More Details on TiVo’s First Quarter Results: A Tale of Confused Financial Media Reporting
In brief:
The company reported non-GAAP $0.40 EPS vs. the consensus estimate of $0.27. News agencies reported all of the following incorrect EPS numbers: (0.29), $0.22, $0.29, $0.30 and $0.45.
The full story:
It’s earnings season, and TiVo (TIVO) reported first quarter 2017 results on May 3 after the market closed, which I discussed in a Special Bulletin to subscribers yesterday. Various financial media reporters looked at the company’s press release, and each proceeded to report various inaccurate numbers to their readers. That’s because TiVo did not report a number for non-GAAP earnings per share (EPS), which is the number Wall Street analysts use to make earnings projections, and to compare results to the company’s recent quarterly and annual performance. However, TiVo did provide the numbers that are used to calculate non-GAAP earnings per share.
At 5:52 PM ET on May 3, Reuters reported a first-quarter loss of (0.29) per share, using GAAP basic and diluted EPS numbers. But Reuters never reports GAAP numbers! Reuters reports non-GAAP numbers and makes direct comparisons to the non-GAAP consensus earnings estimates, so that investors can see whether the quarterly results came in above or below estimates.
The Associated Press reported adjusted EPS of $0.30, but news agencies that published the AP story (Yahoo Finance and CNBC) used GAAP numbers in headlines, such as “TiVo Reports 1Q Loss.”
On the evening of May 3, Briefing.com reported EPS of $0.45.
On the morning of May 4, Zacks reported adjusted EPS of $0.22.
On the morning of May 4, the Charles Schwab website posted first quarter 2017 results, but they inadvertently published fourth-quarter 2016 numbers.
Later in the day on May 4, the Charles Schwab website reported first quarter EPS of $0.29.
So what’s the truth? The actual calculation did not seem complicated. TiVo’s press release included all of the following numbers, except non-GAAP EPS, so I did the calculation:
Still, I felt uncomfortable publishing that number in my Special Bulletin to subscribers yesterday, because it was a simple calculation—it’s supposed to be complicated, right?—yet none of the news reports agreed with it. I was thinking, “What am I missing here?” It turns out that I wasn’t missing anything.
And then I found this on the transcript of TiVo’s earnings conference call from the afternoon of May 3:
Question (from an analyst at an investment firm): “I’ll start off with a housekeeping question to calculate non-GAAP EPS. So I have around $54 million in pretax income and $6 million in cash taxes. And using 120 million in diluted share count, does it direct to $0.40 non-GAAP EPS?”
Answer (from Peter C. Halt, TiVo’s CFO): “That would be the correct calculation.”
So there you have it: $0.40 EPS, everybody reported it wrong, and the share price fell.
I tend to be relaxed about share price volatility, because everything eventually comes out in the wash. The analysts and institutions that propel the bulk of stock purchases will not misunderstand the company’s financial reports. They will recognize a bargain when they see it, and they will drive the share price up.
In the meantime, I just want to encourage investors to buy stocks in financially healthy companies, and be prepared to hold those stocks through volatile time periods, in order to reach the pot of gold at the end of the rainbow.
As for TiVo: buy, buy, buy. Strong Buy