TiVo 2015 Annual Report Download - page 42

Table of Contents
Intellectual Property Licensing Segment
The Intellectual Property Licensing segment's results of operations for the year ended
December 31, 2015 compared to the prior year were as
follows (dollars in thousands):
For the year ended
December 31, 2015 , Intellectual Property Licensing revenue decreased 1% compared to the prior year due to an 8% increase in
revenue from Service Providers and a
23% decrease in revenue from CE manufacturers. Revenue from Service Providers primarily benefited from a new IPG
patent license agreement executed in the fourth quarter of 2015 that included catch - up payments to make us whole for the pre - license period of use. The
decrease in revenue from CE manufacturers was primarily due to a major CE manufacturer being out of license in 2015 and a decrease in revenue from catch -
up payments included in patent license agreements intended to make us whole for the pre - license period of use as compared to the prior year. A decrease in
our licensees' market share, combined with continuing pressures on their business models, have also contributed to the decline in our revenue from CE
manufacturers. This decline could continue unless we are able to successfully license the new entrants to this market.
Intellectual Property Licensing segment Adjusted Operating Expenses increased 2% during the year ended
December 31, 2015 primarily due to a
$6.5 million increase in employee - related and consulting costs and a $0.5 million Gain on sale of patents that reduced Adjusted Operating Expenses in the
prior year, partially offset by a $5.9 million decrease in patent litigation costs. The increase in employee - related and consulting costs for the year ended
December 31, 2015 was primarily due to efforts to renew licenses with AT&T (including DIRECTV), Comcast, EchoStar and Time Warner Cable and the
expansion of the patent strategy group.
Product Segment
The Product segment's results of operations for the year ended
December 31, 2015 compared to the prior year were as follows (dollars in
thousands):
For the year ended
December 31, 2015 , Product segment revenue decreased 5% compared to the prior year due to a 2% decrease in revenue from
Service Providers, a 2% decrease in CE revenue and a 28% decrease in Other revenue. The decrease in Service Provider revenue was primarily the result of
acceptance of our Passport guide product for deployment in multiple countries with a major Latin American service provider which benefited revenue in
2014, offset in part by an increase in advertising revenues. Advertising revenue growth in 2015 was partially offset by agreements with a major pay TV
provider during 2015 and 2014 to report its advertising sales to us on a more timely basis. As a result, advertising revenue for 2015 and 2014 includes a
benefit of $1.5 million and $3.0 million, respectively, from the more timely reporting. As a result of these changes, we now recognize IPG advertising revenue
related to this pay TV provider with no lag. The decrease in CE revenue was primarily due to a decrease in the number of units shipped that incorporate our
products. The decrease in Other revenue
40
Year Ended December 31,
2015
2014
Change $
Change %
Service Provider
$
216,777
$
200,799
$
15,978
8
%
Consumer Electronics
65,045
84,359
(19,314
)
(23
)%
Intellectual Property Licensing Revenues
281,822
285,158
(3,336
)
(1
)%
Adjusted Operating Expenses
60,926
59,810
1,116
2
%
Adjusted EBITDA
$
220,896
$
225,348
$
(4,452
)
(2
)%
Adjusted EBITDA Margin
78.4
%
79.0
%
Year Ended December 31,
2015
2014
Change $
Change %
Service Provider
$
200,985
$
204,877
$
(3,892
)
(2
)%
Consumer Electronics
21,785
22,342
(557
)
(2
)%
Other
21,679
29,934
(8,255
)
(28
)%
Product Revenues
244,449
257,153
(12,704
)
(5
)%
Adjusted Operating Expenses
195,364
197,405
(2,041
)
(1
)%
Adjusted EBITDA
$
49,085
$
59,748
$
(10,663
)
(18
)%
Adjusted EBITDA Margin
20.1
%
23.2
%