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TiVo to Acquire Cloud TV Provider Digitalsmiths for $135 Million

SAN JOSE, CALIF.—TiVo is buying cloud TV enable Digitalsmiths for $135 million to accelerate its migration from hardware-based digital video recorders to software-as-a-service. Digitalsmiths serves iOS, Android, Roku, Xbox, PlayStation, Kindle and multiple set-top boxes. Globally, Digitalsmiths is said to serve 46 clients, including Foxtel, Sharp, Univision, zeebox and i.TV, and reach 100 million households worldwide.

TiVo said Digitalsmiths current user base represents about 10 percent of the total potential user base licensed under its current contracts. TiVo expects the active user base to grow to over 50 percent penetration in the next few years. It expects these factors should drive significant double-digit revenue growth rates for Digitalsmiths for the next several years. Additionally, TiVo said the nature of Digitalsmiths’ SaaS offering should drive strong margins and a material contribution to TiVo’s adjusted EBITDA in fiscal 2016. Further, TiVo expects Digitalsmiths to be adjusted EBITDA positive in fiscal 2015 (begins Feb. 1, 2014). Additionally, TiVo will have access to more than $20 million of Digitalsmiths’ NOLs as well as Digitalsmiths’ intellectual property. TiVo plans to provide additional details on the transaction when it reports its fourth quarter fiscal year 2014 results.

Under the terms of the deal, TiVo will pay $135 million in cash, subject to a working capital adjustment. The transaction, which is subject to customary closing conditions, is expected to close in the first quarter of fiscal 2015.

Separately, TiVo announced that it has increased its current stock repurchase authorization by $100 million, giving the company approximately $186 million of unused repurchase capacity as of the current date. In conjunction with this increased authorization, TiVo intends to repurchase $100 million during the first quarter of fiscal 2015.