OpenTV Reports Second Quarter 2008 Results

OpenTV Reports Second Quarter 2008 Results

SAN FRANCISCO, Aug. 7 /PRNewswire-FirstCall/ -- OpenTV Corp. (NASDAQ:OPTV) , a leading provider of solutions for the delivery of advanced television and advanced advertising services, today announced financial results for its second quarter ended June 30, 2008.

"Our financial results for the second quarter and first half of 2008 demonstrate the successful execution of our plan to grow our core business while improving costs and profitability," said Chief Executive Officer, Ben Bennett. "We have continued to grow our global middleware market share as we work to deepen relationships with existing customers as well as acquire new customers and enter new markets including a recent significant customer win in Japan. On the advanced advertising side, our EclipsePlus product is beginning to be deployed by leading operators. Overall, we are on track with our plans for the year."

   Key Operating Measures of Continuing Operations    USD Millions            Three months ended   Three months ended    Change                              June 30, 2008        June 30, 2007   Revenues                       $26.8m              $23.0m            17%   Adjusted EBITDA, before    unusual items                  $2.5m              ($1.0m)         $3.5m   Cash, Cash Equivalents and    Marketable Debt Securities   $100.4m              $73.6m            36%      Second Quarter 2008 Results  

For the quarter ended June 30, 2008, revenues were $26.8 million, an increase of 17% over revenues of $23.0 million for the second quarter of 2007. Royalties and licenses revenues increased 29% to $18.2 million. Services and other revenues decreased 3% to $8.6 million. Adjusted EBITDA, before unusual items, was $2.5 million for the quarter ended June 30, 2008, compared to ($1.0) million for the second quarter of 2007.

Net income for the second quarter of 2008 was breakeven, compared to a net loss of $4.8 million, or $(0.04) per share, for the second quarter of 2007.

As of June 30, 2008, the Company recorded a balance of $31.0 million in deferred revenue, compared to $24.1 million at the end of 2007.

As of June 30, 2008, the Company had cash, cash equivalents and short and long-term marketable debt securities totaling $100.4 million, compared to $81.8 million as of December 31, 2007.

   Segment Information    Revenues  

-- In the second quarter of 2008, revenues from the Middleware Solutions segment were $23.5 million, compared to $20.2 million for the same period in the prior year.

-- In the second quarter of 2008, revenues from the Advertising Solutions segment were $3.3 million, compared to $2.8 million for the same period in the prior year.

Contribution Margin

-- In the second quarter of 2008, Middleware Solutions contribution margin increased by $3.5 million to $8.0 million, compared to $4.5 million for the same period in the prior year.

-- In the second quarter of 2008, Advertising Solutions contribution margin improved by $0.5 million to $0.2 million, compared to a loss of $0.3 million for the same period in the prior year.

For the second quarter of 2008, total contribution margin from the Company's operating segments increased to $8.2 million, compared to $4.2 million in the second quarter of 2007. Unallocated corporate overhead was $5.7 million in the second quarter of 2008, $0.6 million higher than unallocated corporate overhead of $5.1 million in the second quarter of 2007.

Adjusted EBITDA before unusual items and contribution margin are non-GAAP financial measures. Reconciliations of the differences between these non-GAAP financial measures and net income (loss), which is the most directly comparable GAAP financial measure, are included at the end of this press release. Additional information regarding the derivation of Adjusted EBITDA and contribution margin and a statement of the relevance to management of this information and its possible usefulness to investors is also included at the end of this release and on the investor relations page of our Web site.

Summary of Recent Announcements

The following is a summary of key press releases issued by the Company since its last earnings announcement:

-- OpenTV announced the commercial launch by FOXTEL, Australia's leading Pay TV operator, of the FOXTEL iQ2 platform, which is an advanced, quad-tuner, high-definition, PVR-enabled set-top box running on OpenTV Core2;

-- OpenTV announced that NBC Universal had selected the OpenTV Participate solution to power, centralize and manage cross-platform interactive television applications, including Web, mobile and set-top box, for NBC Universal's broadcast and cable networks;

-- OpenTV announced the general availability of OpenTV EclipsePlus, its next generation campaign management solution, which provides advanced traffic and billing features to cable networks;

-- OpenTV announced that its Core2 and PVR2 middleware solutions had been selected by Brazil's Net Servicos de Comunicacao S.A., the largest cable operator in Latin America; and

-- OpenTV announced that STMicroelectronics, the world leader in set-top box chips, has joined OpenTV's Rapid Porting Program, the OpenTV-led effort to provide rapid, high quality ports of OpenTV middleware to a wide range of chipsets and set-top boxes.

Conference Call Details

OpenTV will conduct a conference call to discuss the Company's second quarter financial results. The details of the call are as follows:

   Date and Time:                 Thursday, August 7, 2008, at 5:00pm ET /                                  2:00pm PT    Dial-in number US:             800.798.2796    Dial-in number International:  617.614.6204    Passcode:                      55 35 58 92    Participants:                  Ben Bennett, Chief Executive Officer                                  Shum Mukherjee, Chief Financial Officer                                  Mark Beariault, General Counsel    

To access a live Web cast of the conference call, please go to the Investor Relations section of the OpenTV Web site at http://www.opentv.com/.

The conference call replay will be available from August 7, 2008 at 7:00pm ET / 4:00pm PT through August 21, 2008 at 11:59pm ET / 8:59pm PT.

   Replay Number US:              888-286-8010    Replay Number International:   617-801-6888    Passcode:                      44 79 24 44     About Segment Information  

Because our business segments reflect the manner in which management reviews our business, they necessarily involve judgments that management believes are reasonable in light of the circumstances under which they are made. These judgments may change over time or may be modified to reflect new facts or circumstances. Segments may also be changed or modified from time to time to reflect technologies and applications that are newly created or that have changed, or other business conditions that evolve, each of which may result in management reassessing specific segments, the elements included therein and the methodologies used to assess segment performance.

Non-GAAP Financial Measures

"EBITDA" is an acronym for earnings before interest, taxes, depreciation and amortization. Adjusted EBITDA, as used in this release, removes from EBITDA the effects of amortization of intangible assets, share-based compensation expense, other income and expense, and minority interest. "Adjusted EBITDA before unusual items" removes from Adjusted EBITDA the effects of contract amendments that mitigated potential loss positions and restructuring costs.

"Contribution margin," as used in this release, is defined by the company as segment revenues less related direct or indirect allocable costs, including headcount and headcount-related overhead costs, consulting and subcontractor costs, travel, marketing and network infrastructure and bandwidth costs. Contribution margin excludes unallocated corporate support, interest, taxes, depreciation and amortization, amortization of intangible assets, share-based compensation, impairment of goodwill, impairment of intangibles, other income, minority interest, restructuring provisions, and unusual items such as contract amendments that mitigated potential loss positions. These exclusions reflect costs not considered directly allocable to individual business segments and result in a definition of contribution margin that does not take into account the substantial cost of doing business.

Management believes that "Adjusted EBITDA before unusual items" and "contribution margin" are relevant and useful measures, when considered in conjunction with the comparable GAAP measures, for use by investors in evaluating the operational performance of the company. They are some of the principal measures used by OpenTV's management to assess the financial performance of its business. OpenTV's management believes that both Adjusted EBITDA before unusual items and contribution margin provide meaningful information because each measure represents a transparent view of OpenTV's recurring operating performance and allows management to readily view operating trends, perform analytical comparisons and benchmarking between segments and identify strategies to improve operating performance. While OpenTV's management may consider Adjusted EBITDA before unusual items and contribution margin to be important measures of comparative operating performance, they should be considered in addition to, but not as a substitute for, profit (loss) from operations, net income (loss), cash flow and other measures of financial performance prepared in accordance with accounting principles generally accepted in the United States that are presented in the financial statements included in this press release. Additionally, OpenTV's calculation of Adjusted EBITDA before unusual items and contribution margin may be different from the calculation used by other companies and, therefore, comparability may be affected. OpenTV reconciles Adjusted EBITDA before unusual items and each reported segment's contribution margin to its consolidated net income (loss) as presented in the accompanying financial statements, because OpenTV believes consolidated net income (loss) is the most directly comparable financial measure presented in accordance with GAAP.

While OpenTV believes that the presentation of non-GAAP financial measures contained in this press release complies with the rules and guidance of the SEC, it can give no assurance that it will be able to provide the same or comparable measures in future press releases or announcements. OpenTV may, in the future, present non-GAAP financial measures other than "Adjusted EBITDA before unusual items," "Adjusted EBITDA" and "contribution margin" that it believes may be useful to investors. Any such determinations will be made with the intention of providing the most useful information to investors and will reflect the information used by OpenTV's management in assessing its business, which may change from time to time.

Cautionary Language Regarding Forward-Looking Information

This press release contains certain "forward-looking statements" within the meaning of the United States Private Securities Litigation Reform Act of 1995. These statements are based on management's current expectations and are subject to uncertainty and changes in circumstances. Actual results may differ materially from these expectations due to changes in political, economic, business, competitive, market and regulatory factors. In particular, factors that could cause our actual results to differ include risks related to: delays in the development or introduction of new versions of our products; technical difficulties with networks or operating systems; our ability to manage our resources effectively; changes in technologies that affect the television industry; and the protection of our proprietary information. These and other risks are more fully described in our periodic reports and registration statements filed with the Securities and Exchange Commission and can be obtained online at the Commission's web site at http://www.sec.gov/. Readers should consider the information contained in this release together with other publicly available information about our company for a more informed overview of our company. We disclaim any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

About OpenTV

OpenTV is one of the world's leading providers of advanced digital television solutions and is dedicated to creating and delivering compelling viewing experiences to consumers of digital content worldwide. The company's software has been integrated in more than 111 million digital devices around the world, and enables enhanced program guides, video-on-demand, personal video recording, enhanced television, interactive and addressable advertising, and a variety of enhanced television applications. For more information, please visit http://www.opentv.com/.

                                 OPENTV CORP.                UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS                     (In thousands, except share amounts)                                                  June 30,        December 31,                                                   2008             2007 *                                ASSETS   Current assets:        Cash and cash equivalents                 $89,719           $58,599        Short-term marketable debt securities       7,565            20,404        Accounts receivable, net of allowance         for doubtful accounts of $470 and $565         at June 30, 2008 and December 31, 2007,         respectively                              27,350            16,655        Prepaid expenses and other current assets   3,912             5,465             Total current assets                 128,546           101,123    Long-term marketable debt securities             3,153             2,811   Property and equipment, net                      6,593             6,554   Goodwill                                        95,084            95,082   Intangible assets, net                          10,539            12,589   Other assets                                     2,232             1,896             Total assets                        $246,147          $220,055               LIABILITIES, MINORITY INTEREST AND SHAREHOLDERS' EQUITY   Current liabilities:        Accounts payable                           $2,891            $2,687        Accrued liabilities                        15,896            17,360        Accrued restructuring                         598               883        Deferred revenue                           19,283            14,992             Total current liabilities             38,668            35,922    Accrued liabilities, net of current portion      1,945             2,764   Accrued restructuring, net of current portion    1,247             1,297   Deferred revenue, net of current portion        11,690             9,142             Total liabilities                     53,550            49,125    Commitments and contingencies    Minority interest                                  435               451    Shareholders' equity:        Preference shares, no par value,         500,000,000 shares authorized;         none issued and outstanding                    -                 -        Class A ordinary shares, no par value,         500,000,000 shares authorized;         109,328,996 and 109,657,613 shares         issued and outstanding at June 30,         2008 and December 31, 2007,         respectively                           2,235,396         2,234,614        Class B ordinary shares, no par value,         200,000,000 shares authorized;         30,206,154 shares issued and         outstanding at June 30, 2008 and         December 31, 2007                         35,953            35,953        Additional paid-in capital                515,121           500,162        Accumulated other comprehensive loss         (535)             (141)        Accumulated deficit                    (2,593,773)       (2,600,109)            Total shareholders' equity            192,162           170,479   Total liabilities, minority interest    and shareholders' equity                     $246,147          $220,055    * The condensed consolidated balance sheet at December 31, 2007 has been   derived from the company's audited consolidated financial statements at   that date.                                     OPENTV CORP.           UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS               (In thousands, except share and per share amounts)                         Three Months Ended June 30,  Six Months Ended June 30,                              2008         2007         2008         2007    Revenues:    Royalties and licenses  $18,196      $14,066      $40,417      $31,927    Services and other        8,627        8,935       20,211       16,143         Total revenues      26,823       23,001       60,628       48,070   Cost of revenues:    Royalties and licenses    1,323        1,934        2,746        3,701    Services and other       10,018        9,965       20,091       19,208         Total cost of          revenues           11,341       11,899       22,837       22,909   Gross profit              15,482       11,102       37,791       25,161   Operating expenses:    Research and     development              8,447        7,754       17,739       16,327    Sales and marketing       2,332        2,993        4,685        5,889    General and     administrative           4,539        4,695       10,910       10,121    Restructuring and     impairment costs           581          (28)         581          (28)    Amortization of     intangible assets          185          510          370        1,020         Total operating          expenses           16,084       15,924       34,285       33,329   Profit (loss) from    operations                 (602)      (4,822)       3,506       (8,168)   Interest income              637          745        1,353        1,246   Other income (expense)       384         (123)       2,230          (50)   Minority interest              8            9           16           17      Income (loss)       before income taxes      427       (4,191)       7,105       (6,955)   Income tax expense           406          578          769          839      Net income (loss)       from continuing       operations                21       (4,769)       6,336       (7,794)   Discontinued operations:      Net loss from       discontinued       operations               -            (95)         -           (214)   Net income (loss)            $21      $(4,864)      $6,336      $(8,008)    Net income (loss) per    share from continuing    operations, basic          $-         $(0.04)       $0.05       $(0.06)   Net loss per share    from discontinued    operations, basic           -            -            -            -   Net income (loss) per    share, basic               $-         $(0.04)       $0.05       $(0.06)    Net income (loss) per    share from continuing    operations, diluted        $-         $(0.04)       $0.05       $(0.06)   Net loss per share    from discontinued    operations, diluted         -            -            -            -   Net income (loss) per    share, diluted             $-         $(0.04)       $0.05       $(0.06)    Shares used in per    share calculation,    basic               139,632,228  138,659,811  139,710,747  138,576,223   Shares used in per    share calculation,    diluted             140,340,755  138,659,811  140,425,226  138,576,223                                     OPENTV CORP.           UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS                                (In thousands)                                                    Six Months Ended June 30,                                                     2008              2007   Cash flows from operating activities:   Net income (loss)                               $6,336           $(8,008)        Less: Loss from discontinued         operations                                   -                (214)        Net income (loss) from         continuing operations                      6,336            (7,794)   Adjustments to reconcile net income    (loss) to net cash provided by    operating activities:        Depreciation and amortization of         property and equipment                     2,076             1,871        Amortization of intangible         assets                                     2,050             3,402        Share-based compensation                    1,841             2,270        Non-cash employee compensation                  8                76        Provision for (reduction of)         doubtful accounts                            (95)              245        Gain on sale of cost investment              (143)              -        Loss on disposal of fixed assets              -                   2        Minority interest                             (16)              (17)        Changes in operating assets and         liabilities:            Accounts receivable                   (10,600)            1,222            Prepaid expenses and other             current assets                          (411)              (29)            Other assets                             (336)              938            Accounts payable                          204            (1,162)            Accrued liabilities                    (2,283)           (3,333)            Accrued restructuring                    (335)             (301)            Deferred revenue                        6,839             7,212            Net cash provided by             operating activities of             continuing operations                  5,135             4,602            Net cash provided by             operating activities of             discontinued operations                  -                 176            Total net cash provided by             operating activities                   5,135             4,778    Cash flows from investing activities:   Purchase of property and equipment              (2,030)           (1,371)   Proceeds from sale of cost investment            1,882               -   Proceeds from sale of marketable debt    securities                                     16,009             6,995   Purchase of marketable debt    securities                                     (3,644)          (19,186)            Net cash provided by (used             in) investing activities of             continuing operations                 12,217           (13,562)            Net cash provided by (used             in) investing activities of             discontinued operations                  225               (20)            Total net cash provided by             (used in) investing             activities                            12,442           (13,582)    Cash flows from financing activities:   Repurchase of employee stock options               -                (167)   Repurchase of restricted shares                   (454)              -   Capital contribution                            14,333             5,395   Proceeds from issuance of ordinary    shares                                             11               236            Net cash provided by             financing activities of             continuing operations                 13,890             5,464    Effect of exchange rate changes on    cash and cash equivalents of    continuing operations                            (347)              (35)   Effect of exchange rate changes on    cash and cash equivalents of    discontinued operations                           -                  42            Total effect of exchange             rate changes on cash and             cash equivalents                        (347)                7    Net increase (decrease) in cash and    cash equivalents of continuing    operations                                     30,895            (3,531)   Net increase in cash and cash    equivalents of discontinued    operations                                        225               198   Net increase (decrease) in cash and    cash equivalents                               31,120            (3,333)    Cash and cash equivalents, beginning    of period, of continuing operations            58,599            48,309   Cash and cash equivalents, beginning    of period, of discontinued    operations                                        -                 307   Cash and cash equivalents, beginning    of period                                      58,599            48,616    Cash and cash equivalents, end of    period, of continuing operations               89,719            44,778   Cash and cash equivalents, end of    period, of discontinued operations                -                 505   Cash and cash equivalents, end of    period                                        $89,719           $45,283    Supplemental disclosure of cash flow    information:   Cash paid for income taxes                     $(1,105)          $(1,004)    Non-cash investing and financing    activities:   Conversion of exchangeable shares                   $2               $42                                     OPENTV CORP.              UNAUDITED SEGMENT INFORMATION AND RECONCILIATION OF         CONTRIBUTION MARGIN AND ADJUSTED EBITDA TO NET INCOME / (LOSS)                                 (In thousands)                                         Three Months Ended  Six Months Ended                                               June 30,          June 30,                                            2008     2007     2008     2007   Revenues:   Middleware solutions     Royalties and licenses               $16,676  $12,976  $37,209  $29,527     Services and other                     6,866    7,239   16,396   12,471       Subtotal - Middleware solutions     23,542   20,215   53,605   41,998   Advertising solutions     Royalties and licenses                 1,520    1,090    3,208    2,400     Services and other                     1,761    1,696    3,815    3,672       Subtotal - Advertising solutions     3,281    2,786    7,023    6,072         Total revenues                   $26,823  $23,001  $60,628  $48,070    Contribution margin (loss):     Middleware solutions                  $7,940   $4,498  $21,608  $11,079     Advertising solutions                    233     (313)     919     (858)         Total contribution margin          8,173    4,185   22,527   10,221   Unallocated corporate support           (5,693)  (5,167) (12,465) (10,798)     Adjusted EBITDA before unusual items   2,480     (982)  10,062     (577)   Restructuring and impairment costs        (581)      28     (581)      28     Adjusted EBITDA                        1,899     (954)   9,481     (549)   Depreciation and amortization           (1,042)    (952)  (2,076)  (1,871)   Amortization of intangible assets       (1,025)  (1,701)  (2,050)  (3,402)   Share-based and non-cash compensation     (434)  (1,215)  (1,849)  (2,346)   Interest income                            637      745    1,353    1,246   Other income (expense)                     384     (123)   2,230      (50)   Minority interest                            8        9       16       17     Income (loss) before income taxes        427   (4,191)   7,105   (6,955)   Income tax expense                         406      578      769      839     Net income (loss) from continuing      operations                               21   (4,769)   6,336   (7,794)   Discontinued operations:     Net loss from discontinued      operations                              -        (95)     -       (214)   Net income (loss)                          $21  $(4,864)  $6,336  $(8,008)  

First Call Analyst:
FCMN Contact:

Source: OpenTV Corp.

CONTACT: Investors, Denise Roche, roche@braincomm.com, or Brad Edwards,
edwards@braincomm.com, both of Brainerd Communicators, +1-212-986-6667, for
OpenTV; or Media, Christine Oury of OpenTV, +1-415-962-5433, coury@opentv.com

Web site: http://www.opentv.com/

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Profile: International Entertainment