31, 2016
. The
Condensed Consolidated Statements of Operations
and the Condensed Consolidated Statements of Cash Flows for the interim periods presented are not necessarily indicative of the results to be expected for the year ending
December 31, 2017
, for any future year, or for any other future interim period.
The accompanying unaudited
Condensed Consolidated Financial Statements
include the accounts of TiVo Corporation and subsidiaries and affiliates in which the Company has a controlling financial interest after the elimination of intercompany accounts and transactions.
Certain prior year amounts have been reclassified to conform to the current year presentation.
Use of Estimates
The preparation of the
Condensed Consolidated Financial Statements
in conformity with U.S. GAAP requires management to make estimates, assumptions and judgments that affect the reported amounts of assets and liabilities and related disclosures at the date of the financial statements and the results of operations for the reporting period. On an ongoing basis, management evaluates its estimates, including those related to revenue recognition, long-lived asset impairment, including goodwill and intangible assets, equity-based compensation and income taxes. Actual results may differ from those estimates.
Concentrations of Risk
Customers representing 10% or more of
Total Revenues, net
were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
AT&T Inc. ("AT&T")
|
14
|
%
|
|
13
|
%
|
|
14
|
%
|
|
13
|
%
|
Substantially all of the Company's revenue from AT&T is reported in the
Intellectual Property Licensing
segment.
Customers representing 10% or more of
Accounts receivable, net
were as follows.
|
|
|
|
|
|
|
|
June 30, 2017
|
|
December 31, 2016
|
AT&T
|
13
|
%
|
|
15
|
%
|
DISH Network L.L.C ("DISH")
|
13
|
%
|
|
(1)
|
|
Virgin Media Inc.
|
(1)
|
|
|
13
|
%
|
(1) Customer represented less than 10% of
Accounts receivable, net
.
The TiVo service is enabled through the use of a DVR manufactured by a third-party contract manufacturer. The Company also relies on third-parties with whom it outsources supply-chain activities related to inventory warehousing, order fulfillment, distribution and other direct sales logistics. The Company cannot be sure that these parties will perform their obligations as expected or that any revenue, cost savings or other benefits will be derived from the efforts of these parties. If any of these parties breaches or terminates their agreement with the Company or otherwise fails to perform their obligations in a timely manner, the Company may be delayed or prevented from commercializing its products and services.
In instances where a supply agreement does not exist and suppliers fail to perform their obligations, the Company may be unable to find alternative suppliers or deliver its products and services to its customers on time, if at all. The Company does not have a long-term written supply agreement with Broadcom Corporation, the sole supplier of the system controller for its DVR.
Recent Accounting Pronouncements
Standards Recently Adopted
In January 2017, the Financial Accounting Standards ("FASB") simplified the goodwill impairment test by eliminating its second step. Pursuant to the simplified test, an entity performs its annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An impairment charge is recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value. The Company elected to early adopt the simplified test. Application of this guidance on January 1, 2017 did not have an effect on the
Condensed Consolidated Financial Statements
.
In March 2016, the FASB simplified certain areas of accounting for stock-based compensation, including accounting for the income tax consequences of stock-based compensation, determining the classification of awards as either equity or liabilities, presenting certain items within the statement of cash flows and introducing an accounting policy election to account for forfeitures of nonvested awards as they occur. Application of this guidance on January 1, 2017 increased the Company's deferred tax assets and the related valuation allowance by
$70.1 million
, resulting in no material effect on the
Condensed Consolidated Financial Statements
. On adoption, the Company did not change its accounting policy of estimating forfeitures for nonvested awards subject to service conditions.
In March 2016, the FASB clarified the assessment of whether contingent options that can accelerate the payment of principal on debt instruments requires bifurcation as an embedded derivative. The amendments require a contingent option embedded in a debt instrument to be evaluated for possible separate accounting as a derivative instrument without regard to the nature of the exercise contingency. Application of the clarified guidance on January 1, 2017 did not have an effect on the
Condensed Consolidated Financial Statements
.
In July 2015, the FASB changed the measurement principle for inventory from the lower of cost or market to the lower of cost and net realizable value for entities that do not use the last-in, first-out ("LIFO") or retail inventory method. The changes also eliminated the requirement to consider replacement cost or net realizable value less an approximately normal profit margin when measuring inventory for entities that do not use the LIFO or retail inventory method. Application of the changed measurement principle for inventory on January 1, 2017 did not have an effect on the
Condensed Consolidated Financial Statements
.
Standards Pending Adoption
In March 2017, the FASB shortened the amortization period for certain callable debt securities held at a premium to the earliest call date. Application of the shortened amortization period is effective for the Company in the first quarter of 2019 on a modified retrospective basis, with early application permitted. The Company does not expect application of the shortened amortization period to have a material effect on its
Condensed Consolidated Financial Statements
.
In January 2017, the FASB clarified the definition of a business. The clarified guidance provides a more defined framework to use in determining when a set of assets and activities constitute a business. The clarified definition is effective for the Company in the first quarter of 2018 on a prospective basis, with early application permitted. The Company does not expect application of the clarified definition of a business to have a material effect on its
Condensed Consolidated Financial Statements
.
In October 2016, the FASB amended its guidance on the tax effects of intra-entity transfers of assets other than inventory. The amended guidance requires an entity to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. The amendments are effective for the Company in the first quarter of 2018 and is required to be applied on a modified retrospective basis. Early application is permitted. The Company is evaluating the effect of application on its
Condensed Consolidated Financial Statements
.
In August 2016, the FASB issued clarifying guidance on the presentation of eight specific cash flow issues for which previous guidance was either unclear or not specific. The clarified guidance is effective for the Company in the first quarter of 2018 and is required to be applied on a retrospective basis. Early application is permitted. The Company is evaluating the effect of application on its
Condensed Consolidated Financial Statements
.
In June 2016, the FASB issued updated guidance that requires entities to use a current expected credit loss model to measure credit-related impairments for financial instruments held at amortized cost. The current expected credit loss model is based on relevant information about past events, including historical experience, current conditions and reasonable and supportable forecasts that affect collectibility. Current expected credit losses, and subsequent adjustments, represent an estimate of lifetime expected credit losses that are recorded as an allowance deducted from the amortized cost basis of the financial instrument. The updated guidance also amends the current other-than-temporary impairment model for available-for-sale debt securities by requiring the recognition of impairments for credit-related losses through an allowance and eliminating the length of time a security has been in an unrealized loss position as a consideration in the determination of whether a credit loss exists. The guidance is effective for the Company in the first quarter of 2020, and is effective using a modified retrospective approach for application of the current expected credit loss model to financial instruments and a prospective approach for credit losses on available-for-sale debt securities. Early application is permitted. The Company is evaluating the effect of application on its
Condensed Consolidated Financial Statements
.
In March 2016, the FASB provided guidance on the derecognition of prepaid stored-value product liabilities, such as gift cards. The guidance is effective for the Company in the first quarter of 2018 and may be applied using a full retrospective or modified retrospective approach, with early adoption permitted. The Company is evaluating the effect of application on its
Condensed Consolidated Financial Statements
.
In February 2016, the FASB issued a new accounting standard for leases. The new standard generally requires the recognition of financing and operating lease liabilities and corresponding right-of-use assets on the balance sheet. For financing leases, a lessee recognizes amortization of the right-of-use asset as an operating expense over the lease term separately from interest on the lease liability. For operating leases, a lessee recognizes its total lease expense as an operating expense over the
lease term. The amendments are effective for the Company in the first quarter of 2019 using a modified retrospective approach, with early application permitted. The Company is evaluating the effect of application on its
Condensed Consolidated Financial Statements
and expects that its existing operating lease commitments will be recognized as operating lease liabilities and right-of-use assets.
In May 2014, the FASB issued an amended accounting standard for revenue recognition. The amendments address how revenue is recognized in order to improve comparability between the financial statements of companies applying U.S. GAAP and International Financial
Reporting Standards. The core principle of the amended revenue standard is for an entity to recognize revenue to depict the transfer of
promised
goods or services to customers in amounts that reflect the consideration to which the entity expects to be entitled in
exchange for those goods or services. In addition, the amended revenue recognition standard provides guidance related to the capitalization and amortization of the incremental costs of obtaining a contract. The guidance also requires enhanced disclosures regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity’s contracts with customers. The amendments are effective for the Company in the first quarter of
2018 and may be applied using a full retrospective or modified retrospective approach. The Company expects to initially apply the amendments in the first quarter of
2018 and is evaluating
the effect the amendments and transition alternatives will have on its
Condensed Consolidated Financial Statements
.
While the Company has not finalized its evaluation of the effect that the amended revenue recognition standard will have on its
Condensed Consolidated Financial Statements
, the Company expects that revenue from both its fixed-fee and per-unit intellectual property licensees may be materially impacted. Under the amended revenue recognition standard, the Company may be required to recognize a substantial portion of license fees under a fixed-fee intellectual property license agreement at inception of the agreement, as opposed to recognizing the license fees ratably over the license term, which is its practice in accordance with existing U.S. GAAP. This could impact revenue recognition for all fixed-fee intellectual property license agreements, including certain fixed-fee agreements that license the Company's existing intellectual property portfolio and intellectual property that is added to the Company's portfolio during the term of the license. In addition, in accordance with existing U.S. GAAP, the Company currently recognizes revenue from per-unit royalty licenses with consumer electronic manufacturers and third party IPG providers in the period the licensee reports its sales, which is generally in the quarter after the underlying sales by the licensee occurred. On adoption of the amended revenue recognition standard, per-unit royalties are recognized as revenue during the period in which the licensee's sales are estimated to have occurred, which results in an adjustment to revenue when actual amounts are subsequently reported by the Company's licensees. In addition, some deferred revenue recognized in accordance with existing U.S. GAAP could be eliminated as part of the effect of adoption. In accordance with existing U.S. GAAP, cost deferrals related to obtaining a contract are minimal; however, under the amended revenue recognition standard, the deferral of incremental costs to obtain a contract are expected to be more significant and may be amortized over period of time commensurate with the period of benefit which may exceed the contract term. The Company is currently assessing the types and amounts of costs that may be eligible for deferral under the amended revenue recognition standard, and the associated amortization period. The Company has not selected a transition approach.
(2) Acquisitions
TiVo Acquisition
On
September 7, 2016
,
Rovi
completed its acquisition of
TiVo Solutions
, a global leader in next-generation video technology and innovative cloud-based software-as-a-service solutions. On the
TiVo Acquisition Date
, each issued and outstanding share of
TiVo Solutions
common stock (other than shares of
TiVo Solutions
common stock held by those
TiVo Solutions
stockholders who had properly demanded and not waived or withdrawn appraisal rights under Delaware law as further discussed below) automatically converted into the right to receive
$2.75
per share in cash and
0.3853
(the “Exchange Ratio”) validly issued, fully paid and non-assessable shares of
TiVo Corporation
common stock. As the employee restricted stock awards, stock options and performance-based restricted stock awards remained outstanding after the
TiVo Acquisition Date
, employee holders were not eligible for the cash component of the merger consideration and the number of
TiVo Corporation
restricted stock awards or stock options delivered at the
TiVo Acquisition Date
was based on an exchange ratio of
0.5186
.
TiVo Solutions
' results of operations and cash flows have been included in the
Condensed Consolidated Financial Statements
for periods subsequent to
September 7, 2016
. For the
three months ended June 30, 2017
,
TiVo Corporation
's results include revenue and operating income from
TiVo Solutions
of
$94.9 million
and
$8.5 million
, respectively. For the
six months ended June 30, 2017
,
TiVo Corporation
's results include revenue and operating loss from
TiVo Solutions
of
$179.7 million
and
$1.3 million
, respectively.
Preliminary Purchase Price
In November 2016, holders of
9.1 million
shares of
TiVo Solutions
common stock outstanding at the
TiVo Acquisition Date
who did not vote to approve the
TiVo Acquisition
filed a petition for appraisal ("Dissenting Holders", and the shares held by such Dissenting Holders, the "Dissenting Shares") in the Delaware Court of Chancery. See
Note 10
for additional information about the claims asserted by the Dissenting Holders.
As of
December 31, 2016
,
$79.0 million
was included in the aggregate merger consideration based on
9.1 million
Dissenting Shares assuming a right to receive
0.3853
shares of
TiVo Corporation
common stock, or
3.5 million
shares of
TiVo Corporation
common stock. In addition, on the
TiVo Acquisition Date
,
TiVo Corporation
paid the cash portion of the merger consideration related to the Dissenting Shares, which was
$2.75
per share, to an account held by the exchange agent in the
TiVo Acquisition
. As of
December 31, 2016
, the exchange agent in the
TiVo Acquisition
was holding
$25.3 million
in cash, substantially all of which related to the Dissenting Holders. The accrued merger consideration was presented in
Accounts payable and accrued expenses
on the
Condensed Consolidated Balance Sheets
as of
December 31, 2016
.
On March 27, 2017,
TiVo Corporation
agreed to settle the claims of the Dissenting Holders for
$117.0 million
, which was paid in cash in April 2017. In connection with the settlement, in March 2017, the exchange agent in the
TiVo Acquisition
returned
$25.1 million
in cash related to the Dissenting Holders to
TiVo Corporation
. As the amount paid to Dissenting Holders resulted from a settlement other than a judgment from the Delaware Court of Chancery, a
Litigation settlement
loss of
$12.9 million
was recognized in the
Condensed Consolidated Statements of Operations
for the
six months ended June 30, 2017
. The
Litigation settlement
loss represents the settlement amount in excess of the amount due to the Dissenting Holders as merger consideration.
Purchase Price Allocation
The
Condensed Consolidated Financial Statements
have been prepared using the acquisition method of accounting under U.S. GAAP with
Rovi
treated as the acquirer of
TiVo Solutions
for accounting purposes. Under the acquisition method of accounting, the purchase consideration delivered by
TiVo Corporation
to complete the acquisition was allocated to the assets acquired and liabilities assumed generally based on their fair value at the
TiVo Acquisition Date
.
TiVo Corporation
has made significant estimates and assumptions in determining the preliminary fair value of the assets acquired and liabilities assumed based on discussions with
TiVo Solutions
’ management and
TiVo Corporation
’s informed insights into the industries in which
TiVo Solutions
competes. To complete the allocation of the purchase price to the assets acquired and liabilities assumed at their
TiVo Acquisition Date
fair value, the measurement of the purchase price, the measurement of certain pre-acquisition contingencies and income tax returns for
TiVo Solutions
for the period prior to the
TiVo Acquisition Date
must be completed. As a result, as of
June 30, 2017
, the purchase price and purchase price allocation are preliminary and subject to change.
The final fair value of assets acquired and liabilities assumed may differ materially from the preliminary fair value estimates presented in these
Condensed Consolidated Financial Statements
, and such differences could have a material impact on the accompanying
Condensed Consolidated Financial Statements
and
TiVo Corporation
’s future results of operations and financial position. Final estimates of fair value are expected to be completed as soon as possible, but no later than one year from the
TiVo Acquisition Date
.
Changes to the purchase price allocation for the period from
December 31, 2016
to
June 30, 2017
were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
Adjustments
|
|
June 30, 2017
|
Goodwill
|
$
|
468,330
|
|
|
$
|
1,357
|
|
|
$
|
469,687
|
|
Accounts payable and accrued expenses and other long-term liabilities
|
(73,456
|
)
|
|
(1,200
|
)
|
|
(74,656
|
)
|
Deferred tax liabilities, net
|
(97,305
|
)
|
|
(157
|
)
|
|
(97,462
|
)
|
Total merger consideration
|
1,129,726
|
|
|
—
|
|
|
1,129,726
|
|
If the measurement period adjustments had been recognized as of the
TiVo Acquisition Date
, their effect on
Net loss
for the
three and six months ended June 30, 2017
would have been immaterial.
Unaudited Pro Forma Information
The following unaudited pro forma financial information (in thousands, except per share amounts) has been adjusted to give effect to the
TiVo Acquisition
as if it were consummated on January 1, 2015. The unaudited pro forma financial information is presented for informational purposes only. The unaudited pro forma financial information is not intended to represent or be indicative of the results of operations that would have been reported had the
TiVo Acquisition
occurred on January 1, 2015 and should not be taken as representative of future results of operations of the combined company.
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
|
2016
|
|
2016
|
Total Revenues, net
|
$
|
204,719
|
|
|
$
|
408,161
|
|
Net loss
|
$
|
(24,978
|
)
|
|
$
|
(83,194
|
)
|
Basic loss per share
|
$
|
(0.22
|
)
|
|
$
|
(0.72
|
)
|
Diluted loss per share
|
$
|
(0.22
|
)
|
|
$
|
(0.72
|
)
|
The unaudited pro forma financial information includes material, nonrecurring pro forma adjustments directly attributable to the
TiVo Acquisition
primarily related to a reduction in revenues and costs to adjust
TiVo Solutions
' historical deferred revenue amortization and deferred technology cost amortization to fair value, the elimination of intercompany revenue as
TiVo Solutions
purchased products from
Rovi
, adjustments to the amortization of intangible assets, adjustments for direct and incremental acquisition-related costs and the related tax effects, as well as
Rovi
's deferred tax asset valuation allowance release as a result of the
TiVo Acquisition
reflected in the historical financial statements. The unaudited pro forma financial information does not include any cost saving synergies from operating efficiencies or the effect of incremental costs incurred from integrating the companies.
(3) Discontinued Operations and Assets Held for Sale
DivX and MainConcept
During the fourth quarter of 2013, the Company determined it would pursue selling its DivX and MainConcept businesses. DivX and MainConcept were providers of high-quality video compression-decompression software and a software library that enabled the distribution of content across the internet and through recordable media, in either physical or streamed forms. On March 31, 2014, the Company sold its DivX and MainConcept businesses for
$52.5 million
in cash, plus up to
$22.5 million
in additional payments based on the achievement of certain revenue milestones over the
three years
following the acquisition. In the
three years
following the acquisition of DivX and MainConcept, no additional payments were received as the revenue milestones were not satisfied.
(4) Financial Statement Details
Accounts receivable, net
(in thousands):
|
|
|
|
|
|
|
|
|
|
June 30, 2017
|
|
December 31, 2016
|
Accounts receivable, gross
|
$
|
187,415
|
|
|
$
|
149,105
|
|
Less: Allowance for doubtful accounts
|
(2,545
|
)
|
|
(1,963
|
)
|
Accounts receivable, net
|
$
|
184,870
|
|
|
$
|
147,142
|
|
Inventory
(in thousands):
|
|
|
|
|
|
|
|
|
|
June 30, 2017
|
|
December 31, 2016
|
Raw materials
|
$
|
3,665
|
|
|
$
|
1,595
|
|
Finished goods
|
7,254
|
|
|
11,591
|
|
Inventory
|
$
|
10,919
|
|
|
$
|
13,186
|
|
Property and equipment, net
(in thousands):
|
|
|
|
|
|
|
|
|
|
June 30, 2017
|
|
December 31, 2016
|
Computer software and equipment
|
$
|
145,286
|
|
|
$
|
136,776
|
|
Leasehold improvements
|
26,813
|
|
|
26,201
|
|
Furniture and fixtures
|
7,018
|
|
|
6,627
|
|
Property and equipment, gross
|
179,117
|
|
|
169,604
|
|
Less: Accumulated depreciation and amortization
|
(138,819
|
)
|
|
(121,232
|
)
|
Property and equipment, net
|
$
|
40,298
|
|
|
$
|
48,372
|
|
Accounts payable and accrued expenses
(in thousands):
|
|
|
|
|
|
|
|
|
|
June 30, 2017
|
|
December 31, 2016
|
Accounts payable
|
$
|
11,107
|
|
|
$
|
29,218
|
|
Accrued compensation and benefits
|
32,160
|
|
|
54,571
|
|
Accrual for merger consideration
|
—
|
|
|
78,981
|
|
Other accrued liabilities
|
77,622
|
|
|
63,681
|
|
Accounts payable and accrued expenses
|
$
|
120,889
|
|
|
$
|
226,451
|
|
(5) Investments
The amortized cost and fair value of cash, cash equivalents and marketable securities by significant investment category were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2017
|
|
Amortized Cost
|
|
Unrealized
Gains
|
|
Unrealized
Losses
|
|
Fair Value
|
Cash
|
$
|
31,211
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
31,211
|
|
Cash equivalents - Money market funds
|
58,684
|
|
|
—
|
|
|
—
|
|
|
58,684
|
|
Cash and cash equivalents
|
$
|
89,895
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
89,895
|
|
|
|
|
|
|
|
|
|
Auction rate securities
|
$
|
10,800
|
|
|
$
|
—
|
|
|
$
|
(216
|
)
|
|
$
|
10,584
|
|
Corporate debt securities
|
101,147
|
|
|
5
|
|
|
(133
|
)
|
|
101,019
|
|
Foreign government obligations
|
2,247
|
|
|
—
|
|
|
(4
|
)
|
|
2,243
|
|
U.S. Treasuries / Agencies
|
112,808
|
|
|
1
|
|
|
(301
|
)
|
|
112,508
|
|
Marketable securities
|
$
|
227,002
|
|
|
$
|
6
|
|
|
$
|
(654
|
)
|
|
$
|
226,354
|
|
Cash, cash equivalents and marketable securities
|
|
|
|
|
|
|
$
|
316,249
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
Amortized Cost
|
|
Unrealized
Gains
|
|
Unrealized
Losses
|
|
Fair Value
|
Cash
|
$
|
50,969
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
50,969
|
|
Cash equivalents - Money market funds
|
141,658
|
|
|
—
|
|
|
—
|
|
|
141,658
|
|
Cash and cash equivalents
|
$
|
192,627
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
192,627
|
|
|
|
|
|
|
|
|
|
Auction rate securities
|
$
|
10,800
|
|
|
$
|
—
|
|
|
$
|
(432
|
)
|
|
$
|
10,368
|
|
Corporate debt securities
|
106,128
|
|
|
8
|
|
|
(215
|
)
|
|
105,921
|
|
Foreign government obligations
|
2,246
|
|
|
—
|
|
|
(8
|
)
|
|
2,238
|
|
U.S. Treasuries / Agencies
|
127,734
|
|
|
14
|
|
|
(262
|
)
|
|
127,486
|
|
Marketable securities
|
$
|
246,908
|
|
|
$
|
22
|
|
|
$
|
(917
|
)
|
|
$
|
246,013
|
|
Cash, cash equivalents and marketable securities
|
|
|
|
|
|
|
$
|
438,640
|
|
The Company attributes unrealized losses on its auction rate securities to liquidity issues rather than credit issues. The Company’s auction rate securities are comprised solely of AAA-rated federally insured student loans. The Company continues to earn interest on its auction rate securities and has the ability and intent to hold these securities until they recover their amortized cost.
As of
June 30, 2017
, the amortized cost and fair value of marketable securities, by contractual maturity, were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
Amortized Cost
|
|
Fair Value
|
Due in less than 1 year
|
$
|
123,750
|
|
|
$
|
123,576
|
|
Due in 1-2 years
|
92,452
|
|
|
92,194
|
|
Due in more than 2 years
|
10,800
|
|
|
10,584
|
|
Total
|
$
|
227,002
|
|
|
$
|
226,354
|
|
As of
June 30, 2017
and
December 31, 2016
, non-marketable equity securities accounted for under the equity method had a carrying amount of
$0.9 million
and
$1.6 million
, respectively, and non-marketable equity securities accounted for under the cost method had a carrying amount of
$2.7 million
and
$2.7 million
, respectively. We periodically review our non-marketable equity securities for potential impairment.
No
impairments were recognized during the
three and six months ended June 30, 2017
on non-marketable equity securities.
(6) Fair Value Measurements
Fair Value Hierarchy
The Company uses valuation techniques that are based on observable and unobservable inputs to measure fair value. Observable inputs are developed using publicly available information and reflect the assumptions market participants would use, while unobservable inputs are developed using the best information available about the assumptions market participants would use. Fair value measurements are classified in a hierarchy that gives the highest priority to observable inputs and the lowest priority to unobservable inputs. Assets and liabilities are classified in the fair value hierarchy based on the lowest level input that is significant to the fair value measurement in its entirety:
Level 1.
Quoted prices in active markets for identical assets or liabilities.
Level 2.
Inputs other than Level 1 inputs that are observable for the asset or liability, either directly or indirectly, such as quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, or market-corroborated inputs.
Level 3.
Unobservable inputs for the asset or liability.
Recurring Fair Value Measurements
Assets and liabilities reported at fair value on a recurring basis in the
Condensed Consolidated Balance Sheets
were classified in the fair value hierarchy as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2017
|
|
Total
|
|
Quoted Prices in
Active Markets
(Level 1)
|
|
Significant Other
Observable Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
Assets
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
|
|
|
|
|
Money market funds
|
$
|
58,684
|
|
|
$
|
58,684
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Short-term marketable securities
|
|
|
|
|
|
|
|
Corporate debt securities
|
72,596
|
|
|
—
|
|
|
72,596
|
|
|
—
|
|
Foreign government obligations
|
2,243
|
|
|
—
|
|
|
2,243
|
|
|
—
|
|
U.S. Treasuries / Agencies
|
48,737
|
|
|
—
|
|
|
48,737
|
|
|
—
|
|
Long-term marketable securities
|
|
|
|
|
|
|
|
Auction rate securities
|
10,584
|
|
|
—
|
|
|
—
|
|
|
10,584
|
|
Corporate debt securities
|
28,423
|
|
|
—
|
|
|
28,423
|
|
|
—
|
|
U.S. Treasuries / Agencies
|
63,771
|
|
|
—
|
|
|
63,771
|
|
|
—
|
|
Total Assets
|
$
|
285,038
|
|
|
$
|
58,684
|
|
|
$
|
215,770
|
|
|
$
|
10,584
|
|
Liabilities
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses
|
|
|
|
|
|
|
|
Cubiware contingent consideration
|
$
|
(2,604
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(2,604
|
)
|
Other long-term liabilities
|
|
|
|
|
|
|
|
Cubiware contingent consideration
|
(3,111
|
)
|
|
—
|
|
|
—
|
|
|
(3,111
|
)
|
Interest rate swaps
|
(16,751
|
)
|
|
—
|
|
|
(16,751
|
)
|
|
—
|
|
Total Liabilities
|
$
|
(22,466
|
)
|
|
$
|
—
|
|
|
$
|
(16,751
|
)
|
|
$
|
(5,715
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
Total
|
|
Quoted Prices in
Active Markets
(Level 1)
|
|
Significant Other
Observable Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
Assets
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
|
|
|
|
|
Money market funds
|
$
|
141,658
|
|
|
$
|
141,658
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Short-term marketable securities
|
|
|
|
|
|
|
|
Corporate debt securities
|
76,568
|
|
|
—
|
|
|
76,568
|
|
|
—
|
|
U.S. Treasuries / Agencies
|
40,516
|
|
|
—
|
|
|
40,516
|
|
|
—
|
|
Long-term marketable securities
|
|
|
|
|
|
|
|
Auction rate securities
|
10,368
|
|
|
—
|
|
|
—
|
|
|
10,368
|
|
Corporate debt securities
|
29,353
|
|
|
—
|
|
|
29,353
|
|
|
—
|
|
Foreign government obligations
|
2,238
|
|
|
—
|
|
|
2,238
|
|
|
—
|
|
U.S. Treasuries / Agencies
|
86,970
|
|
|
—
|
|
|
86,970
|
|
|
—
|
|
Total Assets
|
$
|
387,671
|
|
|
$
|
141,658
|
|
|
$
|
235,645
|
|
|
$
|
10,368
|
|
Liabilities
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses
|
|
|
|
|
|
|
|
Cubiware contingent consideration
|
$
|
(1,988
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(1,988
|
)
|
Interest rate swaps
|
(648
|
)
|
|
—
|
|
|
(648
|
)
|
|
—
|
|
Other long-term liabilities
|
|
|
|
|
|
|
|
Cubiware contingent consideration
|
(3,285
|
)
|
|
—
|
|
|
—
|
|
|
(3,285
|
)
|
Interest rate swaps
|
(19,303
|
)
|
|
—
|
|
|
(19,303
|
)
|
|
—
|
|
Total Liabilities
|
$
|
(25,224
|
)
|
|
$
|
—
|
|
|
$
|
(19,951
|
)
|
|
$
|
(5,273
|
)
|
The Company recognizes transfers between levels of the fair value hierarchy at the end of the reporting period. For the
three and six months ended June 30, 2017 and 2016
, there were no transfers between levels of the fair value hierarchy.
Changes in the fair value of assets and liabilities classified in Level 3 of the fair value hierarchy were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
2017
|
|
2016
|
|
Auction rate securities
|
|
Cubiware contingent consideration
|
|
Auction rate securities
|
Balance at beginning of period
|
$
|
10,476
|
|
|
$
|
(5,104
|
)
|
|
$
|
10,152
|
|
Loss included in earnings
|
—
|
|
|
(611
|
)
|
|
—
|
|
Unrealized gains included in other comprehensive income
|
108
|
|
|
—
|
|
|
108
|
|
Balance at end of period
|
$
|
10,584
|
|
|
$
|
(5,715
|
)
|
|
$
|
10,260
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30,
|
|
2017
|
|
2016
|
|
Auction rate securities
|
|
Cubiware contingent consideration
|
|
Auction rate securities
|
Balance at beginning of period
|
$
|
10,368
|
|
|
$
|
(5,273
|
)
|
|
$
|
10,260
|
|
Loss included in earnings
|
—
|
|
|
(442
|
)
|
|
—
|
|
Unrealized gains included in other comprehensive income
|
216
|
|
|
—
|
|
|
—
|
|
Balance at end of period
|
$
|
10,584
|
|
|
$
|
(5,715
|
)
|
|
$
|
10,260
|
|
The
Loss included in earnings
related to the
Cubiware contingent consideration
liability for the
three months ended June 30, 2017
is included in
Selling, general and administrative
expense as a
$0.4 million
loss related to remeasurement of the
Cubiware contingent consideration
and
$0.2 million
of
Interest expense
related to accretion of the liability to future value.
The
Loss included in earnings
related to the
Cubiware contingent consideration
liability for the
six months ended June 30, 2017
is included in
Selling, general and administrative
expense as a
$0.1 million
loss related to remeasurement of the
Cubiware contingent consideration
and
$0.4 million
of
Interest expense
related to accretion of the liability to future value.
Non-recurring Fair Value Measurements
In May 2017,
TiVo Corporation
vacated a portion of a leased facility as part of its ongoing
TiVo Integration Restructuring Plan
(as described in
Note 8
) resulting in a
$6.7 million
loss on the impairment of certain property and equipment, principally leasehold improvements. The fair value of the impaired assets was estimated using a discounted cash flow technique that incorporated among other items, the timing and amount of expected future cash flows associated with the assets, income tax rates, and economic and market conditions, as well as a risk adjusted discount rate. The fair value of the impaired assets would be classified in Level 2 of the fair value hierarchy.
Valuation Techniques
The fair value of marketable securities, other than auction rate securities, is estimated using observable market-corroborated inputs, such as quoted prices in active markets for similar assets or independent pricing vendors, obtained from a third party pricing service.
The fair value of auction rate securities is estimated using a discounted cash flow analysis or other type of valuation model. These estimates are highly judgmental and incorporate, among other items, the likelihood of redemption, credit and liquidity spreads, duration, interest rates and the timing and amount of expected future cash flows. These securities are also compared, when possible, to other observable data for securities with characteristics similar to the securities held by the Company.
The fair value of contingent consideration liabilities related to acquisitions is estimated utilizing a probability-weighted discounted cash flow analysis based on the terms of the underlying purchase agreement. The significant unobservable inputs used in calculating the fair value of contingent consideration liabilities related to acquisitions include financial performance scenarios, the probability of achieving those scenarios and the discount rate.
The fair value of interest rate swaps is estimated using a discounted cash flow analysis that considers the expected future cash flows of each interest rate swap. This analysis reflects the contractual terms of the interest rate swap, including the remaining period to maturity, and uses market-corroborated inputs, including forward interest rate curves and implied interest rate volatilities. The fair value of an interest rate swap is estimated by netting the discounted future fixed cash payments against the discounted expected variable cash receipts. The variable cash receipts are estimated based on an expectation of future interest rates derived from forward interest rate curves. The fair value of an interest rate swap also incorporates credit valuation adjustments to reflect the nonperformance risk of the Company and the respective counterparty. In adjusting the fair value of its interest rate swaps for the effect of nonperformance risk, the Company considers the effect of its master netting agreements.
Other Fair Value Disclosures
The carrying amount and fair value of debt issued or assumed by the Company were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2017
|
|
December 31, 2016
|
|
Carrying Amount
|
|
Fair Value (1)
|
|
Carrying Amount
|
|
Fair Value (1)
|
2020 Convertible Notes
|
$
|
304,614
|
|
|
$
|
340,472
|
|
|
$
|
297,646
|
|
|
$
|
349,140
|
|
2021 Convertible Notes
|
48
|
|
|
48
|
|
|
48
|
|
|
48
|
|
Term Loan Facility B
|
674,206
|
|
|
679,849
|
|
|
677,038
|
|
|
686,766
|
|
Total Long-term debt
|
$
|
978,868
|
|
|
$
|
1,020,369
|
|
|
$
|
974,732
|
|
|
$
|
1,035,954
|
|
|
|
(1)
|
The fair value of debt issued by the Company is estimated using quoted prices for the identical instrument in a market that is not active and considers interest rates currently available to companies of similar credit standing for similar terms and remaining maturities and considers the nonperformance risk of the Company. If reported at fair value in the
|
Condensed Consolidated Balance Sheets
, debt issued or assumed by the Company would be classified in Level 2 of the fair value hierarchy.
(7) Goodwill and Intangible Assets, Net
Goodwill
Goodwill allocated to the reportable segments and changes in the carrying amount of goodwill were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intellectual Property Licensing
|
|
Product
|
|
Total
|
December 31, 2016
|
$
|
1,291,120
|
|
|
$
|
520,998
|
|
|
$
|
1,812,118
|
|
TiVo Acquisition
|
309
|
|
|
1,048
|
|
|
1,357
|
|
Foreign currency translation
|
—
|
|
|
201
|
|
|
201
|
|
June 30, 2017
|
$
|
1,291,429
|
|
|
$
|
522,247
|
|
|
$
|
1,813,676
|
|
Goodwill resulting from the
TiVo Acquisition
was allocated to the Company's reportable segments based on the relative fair value of the
TiVo Solutions
businesses assigned to the Company's reporting units.
Goodwill at each reporting unit is evaluated for potential impairment annually, as of the beginning of the fourth quarter, and whenever events or changes in circumstances indicate the carrying amount of goodwill may not be recoverable.
Intangible Assets, Net
Intangible assets, net
consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2017
|
|
Gross
|
|
Accumulated
Amortization
|
|
Net
|
Finite-lived intangible assets
|
|
|
|
|
|
Developed technology and patents
|
$
|
1,034,032
|
|
|
$
|
(631,625
|
)
|
|
$
|
402,407
|
|
Existing contracts and customer relationships
|
402,847
|
|
|
(101,759
|
)
|
|
301,088
|
|
Content databases and other
|
59,640
|
|
|
(50,187
|
)
|
|
9,453
|
|
Trademarks / Tradenames
|
8,300
|
|
|
(8,300
|
)
|
|
—
|
|
Total Finite-lived
|
1,504,819
|
|
|
(791,871
|
)
|
|
712,948
|
|
Indefinite-lived intangible assets
|
|
|
|
|
|
TiVo Tradename
|
14,000
|
|
|
—
|
|
|
14,000
|
|
Total intangible assets
|
$
|
1,518,819
|
|
|
$
|
(791,871
|
)
|
|
$
|
726,948
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
Gross
|
|
Accumulated
Amortization
|
|
Net
|
Finite-lived intangible assets
|
|
|
|
|
|
Developed technology and patents
|
$
|
1,031,280
|
|
|
$
|
(586,800
|
)
|
|
$
|
444,480
|
|
Existing contracts and customer relationships
|
402,143
|
|
|
(64,123
|
)
|
|
338,020
|
|
Content databases and other
|
59,390
|
|
|
(49,052
|
)
|
|
10,338
|
|
Trademarks / Tradenames
|
8,300
|
|
|
(8,300
|
)
|
|
—
|
|
Total Finite-lived
|
1,501,113
|
|
|
(708,275
|
)
|
|
792,838
|
|
Indefinite-lived intangible assets
|
|
|
|
|
|
TiVo Tradename
|
14,000
|
|
|
—
|
|
|
14,000
|
|
Total intangible assets
|
$
|
1,515,113
|
|
|
$
|
(708,275
|
)
|
|
$
|
806,838
|
|
Patent Acquisitions
In the
six months ended June 30, 2017
, the Company purchased a portfolio of patents for $
2.0 million
in cash. The Company accounted for the patent portfolio purchase as an asset acquisition and is amortizing the purchase price over a weighted average period of
five years
.
In January 2016, the Company purchased a portfolio of patents for
$2.5 million
in cash. The Company accounted for the patent portfolio purchase as an asset acquisition and is amortizing the purchase price over a weighted average period of
five years
.
Future Amortization
As of
June 30, 2017
, future estimated amortization expense for finite-lived intangible assets was as follows (in thousands):
|
|
|
|
|
Remainder of 2017
|
$
|
83,231
|
|
2018
|
147,393
|
|
2019
|
109,956
|
|
2020
|
109,132
|
|
2021
|
66,323
|
|
Thereafter
|
196,913
|
|
Total
|
$
|
712,948
|
|
(8) Restructuring and Asset Impairment Charges
Components of
Restructuring and asset impairment charges
were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Future minimum lease payments, net
|
$
|
446
|
|
|
$
|
—
|
|
|
$
|
1,207
|
|
|
$
|
214
|
|
Severance costs
|
1,614
|
|
|
—
|
|
|
4,043
|
|
|
388
|
|
Share-based payments
|
573
|
|
|
—
|
|
|
1,918
|
|
|
—
|
|
Contract termination costs
|
—
|
|
|
—
|
|
|
4
|
|
|
1,279
|
|
Asset impairment
|
6,741
|
|
|
—
|
|
|
6,741
|
|
|
452
|
|
Restructuring and asset impairment charges
|
$
|
9,374
|
|
|
$
|
—
|
|
|
$
|
13,913
|
|
|
$
|
2,333
|
|
Accrued restructuring costs
were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
June 30, 2017
|
|
December 31, 2016
|
Future minimum lease payments, net
|
$
|
1,245
|
|
|
$
|
758
|
|
Severance costs
|
2,321
|
|
|
3,796
|
|
Contract termination costs
|
78
|
|
|
183
|
|
Accrued restructuring costs
|
$
|
3,644
|
|
|
$
|
4,737
|
|
We expect a substantial portion of the
Accrued restructuring costs
, including those associated with the
TiVo Acquisition
, to be paid at various dates through December 31, 2017.
TiVo Integration Restructuring Plan
Following completion of the
TiVo Acquisition
,
TiVo Corporation
began implementing its integration plans which are intended to realize operational synergies between
Rovi
and
TiVo Solutions
(the "
TiVo Integration Restructuring Plan
"). As a result of these integration plans,
TiVo Corporation
expects to eliminate duplicative positions resulting in severance costs and the termination of certain leases and other contracts. In May 2017,
TiVo Corporation
vacated a portion of a leased facility resulting in a
$6.7 million
loss on the impairment of certain property and equipment, principally leasehold improvements. Restructuring activities related to the
TiVo Integration Restructuring Plan
for the
six months ended June 30, 2017
were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
Restructuring Expense
|
|
Cash Settlements
|
|
Non-Cash Settlements
|
|
Other
|
|
June 30, 2017
|
Future minimum lease payments, net
|
$
|
224
|
|
|
$
|
380
|
|
|
$
|
(233
|
)
|
|
$
|
—
|
|
|
$
|
(158
|
)
|
|
$
|
213
|
|
Severance costs
|
3,504
|
|
|
4,193
|
|
|
(5,484
|
)
|
|
—
|
|
|
(28
|
)
|
|
2,185
|
|
Share-based payments
|
—
|
|
|
1,918
|
|
|
—
|
|
|
(1,918
|
)
|
|
—
|
|
|
—
|
|
Contract termination costs
|
63
|
|
|
4
|
|
|
(67
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
Asset impairment
|
—
|
|
|
6,741
|
|
|
—
|
|
|
(6,741
|
)
|
|
—
|
|
|
—
|
|
Total
|
$
|
3,791
|
|
|
$
|
13,236
|
|
|
$
|
(5,784
|
)
|
|
$
|
(8,659
|
)
|
|
$
|
(186
|
)
|
|
$
|
2,398
|
|
Legacy
TiVo Solutions
Restructuring Plans
In the
three months ended June 30, 2017
, certain termination benefits expired that were offered by
TiVo Solutions
in connection with the elimination of a number of positions prior to the
TiVo Acquisition Date
(the "Legacy
TiVo Solutions
Restructuring Plans"). As a result of these termination benefits expiring unused,
Restructuring and asset impairment charges
recognized for the
six months ended June 30, 2017
were reduced by
$0.2 million
. As of
June 30, 2017
, the Legacy
TiVo Solutions
Restructuring Plans were completed and
no
Accrued restructuring costs
are included in the
Condensed Consolidated Balance Sheets
related to the Legacy
TiVo Solutions
Restructuring Plans.
Legacy
Rovi
Restructuring Plans
In the three months ended March 31, 2016,
Rovi
initiated certain facility rationalization activities (the "Legacy
Rovi
Restructuring Plans"), including relocating its corporate headquarters from Santa Clara, California to San Carlos, California and consolidating its Silicon Valley operations into the corporate headquarters, and eliminated a number of positions associated with a reorganization of the sales force structure, downsizing the global services workforce and eliminating certain general and administrative positions. As a result of these actions,
Restructuring and asset impairment charges
of
$0.1 million
and
$0.8 million
were recognized in the
three and six months ended June 30, 2017
and
$2.3 million
was recognized in the
six months ended June 30, 2016
.
As of
June 30, 2017
,
Accrued restructuring costs
of
$1.2 million
are included in
Accounts payable and accrued expenses
in the
Condensed Consolidated Balance Sheets
related to the Legacy
Rovi
Restructuring Plans.
(9) Debt and Interest Rate Swaps
A summary of the Company's financing arrangements was as follows (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2017
|
|
December 31, 2016
|
|
Stated Interest Rate
|
Issue Date
|
Maturity Date
|
Outstanding Principal
|
Carrying Amount
|
|
Outstanding Principal
|
Carrying Amount
|
2020 Convertible Notes
|
0.500%
|
March 4, 2015
|
March 1, 2020
|
$
|
345,000
|
|
$
|
304,614
|
|
|
$
|
345,000
|
|
$
|
297,646
|
|
2021 Convertible Notes
|
2.000%
|
September 22, 2014
|
October 1, 2021
|
48
|
|
48
|
|
|
48
|
|
48
|
|
Term Loan Facility B
|
Variable
|
July 2, 2014
|
July 2, 2021
|
679,000
|
|
674,206
|
|
|
682,500
|
|
677,038
|
|
Total Long-term debt
|
|
|
|
$
|
1,024,048
|
|
978,868
|
|
|
$
|
1,027,548
|
|
974,732
|
|
Less: Current portion of long-term debt
|
|
|
|
|
7,000
|
|
|
|
7,000
|
|
Long-term debt, less current portion
|
|
|
|
|
$
|
971,868
|
|
|
|
$
|
967,732
|
|
2020 Convertible Notes
Rovi
issued
$345.0 million
in aggregate principal of
0.500%
Convertible Senior Notes that mature March 1, 2020 (the “
2020 Convertible Notes
”) at par pursuant to an Indenture dated
March 4, 2015
(as supplemented, the "
2015 Indenture
"). The
2020 Convertible Notes
were sold in a private placement and bear interest at an annual rate of
0.500%
payable semi-annually in arrears on March 1 and September 1 of each year, commencing September 1, 2015. In connection with the
TiVo Acquisition
,
TiVo Corporation
and
Rovi
entered into a supplemental indenture under which
TiVo Corporation
became a guarantor of the
2020 Convertible Notes
and the notes became convertible into
TiVo Corporation
common stock.
The
2020 Convertible Notes
were convertible at an initial conversion rate of
34.5968
shares of
TiVo Corporation
common stock per $1,000 of principal of notes, which was equivalent to an initial conversion price of
$28.9044
per share of
TiVo Corporation
common stock. As of
June 30, 2017
, the
2020 Convertible Notes
are convertible at a conversion rate of
35.2777
shares of
TiVo Corporation
common stock per
$1,000
principal of notes, which is equivalent to a conversion price of
$28.3465
per share of
TiVo Corporation
common stock. The conversion rate and conversion price are subject to adjustment pursuant to the
2015 Indenture
, including as a result of dividends paid by
TiVo Corporation
.
Holders may convert the
2020 Convertible Notes
, prior to the close of business on the business day immediately preceding
December 1, 2019
, in multiples of
$1,000
of principal under the following circumstances:
|
|
•
|
during any calendar quarter commencing after the calendar quarter ending on June 30, 2015 (and only during such calendar quarter), if the last reported sale price of
TiVo Corporation
's common stock for at least
20
trading days (whether or not consecutive) during the period of
30
consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to
130%
of the conversion price on each applicable trading day;
|
|
|
•
|
during the
five
business day period after any
ten
consecutive trading day period in which the trading price per
$1,000
of principal of
2020 Convertible Notes
for each trading day was less than
98%
of the product of the last reported sale price of
TiVo Corporation
’s common stock and the conversion rate on each such trading day; or
|
|
|
•
|
on the occurrence of specified corporate events.
|
On or after
December 1, 2019
until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert the
2020 Convertible Notes
, in multiples of
$1,000
of principal, at any time.
In addition, during the
35
-day trading period following a Merger Event, as defined in the
2015 Indenture
, holders may convert the
2020 Convertible Notes
, in multiples of
$1,000
of principal.
On conversion, a holder will receive the conversion value of the
2020 Convertible Notes
converted based on the conversion rate multiplied by the volume-weighted average price of
TiVo Corporation
’s common stock over a specified observation period. On conversion,
Rovi
will pay cash up to the aggregate principal of the
2020 Convertible Notes
converted and deliver shares of
TiVo Corporation
’s common stock in respect of the remainder, if any, of the conversion obligation in excess of the aggregate principal of the
2020 Convertible Notes
being converted.
The conversion rate is subject to adjustment in certain events, including certain events that constitute a "Make-Whole Fundamental Change" (as defined in the
2015 Indenture
). In addition, if
Rovi
undergoes a "Fundamental Change" (as defined in the
2015 Indenture
) prior to March 1, 2020, holders may require
Rovi
to repurchase for cash all or a portion of the
2020 Convertible Notes
at a repurchase price equal to
100%
of the principal of the repurchased
2020 Convertible Notes
, plus accrued and unpaid interest. The conversion rate is also subject to customary anti-dilution adjustments.
The
2020 Convertible Notes
are not redeemable prior to maturity by
Rovi
and no sinking fund is provided. The
2020 Convertible Notes
are unsecured and do not contain financial covenants or restrictions on the payment of dividends, the incurrence of indebtedness or the repurchase of other securities by
Rovi
. The
2015 Indenture
includes customary terms and covenants, including certain events of default after which the
2020 Convertible Notes
may be due and payable immediately.
TiVo Corporation
has separately accounted for the liability and equity components of the
2020 Convertible Notes
. The initial carrying amount of the liability component was calculated by estimating the value of the
2020 Convertible Notes
using
TiVo Corporation
’s estimated non-convertible borrowing rate of
4.75%
at the time the instrument was issued. The carrying amount of the equity component, representing the value of the conversion option, was determined by deducting the liability component from the principal of the
2020 Convertible Notes
. The difference between the principal of the
2020 Convertible Notes
and the liability component is considered a debt discount which is being amortized to interest expense using the effective interest method over the expected term of the
2020 Convertible Notes
. The equity component of the
2020 Convertible Notes
was recorded as a component of
Additional paid-in capital
in the
Condensed Consolidated Balance Sheets
and will not be remeasured as long as it continues to meet the conditions for equity classification. Related to the
2020 Convertible Notes
, the
Condensed Consolidated Balance Sheets
included the following (in thousands):
|
|
|
|
|
|
|
|
|
|
June 30, 2017
|
|
December 31, 2016
|
Liability component
|
|
|
|
Principal outstanding
|
$
|
345,000
|
|
|
$
|
345,000
|
|
Less: Unamortized debt discount
|
(35,895
|
)
|
|
(42,144
|
)
|
Less: Unamortized debt issuance costs
|
(4,491
|
)
|
|
(5,210
|
)
|
Carrying amount
|
$
|
304,614
|
|
|
$
|
297,646
|
|
|
|
|
|
Equity component
|
$
|
63,854
|
|
|
$
|
63,854
|
|
Components of interest expense related to the
2020 Convertible Notes
included in the
Condensed Consolidated Statements of Operations
were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Stated interest
|
$
|
431
|
|
|
$
|
431
|
|
|
$
|
863
|
|
|
$
|
863
|
|
Amortization of debt discount
|
3,143
|
|
|
3,000
|
|
|
6,249
|
|
|
5,965
|
|
Amortization of debt issuance costs
|
364
|
|
|
329
|
|
|
719
|
|
|
650
|
|
Total interest expense
|
$
|
3,938
|
|
|
$
|
3,760
|
|
|
$
|
7,831
|
|
|
$
|
7,478
|
|
Rovi
incurred
$9.3 million
in transaction costs related to the issuance of the
2020 Convertible Notes
which were allocated to liability and equity components based on the relative amounts calculated for the
2020 Convertible Notes
at the date of issuance. Transaction costs of
$7.6 million
attributable to the liability component were recorded in
Long-term debt, less current portion
in the
Condensed Consolidated Balance Sheets
and are being amortized to interest expense using the effective interest method over the expected term of the
2020 Convertible Notes
. Transaction costs of
$1.7 million
attributable to the equity component were recorded as a component of
Additional paid-in capital
in the
Condensed Consolidated Balance Sheets
.
Purchased Call Options and Sold Warrants related to the
2020 Convertible Notes
Concurrent with the issuance of the
2020 Convertible Notes
,
Rovi
paid
$64.8 million
to purchase call options with respect to its common stock. The call options gave
TiVo Corporation
the right, but not the obligation, to purchase up to
11.9 million
shares of
TiVo Corporation
's common stock at an exercise price of
$28.9044
per share, which corresponds to the initial conversion price of the
2020 Convertible Notes
, and are exercisable by TiVo Corporation on conversion of the
2020 Convertible Notes
. As of
June 30, 2017
, the call options give
TiVo Corporation
the right, but not the obligation, to purchase up to
12.2 million
shares of
TiVo Corporation
's common stock at an exercise price of
$28.3465
per share. The exercise price is subject to adjustment, including as a result of dividends paid by
TiVo Corporation
. The call options are intended to reduce the potential dilution from conversion of the
2020 Convertible Notes
. The purchased call options are separate transactions from the
2020 Convertible Notes
and holders of the
2020 Convertible Notes
do not have any rights with respect to the purchased call options.
Concurrent with the issuance of the
2020 Convertible Notes
,
Rovi
received
$31.3 million
from the sale of warrants that provide the holder of the warrant the right, but not the obligation, to purchase up to
11.9 million
shares of TiVo Corporation common stock at an exercise price of
$40.1450
per share. As of
June 30, 2017
, the warrants have an exercise price of
$39.3701
per share. The exercise price is subject to adjustment, including as a result of dividends paid by
TiVo Corporation
. The warrants are exercisable beginning June 1, 2020 and can be settled in cash or shares at
TiVo Corporation
's election. The warrants were entered into to offset the cost of the purchased call options. The warrants are separate transactions from the
2020 Convertible Notes
and holders of the
2020 Convertible Notes
do not have any rights with respect to the warrants.
The amounts paid to purchase the call options and received to sell the warrants were recorded in
Additional paid-in capital
in the
Condensed Consolidated Balance Sheets
.
2021 Convertible Notes
TiVo Solutions
issued
$230.0 million
in aggregate principal of
2.0%
Convertible Senior Notes that mature
October 1, 2021
(the "
2021 Convertible Notes
") at par pursuant to an Indenture dated September 22, 2014 (as supplemented, "the
2014 Indenture
"). The
2021 Convertible Notes
bear interest at an annual rate of
2.0%
, payable semi-annually in arrears on April 1
and October 1 of each year, commencing April 2015. On
October 12, 2016
,
TiVo Solutions
repaid
$229.95 million
of the par value of the
2021 Convertible Notes
.
The
2021 Convertible Notes
were convertible at an initial conversion rate of
56.1073
shares of
TiVo Solutions
common stock per
$1,000
principal of notes, which was equivalent to an initial conversion price of
$17.8230
per share of
TiVo Solutions
common stock. Following the
TiVo Acquisition
, the
2021 Convertible Notes
were convertible at a conversion rate of
21.6181
shares of
TiVo Corporation
common stock per
$1,000
principal of notes and
$154.30
per
$1,000
principal of notes, which was equivalent to a conversion price of
$39.12
per share of
TiVo Corporation
common stock. As of
June 30, 2017
, the
2021 Convertible Notes
are convertible at a conversion rate of
22.0534
shares of
TiVo Corporation
common stock per
$1,000
principal of notes and
$154.30
per
$1,000
principal of notes, which is equivalent to a conversion price of
$38.3478
per share of
TiVo Corporation
common stock. The conversion rate and conversion price are subject to adjustment pursuant to the
2014 Indenture
, including as a result of dividends paid by
TiVo Corporation
.
TiVo Solutions
can settle the
2021 Convertible Notes
in cash, shares of common stock, or any combination thereof pursuant to the
2014 Indenture
. Subject to certain exceptions, holders may require
TiVo Solutions
to repurchase, for cash, all or part of their
2021 Convertible Notes
upon a “Fundamental Change” (as defined in the
2014 Indenture
) at a price equal to
100%
of the principal amount of the
2021 Convertible Notes
being repurchased plus any accrued and unpaid interest up to, but excluding, the “Fundamental Change Repurchase Date” (as defined in the
2014 Indenture
). In addition, on a “Make-Whole Fundamental Change” (as defined in the
2014 Indenture
) prior to the maturity date of the
2021 Convertible Notes
,
TiVo Solutions
will, in some cases, increase the conversion rate for a holder that elects to convert its
2021 Convertible Notes
in connection with such Make-Whole Fundamental Change.
Senior Secured Credit Facility
On July 2, 2014, Rovi Corporation, as parent guarantor, and
two
of its wholly-owned subsidiaries, Rovi Solutions Corporation and Rovi Guides, Inc., as borrowers, and certain of its other subsidiaries, as subsidiary guarantors, entered into a Credit Agreement (the “
Credit Agreement
”). After the completion of the
TiVo Acquisition
,
TiVo Corporation
became a guarantor under the
Credit Agreement
. The
Credit Agreement
provided for a (i)
five
-year
$125.0 million
term loan A facility (“
Term Loan Facility A
”), (ii)
seven
-year
$700.0 million
term loan B facility (“
Term Loan Facility B
” and together with
Term Loan Facility A
, the “
Term Loan Facility
”) and (iii)
five
-year
$175.0 million
revolving credit facility (including a letter of credit sub-facility) (the "
Revolving Facility
” and together with the
Term Loan Facility
, the “
Senior Secured Credit Facility
”). In September 2015,
Rovi
made a voluntary principal prepayment to extinguish
Term Loan Facility A
and elected to terminate the
Revolving Facility
.
Prior to the refinancing described below, loans under
Term Loan Facility B
bore interest, at the Company's option, at a rate equal to either LIBOR, plus an applicable margin equal to
3.00%
per annum (subject to a
0.75%
LIBOR floor) or the prime lending rate, plus an applicable margin equal to
2.00%
per annum.
On
January 26, 2017
,
TiVo Corporation
, as parent guarantor, two of its wholly-owned subsidiaries, Rovi Solutions Corporation and Rovi Guides, Inc., as borrowers, and certain of
TiVo Corporation
’s other subsidiaries, as subsidiary guarantors, entered into
Refinancing Agreement No. 1
with respect to
Term Loan Facility B
. The
$682.5 million
in proceeds from
Refinancing Agreement No. 1
was used to repay existing loans under
Term Loan Facility B
in full. The borrowing terms for
Refinancing Agreement No. 1
are substantially similar to the borrowing terms of
Term Loan Facility B
. However, loans under
Refinancing Agreement No. 1
bear interest, at the borrower's option, at a rate equal to either LIBOR, plus an applicable margin equal to
2.50%
per annum (subject to a
0.75%
LIBOR floor) or the prime lending rate, plus an applicable margin equal to
1.50%
per annum.
Refinancing Agreement No. 1
requires quarterly principal payments of
$1.75 million
through June 2021, with any remaining balance payable in July 2021.
Refinancing Agreement No. 1
is part of the
Senior Secured Credit Facility
.
The refinancing of
Term Loan Facility B
resulted in a
Loss on debt extinguishment
of $
0.1 million
and a
Loss on debt modification
of
$0.9 million
for the
six months ended June 30, 2017
. Creditors in
Term Loan Facility B
that elected not to participate in
Refinancing Agreement No. 1
were extinguished. Creditors in
Term Loan Facility B
that elected to participate in
Refinancing Agreement No. 1
and for which the present value of future cash flows were not substantially different were accounted for as a debt modification.
The
Credit Agreement
contains customary representations and warranties and customary affirmative and negative covenants applicable to the Company and its subsidiaries, including, among other things, restrictions on indebtedness, liens, investments, mergers, dispositions, prepayment of other indebtedness, and dividends and other distributions. The
Credit Agreement
is secured by substantially all of the Company's assets. The Company may be required to make an additional payment on the
Term Loan Facility
each February. This payment is calculated as a percentage of the prior year's "Excess Cash Flow" as defined in the
Credit Agreement
. No additional payment was required in February 2017.
Debt Maturities
As of
June 30, 2017
, aggregate expected future principal payments on long-term debt, including the current portion of long-term debt, were as follows (in thousands):
|
|
|
|
|
Remainder of 2017
|
$
|
3,500
|
|
2018
|
7,000
|
|
2019 (1)
|
352,000
|
|
2020
|
7,000
|
|
2021
|
654,548
|
|
Total
|
$
|
1,024,048
|
|
|
|
(1)
|
While the
2020 Convertible Notes
are scheduled to mature on March 1, 2020, future principal payments are presented based on the date the
2020 Convertible Notes
can be freely converted by holders, which is
December 1, 2019
. However, the
2020 Convertible Notes
may be converted by holders prior to
December 1, 2019
in certain circumstances.
|
Interest Rate Swaps
The Company issues long-term debt denominated in U.S. dollars based on market conditions at the time of financing and may enter into interest rate swaps to achieve a primarily fixed interest rate. Alternatively, the Company may choose not to enter into interest rate swaps or may terminate a previously executed swap if it believes a larger proportion of floating-rate debt would be beneficial. The Company has not designated any of its interest rate swaps as hedges for accounting purposes. The Company records interest rate swaps in the
Condensed Consolidated Balance Sheets
at fair value with changes in fair value recorded as
Loss on interest rate swaps
in the
Condensed Consolidated Statements of Operations
. Amounts are presented in the
Condensed Consolidated Balance Sheets
after considering the right of offset and the effect of master netting agreements. During the
three months ended June 30, 2017 and 2016
, the Company recorded a loss of
$1.9 million
and
$5.5 million
, respectively, from adjusting its interest rate swaps to fair value. During the
six months ended June 30, 2017 and 2016
, the Company recorded a loss of
$1.3 million
and
$18.6 million
, respectively, from adjusting its interest rate swaps to fair value.
Details of the Company's interest rate swaps as of
June 30, 2017
and
December 31, 2016
were as follows (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notional
|
|
|
Contract Inception
|
Contract Effective Date
|
Contract Maturity
|
June 30, 2017
|
December 31, 2016
|
Interest Rate Paid
|
Interest Rate Received
|
Senior Secured Credit Facility
|
|
|
|
|
May 2012
|
April 2014
|
March 2017
|
$
|
—
|
|
$
|
215,000
|
|
(1)
|
One month USD-LIBOR
|
June 2013
|
January 2016
|
March 2019
|
$
|
250,000
|
|
$
|
250,000
|
|
2.23%
|
One month USD-LIBOR
|
September 2014
|
January 2016
|
July 2021
|
$
|
125,000
|
|
$
|
125,000
|
|
2.66%
|
One month USD-LIBOR
|
September 2014
|
March 2017
|
July 2021
|
$
|
200,000
|
|
$
|
200,000
|
|
2.93%
|
One month USD-LIBOR
|
|
|
(1)
|
The Company paid a fixed interest rate which gradually increased from
0.65%
for the
three-month settlement period ended in June 2014
to
2.11%
for the settlement period ended in
March 2017
.
|
(10) Commitments and Contingencies
Purchase Commitments
In August 2016,
Rovi
entered into a
10
-year patent license agreement with DISH. Under the license agreement, DISH will pay
Rovi
for the period beginning on April 5, 2016 based on a monthly, per-subscriber fee, consistent with
Rovi
’s existing licensing program for its largest pay TV providers. In addition, DISH agreed to provide
TiVo Inc.
with a release for all past products and a going-forward covenant not-to-sue under DISH’s existing patents during the 10-year license term in exchange for
TiVo Solutions
providing DISH certain
TiVo Solutions
products during the term and cash payments by
TiVo Solutions
to DISH of
$60.3 million
in the aggregate, of which
$15.0 million
was paid in the second quarter of 2017 and
$15.0 million
was paid in the fourth quarter of 2016 with the remainder due by the end of the third quarter of 2017
.
The
TiVo Solutions
release and covenant transaction is being recognized as a reduction to revenue over the license term in the
Condensed Consolidated Statements of Operations
. No changes were made to the prior, existing patent settlement between EchoStar Corporation and DISH Network Corporation (together, "EchoStar"), and
TiVo Solutions
as a result of this agreement.
The Company purchases components from a variety of suppliers and uses several contract manufacturers to provide manufacturing services for its products. During the normal course of business, in order to manage manufacturing lead times and help ensure adequate component supply, the Company enters into agreements with contract manufacturers and suppliers that either allow them to procure inventory based on criteria as defined by the Company or that establish the parameters defining the Company’s requirements. A significant portion of the Company’s reported purchase commitments arising from these agreements consists of firm, non-cancelable and unconditional purchase commitments. In certain instances, these agreements allow the Company the option to cancel, reschedule and adjust the Company’s requirements based on its business needs prior to firm orders being placed. As of
June 30, 2017
, the Company had total purchase commitments for inventory of
$12.1 million
, of which
$1.3 million
was accrued in the
Condensed Consolidated Balance Sheets
.
Indemnifications
In the normal course of business, the Company provides indemnifications of varying scopes and amounts to certain of its licensees against claims made by third parties arising out of the use and / or incorporation of the Company's products, intellectual property, services and / or technologies into the licensees' products and services.
TiVo Solutions
has also indemnified certain customers and business partners for, among other things, the licensing of its products, the sale of its DVRs, and the provision of engineering and consulting services. The Company’s obligation to provide indemnifications under its agreements with customer and business partners would arise in the event that a third party filed a claim against one of the parties that was covered by the Company’s indemnification. Pursuant to these agreements, the Company may indemnify the other party for certain losses suffered or incurred by the indemnified party in connection with various types of claims, which may include, without limitation, intellectual property infringement, advertising and consumer disclosure laws, certain tax liabilities, negligence and intentional acts in the performance of services and violations of laws.
In some cases, the Company may receive tenders of defense and indemnity arising out of products, intellectual property services and / or technologies that are no longer provided by the Company due to having divested certain assets, but which were previously licensed or provided by the Company.
The term of the Company's indemnification obligations is generally perpetual. The Company's indemnification obligations are typically limited to the cumulative amount paid to the Company by the licensee under the license agreement; however, some license agreements, including those with the Company's largest multiple system operators and digital broadcast satellite providers, have larger limits or do not specify a limit on amounts that may be payable under the indemnity arrangements.
The Company cannot reasonably estimate the possible range of losses that may be incurred pursuant to its indemnification obligations, if any. Variables affecting any such assessment include but are not limited to: the nature of the claim asserted; the relative merits of the claim; the financial ability of the party suing the indemnified party to engage in protracted litigation; the number of parties seeking indemnification; the nature and amount of damages claimed by the party suing the indemnified party; and the willingness of such party to engage in settlement negotiations. Due to the nature of the Company's potential indemnity liability, the
Condensed Consolidated Financial Statements
could be materially affected in a particular period by one or more of these indemnities.
Under certain circumstances,
TiVo Solutions
may seek to recover some or all amounts paid to an indemnified party from its insurers.
TiVo Solutions
does not have any assets held either as collateral or by third parties that, on the occurrence of
an event requiring it to indemnify a customer,
TiVo Solutions
could obtain and liquidate to recover all or a portion of the amounts paid pursuant to its indemnification obligations.
Legal Proceedings
The Company is involved in various lawsuits, claims and proceedings, including those identified below, consisting of intellectual property, commercial, securities and employment matters that arise in the normal course of business. The Company accrues a liability when management believes information available prior to the issuance of the financial statements indicates it is probable a loss has been incurred as of the date of the financial statements and the amount of loss can be reasonably estimated. The Company adjusts its accruals to reflect the impact of negotiations, settlements, rulings, advice of legal counsel and other information and events pertaining to a particular case. The Company believes it has recorded adequate provisions for any such matters and, as of
June 30, 2017
, it was not reasonably possible that a material loss had been incurred in excess of the amounts recognized in the
Condensed Consolidated Financial Statements
. Legal costs are expensed as incurred. Based on its experience, the Company believes that damage amounts claimed in these matters are not meaningful indicators of potential liability. Some of the matters pending against the Company involve potential compensatory, punitive or treble damage claims or sanctions, that, if granted, could require the Company to pay damages or make other expenditures in amounts that could have a material adverse effect on its
Condensed Consolidated Financial Statements
.
On November 15, 2016, Driehaus Appraisal Litigation Fund, L.P., Driehaus Companies Profit Sharing Plan and Trust, and Richard H. Driehaus IRA (the “Driehaus Entities”) filed a petition for appraisal pursuant to Section 262 of the Delaware General Corporation Law ("Section 262") in the Court of Chancery of the State of Delaware covering a total of
1.9 million
shares of common stock of TiVo Solutions in connection with the TiVo Acquisition. Additionally, on November 15, 2016, Fir Tree Value Master Fund L.P. and Fir Tree Capital Opportunity Master Fund L.P. (the “Fir Tree Entities” and together with the Driehaus Entities, the “Appraisal Petitioners”) filed a petition for appraisal pursuant to Section 262 in the Court of Chancery of the State of Delaware covering a total of
7.2 million
shares of common stock of TiVo Solutions in connection with the TiVo Acquisition. On January 11, 2017, the Court of Chancery consolidated the
two
petitions into a consolidated action entitled In re Appraisal of TiVo, Inc., C.A. No. 12909-CB (Del. Ch.). The Appraisal Petitioners were also seeking the payment of their costs and attorneys’ fees. As discussed in Note 2, on March 27, 2017, TiVo Corporation executed a settlement agreement with the Dissenting Holders to settle the claims of the Dissenting Holders for
$117.0 million
, which was paid in cash in April 2017.
On
January 27, 2017
, UBS Securities LLC ("UBS") filed a complaint against
TiVo Solutions
alleging
TiVo Solutions
breached its contractual obligations to UBS under a September 14, 2010 letter agreement (the "Letter Agreement") whereby
TiVo Solutions
retained UBS as its financial advisor. In the complaint, UBS alleged that
TiVo Solutions
never terminated its Letter Agreement with UBS and, as a result,
TiVo Solutions
breached its obligations to UBS by (i) not paying UBS's annual retainer fee of
$0.3 million
for an unspecified number of years, but totaling an amount of
$1.4 million
, including unpaid retainer fees and out-of-pocket expenses, and (ii) not considering or retaining UBS as
TiVo Solutions
' financial advisor in connection with its merger with
Rovi
, for which UBS alleged
TiVo Solutions
owed it a fee of
$14.5 million
(the amount
TiVo Solutions
paid its financial advisor for the merger). The Company and UBS settled this matter in May 2017 for
$0.7 million
, to be paid in a combination of a current cash payment and potential future service fees.
(11) Stockholders' Equity
Earnings (Loss) Per Share
Basic earnings per share ("EPS") is computed using the weighted average number of common shares outstanding during the period. Diluted EPS is computed using the weighted average number of common shares and dilutive common share equivalents outstanding during the period, except for periods of a loss from continuing operations. In periods of a loss from continuing operations, no common share equivalents are included in Diluted EPS because their effect would be anti-dilutive.
The number of shares used to calculate Basic EPS and Diluted EPS were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Weighted average shares used in computing basic per share amounts
|
120,209
|
|
|
82,110
|
|
|
119,515
|
|
|
81,742
|
|
Dilutive effect of equity-based compensation awards
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Weighted average shares used in computing diluted per share amounts
|
120,209
|
|
|
82,110
|
|
|
119,515
|
|
|
81,742
|
|
Weighted average potential shares excluded from the calculation of Diluted EPS as their effect would have been anti-dilutive were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Stock options
|
2,812
|
|
|
3,501
|
|
|
3,233
|
|
|
3,579
|
|
Restricted awards
|
3,440
|
|
|
2,246
|
|
|
4,048
|
|
|
2,523
|
|
2020 Convertible Notes (1)
|
12,171
|
|
|
11,936
|
|
|
12,171
|
|
|
11,936
|
|
2021 Convertible Notes (1)
|
1
|
|
|
—
|
|
|
1
|
|
|
—
|
|
Warrants related to 2020 Convertible Notes (1)
|
11,936
|
|
|
11,936
|
|
|
11,936
|
|
|
11,936
|
|
Weighted average potential shares excluded from the calculation of Diluted EPS
|
30,360
|
|
|
29,619
|
|
|
31,389
|
|
|
29,974
|
|
|
|
(1)
|
See Note 9 for additional details.
|
For the
three months ended June 30, 2017 and 2016
,
0.4 million
and
0.9 million
weighted average performance-based restricted awards, respectively, were excluded from the calculation of Diluted EPS as the performance metric had yet to be achieved or their inclusion would have been anti-dilutive. For the
six months ended June 30, 2017 and 2016
,
0.5 million
and
0.8 million
weighted average performance-based restricted awards, respectively, were excluded from the calculation of Diluted EPS as the performance metric had yet to be achieved or their inclusion would have been anti-dilutive.
Effect of the 2020 Convertible Notes and related transactions on Diluted EPS
In periods when the Company reports income from continuing operations, the potential dilutive effect of additional shares that may be issued on conversion of the
2020 Convertible Notes
are included in the calculation of Diluted EPS under the treasury stock method if the price of the Company’s common stock exceeds the conversion price. The
2020 Convertible Notes
have no impact on Diluted EPS until the price of the Company's common stock exceeds the conversion price of
$28.3465
per share because the principal of the
2020 Convertible Notes
is required to be settled in cash. Based on the closing price of the Company's common stock of
$18.65
per share on
June 30, 2017
, the if-converted value of the
2020 Convertible Notes
was less than the outstanding principal.
Under the treasury stock method, the
2020 Convertible Notes
would be dilutive if the Company’s common stock closes at or above
$28.3465
per share. However, on conversion, no economic dilution is expected from the
2020 Convertible Notes
as the exercise of call options purchased by the Company with respect to its common stock described in
Note 9
is expected to eliminate any potential dilution from the
2020 Convertible Notes
that would have otherwise occurred. The call options are always excluded from the calculation of Diluted EPS as they are anti-dilutive under the treasury stock method.
The warrants sold by the Company with respect to its common stock in connection with the
2020 Convertible Notes
described in
Note 9
have an effect on Diluted EPS when the Company’s share price exceeds the warrant’s strike price of
$39.3701
per share. As the price of the Company’s common stock increases above the warrant strike price, additional dilution would occur.
Share Repurchase Program
On
February 14, 2017
,
TiVo Corporation
's Board of Directors approved an increase to the stock repurchase program authorization to
$150.0 million
. The February 2017 authorization includes amounts which were outstanding under previously
authorized share repurchase programs. As of
June 30, 2017
, the Company had
$150.0 million
of stock repurchase authorization remaining.
The Company issues restricted awards as part of the equity incentive plans described in
Note 12
. For the majority of restricted awards, shares are withheld to satisfy required withholding taxes at the vesting date. Shares withheld to satisfy required withholding taxes in connection with the vesting of restricted awards are treated as common stock repurchases in the
Condensed Consolidated Financial Statements
because they reduce the number of shares that would have been issued on vesting. However, these withheld shares are not considered common stock repurchases under the Company's authorized share repurchase plan. During the
three months ended June 30, 2017 and 2016
, the Company withheld
0.1 million
and
16.8 thousand
shares of common stock to satisfy $
1.7 million
and
$0.3 million
of required withholding taxes, respectively. During the
six months ended June 30, 2017 and 2016
, the Company withheld
0.6 million
and
0.2 million
shares of common stock to satisfy
$11.3 million
and
$4.0 million
of required withholding taxes, respectively.
Dividend
On
April 30, 2017
,
TiVo Corporation
's Board of Directors declared a cash dividend of
$0.18
per share, which was paid on
June 20, 2017
to stockholders of record on
June 6, 2017
.
Section 382 Transfer Restrictions
On
September 7, 2016
, upon the effective time of the
TiVo Acquisition
, the Company’s certificate of incorporation was amended and restated to include certain transfer restrictions intended to preserve tax benefits related to the net operating loss carryforwards (“NOLs”) of the Company pursuant to Section 382 of Internal Revenue Code of 1986, as amended (the “Code”), that apply to transfers made by 5% stockholders, transferees related to a 5% stockholder, transferees acting in coordination with a 5% stockholder, or transfers that would result in a stockholder becoming a 5% stockholder. If the Company experiences an “ownership change,” as defined in Section 382 of the Code, its ability to fully utilize the NOLs on an annual basis will be substantially limited, and the timing of the usage of the NOLs could be substantially delayed, which could therefore significantly impair the value of those benefits. These transfer restrictions are intended to act as a deterrent to any person (an “Acquiring Person”) acquiring (together with all affiliates and associates of such person) beneficial ownership of 5% or more of the Company's outstanding common stock within the meaning of Section 382 of the Code, without the approval of the Company's Board of Directors. Such transfer restrictions will expire on the earlier of (i) the repeal of Section 382 or any successor statute if the Company’s Board of Directors determines that such restrictions are no longer necessary or desirable for the preservation of certain tax benefits, (ii) the beginning of a taxable year to which the Company’s Board of Directors determines that no tax benefits may be carried forward or (iii) the end of the day on September 7, 2019, three years from the effective time of the TiVo Acquisition when the Company’s certificate of incorporation was amended and restated to include certain transfer restrictions. The Company conducted a stockholder advisory vote with respect to the maintenance of such transfer restrictions in its certificate of incorporation at its 2017 Annual Meeting of Stockholders and the stockholders approved of such transfer restrictions.
(12) Equity-based Compensation
Stock Options and Restricted Awards
The Company grants equity-based compensation awards from the Rovi 2008 Equity Incentive Plan (the “Rovi 2008 Plan”). As of
June 30, 2017
, the Company had
30.0 million
shares reserved and
13.9 million
shares available for issuance under the Rovi 2008 Plan. The Rovi 2008 Plan permits the grant of stock options, restricted stock, restricted stock units and similar types of equity awards to employees, officers, directors and consultants of the Company. Stock options generally have vesting periods of
four
years with one quarter of the grant vesting on the first anniversary of the grant, followed by monthly vesting thereafter. Stock options generally have a contractual term of
seven
years. Restricted stock is considered outstanding at the time of the grant as holders are entitled to voting rights. Awards of restricted stock and restricted stock units (collectively, "restricted awards") are generally subject to a
four
year graded vesting period.
On
September 7, 2016
, the Company assumed the
TiVo Inc.
Amended and Restated 2008 Equity Incentive Award Plan (the “TiVo 2008 Plan”). Stock options assumed from the TiVo 2008 Plan generally have vesting periods of
four
years with one quarter of the grant vesting on the first anniversary of the grant, followed by monthly vesting thereafter or vesting monthly over the
four
year vesting period. Stock options assumed from TiVo 2008 Plan generally have a contractual term of
seven
years. Restricted awards assumed from the TiVo 2008 Plan are generally subject to a
three
year vesting period, with
17%
of the award vesting every
six
months. As of
June 30, 2017
, there were
3.9 million
shares reserved and
3.9 million
shares available for future grant under the TiVo 2008 Plan. The Company has amended and restated the TiVo 2008 Plan effective as of the closing of the
TiVo Acquisition
to be the
TiVo Corporation
Titan Equity Incentive Award Plan for purposes of awards granted following the closing of the
TiVo Acquisition
.
The Company also grants performance-based restricted stock units to certain of its senior officers for
three
-year performance periods. Vesting in the performance-based restricted stock units may subject to either performance conditions or market conditions as well as a
three
-year service period. Depending on the level of achievement, the maximum number of shares that could be issued on vesting could be up to
200%
of the target number of performance-based restricted stock units granted.
For awards subject to a market condition, the fair value per award is fixed at the grant date and the amount of compensation expense is not adjusted during the performance period based on changes in the level of achievement of a relative Total Shareholder Return metric. For awards subject to performance conditions, the fair value per award is fixed at the grant date; however, the amount of compensation expense is adjusted throughout the performance period based on the probability of achievement of a target revenue compound annual growth rate and a target Adjusted EBITDA (defined in Note 14) margin, with compensation expense based on the number of shares ultimately issued.
Employee Stock Purchase Plan
The Company’s 2008 Employee Stock Purchase Plan (“ESPP”) allows eligible employees to purchase shares of the Company’s common stock at a discount through payroll deductions. The ESPP consists of up to
four
consecutive
six
-month purchase periods within a
twenty-four
month offering period. Employees purchase shares each purchase period at the lower of
85%
of the market value of the Company’s common stock at either the beginning of the offering period or the end of the purchase period.
As of
June 30, 2017
, the Company had
6.4 million
shares of common stock reserved and available for issuance under the ESPP.
Valuation Techniques and Assumptions
The Company uses the Black-Scholes-Merton option-pricing formula to estimate the fair value of stock options and ESPP shares. The fair value of stock options and ESPP shares is estimated on the grant date using complex and subjective inputs, such as the expected volatility of the Company's common stock over the expected term of the award and projected employee exercise behavior. For restricted awards subject to service or performance conditions granted prior to February 14, 2017, fair value was estimated as the price of the Company's common stock at the close of trading on the date of grant. As restricted awards subject to service or performance conditions granted after February 14, 2017 are not dividend-protected, fair value is estimated as the price of the Company's common stock at the close of trading on the date of grant, less the present value of dividends expected to be paid during the vesting period. A Monte Carlo simulation is used to estimate the fair value of restricted stock units subject to market conditions.
Assumptions used to estimate the fair value of equity-based compensation awards granted during the period were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Stock options:
|
|
|
|
|
|
|
|
Expected volatility
|
N/A
|
|
N/A
|
|
N/A
|
|
|
55.7
|
%
|
Expected term
|
N/A
|
|
N/A
|
|
N/A
|
|
|
4.1 years
|
|
Risk-free interest rate
|
N/A
|
|
N/A
|
|
N/A
|
|
|
1.2
|
%
|
Expected dividend yield
|
N/A
|
|
N/A
|
|
N/A
|
|
|
0.0
|
%
|
ESPP shares:
|
|
|
|
|
|
|
|
Expected volatility
|
N/A
|
|
N/A
|
|
41.7
|
%
|
|
60.9
|
%
|
Expected term
|
N/A
|
|
N/A
|
|
1.3 years
|
|
|
1.3 years
|
|
Risk-free interest rate
|
N/A
|
|
N/A
|
|
1.0
|
%
|
|
0.6
|
%
|
Expected dividend yield
|
N/A
|
|
N/A
|
|
0.0
|
%
|
|
0.0
|
%
|
Restricted stock units subject to market conditions:
|
|
|
|
|
|
|
|
Expected volatility
|
N/A
|
|
N/A
|
|
N/A
|
|
|
55.9
|
%
|
Expected term
|
N/A
|
|
N/A
|
|
N/A
|
|
|
3.0 years
|
|
Risk-free interest rate
|
N/A
|
|
N/A
|
|
N/A
|
|
|
1.0
|
%
|
Expected dividend yield
|
N/A
|
|
N/A
|
|
N/A
|
|
|
0.0
|
%
|
Expected volatility is estimated using a combination of historical volatility and implied volatility derived from publicly-traded options on the Company's common stock. When historical data is available and relevant, the expected term of the award is estimated by calculating the average term from historical experience. When there is insufficient historical data to provide a reasonable basis on which to estimate the expected term, the Company uses an average of the vesting period and the contractual term of the award to estimate the expected term of the award. The risk-free interest rate is the yield on U.S. Treasury zero-coupon issues with remaining terms similar to the expected term of the award at the grant date. For awards granted prior to February 14, 2017, the Company assumed an expected dividend yield of zero as it had not historically paid a dividend. For awards granted subsequent to February 14, 2017, the Company assumed a constant dividend yield commensurate with dividend yield at the grant date. The number of awards expected to vest during the requisite service period is estimated at the time of grant using historical data and equity-based compensation is only recognized for awards for which the requisite service is expected to be rendered. Forfeiture estimates are revised during the requisite service period and the effect of changes in the number of awards expected to vest during the requisite service period is recorded as a cumulative effect adjustment in the period estimates are revised.
The weighted-average grant date fair value of equity-based awards (per award) and pre-tax equity-based compensation expense (in thousands) was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Stock options
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
|
$
|
10.30
|
|
ESPP shares
|
N/A
|
|
|
N/A
|
|
|
$
|
5.92
|
|
|
$
|
7.62
|
|
Restricted awards
|
$
|
16.82
|
|
|
$
|
17.41
|
|
|
$
|
17.69
|
|
|
$
|
23.73
|
|
|
|
|
|
|
|
|
|
Pre-tax equity-based compensation, excluding amounts included in restructuring expense
|
$
|
11,749
|
|
|
$
|
9,917
|
|
|
$
|
25,774
|
|
|
$
|
18,355
|
|
Pre-tax equity-based compensation, included in restructuring expense
|
$
|
573
|
|
|
$
|
—
|
|
|
$
|
1,918
|
|
|
$
|
—
|
|
As of
June 30, 2017
, there was
$56.1 million
of unrecognized compensation cost, net of estimated forfeitures, related to unvested equity-based awards which is expected to be recognized over a remaining weighted average period of
2.0 years
.
Equity-Based Compensation Award Activity
Activity related to the Company's restricted awards for the
six months ended June 30, 2017
was as follows:
|
|
|
|
|
|
|
|
|
Restricted Awards (In Thousands)
|
|
Weighted-Average Grant Date Fair Value
|
Outstanding at beginning of period
|
5,162
|
|
|
$
|
21.80
|
|
Granted
|
402
|
|
|
$
|
17.69
|
|
Vested
|
(1,940
|
)
|
|
$
|
20.38
|
|
Forfeited
|
(257
|
)
|
|
$
|
20.39
|
|
Outstanding at end of period
|
3,367
|
|
|
$
|
20.32
|
|
As of
June 30, 2017
,
2.5 million
restricted stock units were unvested, which includes
0.4 million
performance-based restricted stock units. As of
June 30, 2017
,
0.8 million
shares of restricted stock were unvested. The aggregate fair value of restricted awards vested during the
three months ended June 30, 2017 and 2016
was
$4.4 million
and
$1.2 million
, respectively. The aggregate fair value of restricted awards vested during the
six months ended June 30, 2017 and 2016
was
$36.5 million
and
$21.4 million
, respectively.
Activity under the Company's stock option plans for the
six months ended June 30, 2017
was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options (In Thousands)
|
|
Weighted-Average Exercise Price
|
|
Weighted-Average Remaining Contractual Term
|
|
Aggregate Intrinsic Value (In Thousands)
|
Outstanding at beginning of period
|
3,938
|
|
|
$
|
28.21
|
|
|
|
|
|
Exercised
|
(450
|
)
|
|
$
|
14.49
|
|
|
|
|
|
Forfeited and canceled
|
(881
|
)
|
|
$
|
37.76
|
|
|
|
|
|
Outstanding at end of period
|
2,607
|
|
|
$
|
27.35
|
|
|
2.9 years
|
|
$
|
323
|
|
Vested and expected to vest at June 30, 2017
|
2,562
|
|
|
$
|
27.43
|
|
|
2.8 years
|
|
$
|
321
|
|
Exercisable at June 30, 2017
|
2,112
|
|
|
$
|
28.31
|
|
|
2.4 years
|
|
$
|
296
|
|
The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value that option holders would have received had all option holders exercised their options at the end of the last trading day in the period. The aggregate intrinsic value is the difference between TiVo's closing stock price on the last trading day of the period and the exercise price of the option, multiplied by the number of in-the-money options.
The aggregate intrinsic value of stock options exercised is the difference between the market price of the shares at the time of exercise and the exercise price of the stock option multiplied by the number of stock options exercised. The aggregate intrinsic value of stock options exercised during the
three months ended June 30, 2017
was
$0.6 million
. The aggregate intrinsic value of stock options exercised during the
three months ended June 30, 2016
was immaterial. The aggregate intrinsic value of stock options exercised during the
six months ended June 30, 2017 and 2016
was
$2.0 million
and
$0.6 million
, respectively.
(13) Income Taxes
Due to the fact that the Company has significant net operating loss carryforwards and has recorded a valuation allowance against a significant portion of its deferred tax assets, foreign withholding taxes are the primary driver of
Income tax expense
.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Foreign withholding tax
|
$
|
2,803
|
|
|
$
|
2,737
|
|
|
$
|
7,011
|
|
|
$
|
6,444
|
|
State income tax
|
569
|
|
|
(271
|
)
|
|
1,135
|
|
|
122
|
|
Foreign income tax
|
181
|
|
|
192
|
|
|
744
|
|
|
837
|
|
Release of deferred tax asset valuation allowance
|
—
|
|
|
—
|
|
|
(152
|
)
|
|
—
|
|
Change in net deferred tax liabilities
|
363
|
|
|
461
|
|
|
681
|
|
|
921
|
|
Change in unrecognized tax benefits
|
(8
|
)
|
|
87
|
|
|
56
|
|
|
296
|
|
Income tax expense
|
$
|
3,908
|
|
|
$
|
3,206
|
|
|
$
|
9,475
|
|
|
$
|
8,620
|
|
The Company believes it has provided adequate reserves for all tax deficiencies or reductions in tax benefits that could result from U.S. federal, state and foreign tax audits. The Company regularly assesses potential outcomes of these audits in order to determine the appropriateness of its tax provision. Adjustments to accruals for unrecognized tax benefits are made to reflect the impact of negotiations, settlements, rulings, advice of legal counsel and other information and events pertaining to a particular income tax audit. However, income tax audits are inherently unpredictable and there can be no assurance that the Company will accurately predict the outcome of these audits. The amounts ultimately paid on resolution of an audit could be materially different from the amounts previously recognized, and therefore the resolution of one or more of these uncertainties in any particular period could have a material adverse impact on the
Condensed Consolidated Financial Statements
.
(14) Segment Information
Reportable segments are identified based on the Company's organizational structure and information reviewed by the Company’s chief operating decision maker ("CODM") to evaluate performance and allocate resources. The Company's operations are organized into
two
reportable segments for financial reporting purposes:
Intellectual Property Licensing
and
Product
. The
Intellectual Property Licensing
segment consists primarily of licensing the Company's patent portfolio to U.S. and international pay-television providers (directly and through their suppliers), mobile device manufacturers, consumer electronics ("CE") manufacturers and over-the-top ("OTT") video providers. The
Product
segment consists primarily of licensing Company-developed IPG products and services to multi-channel video service providers and CE manufacturers, in-guide advertising revenue, data analytics revenue and revenue from licensing the TiVo service, licensing metadata and selling TiVo-enabled devices. The
Product
segment also includes sales of legacy Analog Content Protection, VCR Plus+ and media recognition products.
During the first quarter of 2017, the Company reorganized the presentation of revenue within its
Intellectual Property Licensing
segment to
US Pay TV Providers
and
Other
to better portray its growth strategy. Revenue from
US Pay TV Providers
includes direct and indirect licensing of multi-channel linear video programming regardless of the particular distribution technology (e.g., cable, satellite or the internet). Specifically, this includes licensing to traditional Pay TV providers and internet-based Pay TV providers based in the U.S.
Other
revenue includes licensing international Pay TV providers, mobile device manufacturers, CE manufacturers and on-demand OTT video providers. Revenue within the
Intellectual Property Licensing
segment for prior periods has been reclassified to conform to the current presentation.
Segment results are derived from the Company's internal management reporting system. The accounting policies used to derive segment results are substantially the same as those used by the consolidated company. Intersegment revenues and expenses have been eliminated from segment financial information as transactions between reportable segments are excluded from the measure of segment profitability reviewed by the CODM. In addition, certain costs are not allocated to the segments as they are considered Corporate costs. Corporate costs primarily include general and administrative costs such as corporate management, finance, legal and human resources. The CODM uses an Adjusted EBITDA (as defined below) measure to evaluate the performance of, and allocate resources to, the segments. Segment balance sheets are not used by the CODM to allocate resources or assess performance.
Segment results were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Intellectual Property Licensing
|
|
|
|
|
|
|
|
US Pay TV Providers
|
$
|
68,733
|
|
|
$
|
43,567
|
|
|
$
|
132,077
|
|
|
$
|
76,877
|
|
Other
|
35,462
|
|
|
24,152
|
|
|
62,839
|
|
|
47,102
|
|
Revenues, net
|
104,195
|
|
|
67,719
|
|
|
194,916
|
|
|
123,979
|
|
Adjusted Operating Expenses (1)
|
20,817
|
|
|
17,697
|
|
|
45,004
|
|
|
31,854
|
|
Adjusted EBITDA (2)
|
83,378
|
|
|
50,022
|
|
|
149,912
|
|
|
92,125
|
|
Product
|
|
|
|
|
|
|
|
Platform Solutions
|
82,971
|
|
|
36,595
|
|
|
171,154
|
|
|
72,079
|
|
Software and Services
|
19,752
|
|
|
19,482
|
|
|
45,021
|
|
|
39,869
|
|
Other
|
1,640
|
|
|
1,449
|
|
|
3,231
|
|
|
7,702
|
|
Revenues, net
|
104,363
|
|
|
57,526
|
|
|
219,406
|
|
|
119,650
|
|
Adjusted Operating Expenses (1)
|
92,011
|
|
|
44,503
|
|
|
189,007
|
|
|
91,150
|
|
Adjusted EBITDA (2)
|
12,352
|
|
|
13,023
|
|
|
30,399
|
|
|
28,500
|
|
Corporate:
|
|
|
|
|
|
|
|
Adjusted Operating Expenses (1)
|
14,876
|
|
|
12,209
|
|
|
31,233
|
|
|
24,255
|
|
Adjusted EBITDA (2)
|
(14,876
|
)
|
|
(12,209
|
)
|
|
(31,233
|
)
|
|
(24,255
|
)
|
Consolidated:
|
|
|
|
|
|
|
|
Total Revenues, net
|
208,558
|
|
|
125,245
|
|
|
414,322
|
|
|
243,629
|
|
Adjusted Operating Expenses (1)
|
127,704
|
|
|
74,409
|
|
|
265,244
|
|
|
147,259
|
|
Adjusted EBITDA (2)
|
80,854
|
|
|
50,836
|
|
|
149,078
|
|
|
96,370
|
|
Depreciation
|
5,382
|
|
|
4,325
|
|
|
10,854
|
|
|
8,559
|
|
Amortization of intangible assets
|
41,678
|
|
|
19,030
|
|
|
83,378
|
|
|
38,162
|
|
Restructuring and asset impairment charges
|
9,374
|
|
|
—
|
|
|
13,913
|
|
|
2,333
|
|
Equity-based compensation
|
11,749
|
|
|
9,917
|
|
|
25,774
|
|
|
18,355
|
|
Transaction, transition and integration costs
|
5,108
|
|
|
6,043
|
|
|
12,307
|
|
|
6,043
|
|
Earnout amortization and settlement
|
959
|
|
|
1,189
|
|
|
1,917
|
|
|
1,189
|
|
Change in contingent consideration liability
|
398
|
|
|
—
|
|
|
74
|
|
|
—
|
|
Gain on settlement of acquired receivable
|
(2,537
|
)
|
|
—
|
|
|
(2,537
|
)
|
|
—
|
|
Change in franchise tax reserve
|
—
|
|
|
154
|
|
|
—
|
|
|
154
|
|
Operating income
|
8,743
|
|
|
10,178
|
|
|
3,398
|
|
|
21,575
|
|
Interest expense
|
(10,573
|
)
|
|
(10,859
|
)
|
|
(20,837
|
)
|
|
(21,390
|
)
|
Interest income and other, net
|
2,823
|
|
|
(14
|
)
|
|
2,760
|
|
|
(31
|
)
|
Loss on interest rate swaps
|
(1,856
|
)
|
|
(5,507
|
)
|
|
(1,335
|
)
|
|
(18,594
|
)
|
Loss on debt extinguishment
|
—
|
|
|
—
|
|
|
(108
|
)
|
|
—
|
|
Loss on debt modification
|
—
|
|
|
—
|
|
|
(929
|
)
|
|
—
|
|
Litigation settlement
|
—
|
|
|
—
|
|
|
(12,906
|
)
|
|
—
|
|
Loss before income taxes
|
$
|
(863
|
)
|
|
$
|
(6,202
|
)
|
|
$
|
(29,957
|
)
|
|
$
|
(18,440
|
)
|
|
|
(1)
|
Adjusted Operating Expenses is defined as operating expenses excluding depreciation, amortization of intangible assets, restructuring and asset impairment charges, equity-based compensation, transaction, transition and integration costs, gain on settlement of acquired receivable, retention earn-outs payable to former shareholders of acquired businesses, earn-out settlements, changes in contingent consideration and changes in franchise tax reserves.
|
|
|
(2)
|
Adjusted EBITDA is defined as operating income excluding depreciation, amortization of intangible assets, restructuring and asset impairment charges, equity-based compensation, transaction, transition and integration costs,
|
gain on settlement of acquired receivable, retention earn-outs payable to former shareholders of acquired businesses, earn-out settlements, changes in contingent consideration and changes in franchise tax reserves.
(15) Subsequent Event
On
August 2, 2017
,
TiVo Corporation
's Board of Directors declared a cash dividend of
$0.18
per share, payable on
September 21, 2017
, to stockholders of record on
September 7, 2017
.