TiVo 2005 Annual Report Download - page 43

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Table of Contents
Operating Expenses. Our operating expenses, including research and development, sales and marketing, and general and administrative expenses,
increased $22.6 million or 25% during the fiscal year ended January 31, 2006 compared to the prior fiscal year. The largest contributor to the increase in
operating expenses was the increase in legal expenses related to on-going litigation of $14.5 million for the fiscal year ended January 31, 2006, as compared
to the prior fiscal year.
Cash Flows from Operating Activities. Our cash provided by operating activities for the fiscal year ended January 31, 2006 was $3.4 million, as
compared to ($37.2) million used in operating activities for the prior fiscal year. This improvement in cash flows from operating activities is largely due to the
increase in our service revenues gross margin.
Key Business Metrics
Management periodically reviews certain key business metrics in order to evaluate our operations, allocate resources, and drive financial performance
in our business. Management monitors these metrics together and not individually as it does not make business decisions based upon any single metric.
Subscriptions. Management reviews this metric, and believes it may be useful to investors, in order to evaluate TiVo's relative position in the
marketplace and to forecast future potential service revenues. Below is a table that details the growth in our subscription base during the past eight quarters.
The TiVo-Owned lines refer to subscriptions sold directly by TiVo to consumers who have TiVo-enabled DVRs. The DIRECTV lines refer to subscriptions
sold by DIRECTV to consumers who have integrated DIRECTV satellite receivers with TiVo service. Additionally, we provide a breakdown of the percent of
TiVo-Owned subscriptions for which consumers pay a recurring fee, as opposed to a one-time product lifetime fee.
Three Months Ended
(Subscriptions in thousands)
Jan 31,
2006
Oct 31,
2005
Jul 31,
2005
April 30,
2005
Jan 31,
2005
Oct 31,
2004
Jul 31,
2004
April 30,
2004
TiVo-Owned Subscription Gross Additions: 221 92 77 104 276 119 78 82
Subscription Net Additions:
TiVo-Owned 183 55 40 72 251 103 63 68
DIRECTV 173 379 214 247 447 316 225 196
Total Subscription Net Additions 356 434 254 319 698 419 288 264
Cumulative Subscriptions:
TiVo-Owned 1,491 1,308 1,253 1,213 1,141 890 787 724
DIRECTV 2,873 2,700 2,321 2,107 1,860 1,413 1,097 872
Total Cumulative Subscriptions 4,364 4,008 3,574 3,320 3,001 2,303 1,884 1,596
% of TiVo-Owned Cumulative Subscriptions paying recurring fees 51% 51% 51% 51% 50% 46% 43% 42%
Included in the 4,364,000 subscriptions are approximately 100,000 lifetime subscriptions that have reached the end of the 48-month period TiVo uses to
recognize lifetime subscription revenue. These lifetime subscriptions no longer generate subscription revenue.
We define a "subscription" as a contract referencing a TiVo-enabled DVR for which (i) a consumer has paid for the TiVo service and (ii) service is not
canceled. We offer a product lifetime subscription for general sale, under which consumers could purchase a subscription that is valid for the lifetime of a
particular DVR. We have announced our intention to eliminate the product lifetime service option. We count these as subscriptions until both of the following
conditions are met: (i) the four-year period we use to recognize lifetime subscription revenues ends, and (ii) the related DVR has not made contact to the TiVo
service within the prior six-month period. Lifetime subscriptions past the four-year mark which have not called into the TiVo service for six-months are not
counted in this total. We are not aware of any uniform standards for defining subscriptions and caution that our presentation may not be consistent with that of
other companies.
We believe TiVo-Owned subscription net additions for the fiscal year ended January 31, 2006 decreased by 135,000 compared to the prior fiscal year
period because of increased competition from DVRs distributed by cable and satellite providers, including DIRECTV's TiVo and non-TiVo products. The
percent of cumulative TiVo-Owned subscriptions paying recurring fees was 51% during the quarter ended January 31, 2006, an increase of 1% from the same
period last year, due to the fact that 70% of TiVo-Owned subscription gross additions chose a monthly fee option. DIRECTV subscription net additions were
171,000 lower for the fiscal year ended January 31, 2006 than the prior fiscal year.
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