M+E Connections

Rovi reported better than expected second quarter fiscal results July 28, with revenue of $125.2 million, and a slew of positive news to give investors.

Excluding pre-paid pay TV licensees, there are now 142 million pay TV households worldwide using a Rovi guide, or using a guide under a license from Rovi. More than 17 million subscription TV homes use Rovi’s cable TV set-tops and digital terminal adapter guides.

During the quarter, Verizon inked a multi-year patent license renewal, and Dish employed a voice remote option powered by Rovi Conversation Services. Rovi’s Fan TV app launched a voice search option on iOS and Android mobile, as well as Android TV, and Evolution Digital announced Rovi’s Fan TV software platform would be used in its latest eBOX IP hybrid set-top.

“We’re pleased to report that Rovi delivered stronger-than-expected Q2 results, due in part to the successful recent renewal of our IP License agreement with Verizon,” said Tom Carson, president and CEO of Rovi, in a statement. “Rovi now has eight of the top 10 U.S. pay TV providers under license, with six of those having entered into agreements in the last six quarters. We look forward to building on this momentum as we continue to engage with potential customers and licensees during the back half of the year.”

Eric Wold, an analyst with B. Riley & Co., wrote in a note to investors that Rovi’s results are being “driven by continued underling IP licensing strength,” and that more licensing deals are right around the corner for the company.

“Although four months have passed since the Dish/EchoStar license expired, we remain optimistic the standstill agreement and the growing relationship with further integration of Rovi’s IP (e.g., conversational search) signals a stronger likelihood of near-term resolution than is reflected in the stock, especially given the upside magnitude it would drive to guidance and consensus,” Wold said.

Additionally, Rovi’s proposed acquisition of TiVo also remains on track, with the company expecting to close the deal by the end of the third quarter, after receiving Department of Justice and Federal Trade Commission approval in July.

Wold said that Rovi’s current stock price is undervalued, with Wall Street giving “little to no credit for the probability closing the TiVo.”

“… Not only do we believe the timing of a Rovi/TiVo combination makes sense with both companies hitting licensing revenue tailwind inflection points, but the transaction should also drive meaningful revenue and cost synergies vs. each company’s separate efforts,” he wrote. “While the estimated $100 million in cost synergies announced on April 29 was spot on with our projection of $105 million, we believe the more attractive opportunity lies in being able to approach current and target customers with a single offering that draws from the best IP of both companies.”