TiVo 2006 Annual Report Download - page 46

Table of Contents
Executive Overview and Outlook of Financial Results
During the fiscal year ended January 31, 2007, we experienced growth in our TiVo-Owned subscription base and subscription revenues. Through our
continued investment in marketing and research and development, we increased our TiVo-Owned subscription base. However, this subscription growth was
largely offset by the loss of a portion of our DIRECTV installed subscription base. Additionally, in fiscal year 2007 we elected to invest in subscription
acquisition activities in an effort to expand our subscription base and promote the TiVo brand for future partnerships. TiVo-Owned subscription gross
additions for the fiscal year 2007 were 429,000, which was down 13% from the fiscal year 2006.
For the fiscal year ending January 31, 2008, we plan to lower our consumer hardware rebates offerings thereby reducing our rebates, revenues share and
other payments to channel and we will redirect a portion of those funds towards advertising expenditures to promote the TiVo brand and service, which will
increase our sales and marketing expenses. In fiscal year 2008, we expect to continue to grow our TiVo-Owned subscription base; however, we expect this
growth to continue to be offset by losses in our DIRECTV subscription installed base as DIRECTV no longer markets the TiVo service to its customers as of
February 2007. We anticipate fiscal year 2008 will have continued service revenue growth as our TiVo-Owned subscription base increases and our
advertising sales business grows. This service revenue growth will be somewhat offset by the continued decline of product lifetime subscription related
revenues as they become fully recognized coupled with a decline in DIRECTV-related service revenues due to further losses in our DIRECTV subscription
installed base. Development and deployment of the TiVo service software solution for Comcast and Cox are expected to launch in initial markets during fiscal
year 2008. During fiscal year 2008, we expect to recognize technology revenue associated with the development work from our Comcast and Cox agreements.
The following table sets forth selected information as of our fiscal years ended January 31, 2007, 2006, and 2005:
Fiscal Year Ended January 31,
2007 2006 2005
(In thousands)
Service and technology revenues $ 217,985 $ 170,859 $ 115,476
Net revenues $ 258,589 $ 195,925 $ 172,055
Cost of revenues (172,389) (121,778) (156,258)
Operating expenses (138,496) (114,152) (91,594)
Loss from operations $ (52,296) $ (40,005) $ (75,797)
Cash flows from operating activities $ (33,507) $ 3,425 $ (37,214)
Service and Technology Revenues. Our service and technology revenues, which include subscription fees received for the TiVo service, advertising
fees, and engineering and licensing fees, increased $47.1 million or 28% during the fiscal year ended January 31, 2007 compared to the prior fiscal year. This
increase was primarily due to an increase in our cumulative TiVo-Owned subscription installed base of approximately 235,000 net TiVo-Owned subscriptions
during the fiscal year ended January 31, 2007, coupled with $16.2 million in technology revenues from licensing and engineering work recognized from our
Comcast Agreement.
Net Revenues. In addition to service and technology revenues, our net revenues include our hardware revenues as well as any offsetting effects of
contra-revenue such as rebates, revenue shares, and other payments to channel. Net revenues increased by $62.7 million or 32% during the fiscal year ended
January 31, 2007 compared to the prior fiscal year. The increase of $16.6 million in hardware revenues in absolute dollars is attributed to increased sales to
our new and existing retail channel customers and the rollout of our new TiVo Series2 DT and from our new TiVo Series3 HD DMR models.
Cost of Revenues. Our total costs of revenues, which include cost of service revenues, cost of technology revenues, and cost of hardware revenues,
increased by $50.6 million or 42% during the
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