OpenTV Reports Second Quarter Results

OpenTV Reports Second Quarter Results

SAN FRANCISCO, Aug. 2 /PRNewswire-FirstCall/ -- OpenTV (NASDAQ:OPTV), a leading provider of solutions for the delivery of advanced digital television and cross platform interactive services, today announced financial results for its second quarter ended June 30, 2007.

"OpenTV is making good progress in refining its global strategic vision as well as its ability to execute effectively across the organization in support of that vision," said OpenTV's Chief Executive Officer, Alan Guggenheim. We continued our trend of improved operating cash flows this quarter generating $4.8 million in net cash during the first six months of this year and we remain on track with our financial goals for the full year. Our goal is to move expeditiously to generate sustainable growth and profitability as we realize our vision of becoming a leading provider of end-to-end solutions for the delivery of convergent media experiences."

Key Operating Measures

USD Millions Three months ended Three months ended Change
June 30, 2007 June 30, 2006
Revenues $24.3m $23.7m 3%
Adjusted EBITDA,
before unusual
items $(1.1)m $0.4m $(1.5)m
Cash, Cash
Equivalents and
Marketable Debt
Securities $74.1m $65.0m 14%

Second Quarter 2007 Results

For the quarter ended June 30, 2007, revenues were $24.3 million, an increase of 3% over revenues of $23.7 million for the second quarter of 2006. Royalties and license revenues decreased 4% to $14.1 million, compared to the second quarter of 2006. Services and other revenues increased 13% to $10.2 million, compared to the second quarter of 2006. Adjusted EBITDA, before unusual items, was $(1.1) million for the quarter ended June 30, 2007, compared to $0.4 million for the second quarter of 2006.

Net loss for the second quarter of 2007 was $4.9 million, or $(0.04) per share, compared to a net loss of $2.5 million, or $(0.02) per share in the second quarter of 2006.

As of June 30, 2007, the Company had $32.8 million in deferred revenue, compared to $25.6 million at the end of 2006.

As of June 30, 2007, the Company had cash, cash equivalents and short and long-term marketable debt securities totaling $74.1 million, compared to $65.2 million at December 31, 2006.

Segment Information (quarter over prior-year quarter comparison)
Revenues

-- Middleware and Integrated Technologies revenues increased by 9% to
$20.0 million, compared to $18.3 million.
-- Applications revenues decreased by 11% to $4.2 million, compared to
$4.7 million.
-- BettingCorp revenues decreased by 86% to $0.1 million, compared to
$0.7 million.

Contribution Margin

-- Middleware and Integrated Technologies contribution margin decreased by
$2.1 million to $4.6 million, compared to $6.7 million.
-- Applications contribution margin improved by $0.5 million to
$0.3 million, compared to a loss of $0.2 million.
-- BettingCorp contribution margin improved by $0.1 million to a loss of
$0.8 million, compared to a loss of $0.9 million.

For the second quarter of 2007, total contribution margin from the Company's operating segments decreased to $4.1 million, compared to $5.6 million in the second quarter of 2006. Unallocated corporate overhead was $5.2 million in the second quarter of 2007, the same as in the second quarter of 2006.

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 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.

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 2, 2007 at 5 p.m. ET / 2 p.m. PT
Dial-in Number US: 866-383-7989
Dial-in Number
International: 617-597-5328
Pass Code: 93027450
Replay Number US: 888-286-8010
Replay Number
International: 617-801-6888
Pass Code: 85919065

The conference call replay will be available from Thursday, August 2 at 7 p.m. ET / 4 p.m. PT through Thursday, August 9 until 11 p.m. ET / 8 p.m. PT. To access a live webcast of the conference call, please go to the Investor Relations section of the OpenTV Web site at http://www.opentv.com/.

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. In addition to reviewing the company's business segments by revenues, management also reviews and assesses the "contribution margin" of each of these segments, which is a non- GAAP financial measure.

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, loss from operations, net 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 loss as presented in the accompanying financial statements, because OpenTV believes consolidated net 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

The foregoing information 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: market acceptance of interactive television services and applications such as ours; delays in the development or introduction of new applications and versions of our service; 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 Open TV

OpenTV is one of the world's leading providers of solutions for the delivery of digital and interactive television. The company's software has been integrated in over 92 million digital set-top boxes and digital televisions around the world. The software enables enhanced program guides, video-on-demand, personal video recording, enhanced television, interactive shopping, interactive and addressable advertising, games and gaming and a variety of consumer care and communication 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,
2007 2006 *
ASSETS
Current assets:
Cash and cash equivalents $45,283 $48,616
Short-term marketable debt
securities 25,673 8,681
Accounts receivable, net of
allowance for doubtful accounts
of $593 and $348 at June 30, 2007
and December 31, 2006,
respectively 18,551 20,560
Prepaid expenses and other
current assets 5,985 5,799
Total current assets 95,492 83,656

Long-term marketable debt securities 3,146 7,928
Property and equipment, net 6,675 7,231
Goodwill 98,687 98,645
Intangible assets, net 15,075 18,477
Other assets 3,889 4,827
Total assets $222,964 $220,764

LIABILITIES, MINORITY INTEREST AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $3,210 $4,335
Accrued liabilities 13,848 17,020
Current portion of accrued
restructuring 972 416
Current portion of deferred
revenue 24,515 12,614
Total current liabilities 42,545 34,385

Long-term liabilities:
Taxes payable 1,767 1,920
Deferred rent 1,047 1,201
Accrued restructuring 1,097 1,954
Deferred revenue 8,294 12,987
Total long-term liabilities 12,205 18,062

Total liabilities 54,750 52,447

Commitments and contingencies

Minority interest 469 486

Shareholders' equity:
Class A ordinary shares, no par
value, 500,000,000 shares
authorized; 108,534,104 and
107,906,960 shares issued
and outstanding, including
treasury shares, at June 30, 2007
and December 31, 2006,
respectively 2,235,872 2,235,495
Class B ordinary shares, no par
value, 200,000,000 shares
authorized; 30,206,154 and
30,631,746 shares issued and
outstanding at June 30, 2007 and
December 31, 2006, respectively 35,953 35,953
Additional paid-in capital 499,122 491,630
Treasury shares at cost, 76,327
shares (38) (38)
Accumulated other comprehensive
loss (208) (261)
Accumulated deficit (2,602,956) (2,594,948)
Total shareholders' equity 167,745 167,831
Total liabilities, minority interest
and shareholders' equity $222,964 $220,764

* The condensed consolidated balance sheet at December 31, 2006 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 Six Months Ended
June 30, June 30,
2007 2006 2007 2006
Revenues:
Royalties and
licenses $14,066 $14,743 $31,927 $31,114
Services and
other 10,200 8,978 18,745 17,503
Total revenues 24,266 23,721 50,672 48,617
Cost of revenues:
Royalties and
licenses 1,934 1,807 3,701 3,687
Services and
other 11,063 9,332 21,421 18,251

Total cost of
revenues 12,997 11,139 25,122 21,938

Gross profit 11,269 12,582 25,550 26,679
Operating expenses:
Research and
development 8,000 7,654 16,863 16,017
Sales and
marketing 2,993 3,297 5,889 5,950
General and
administrative 4,777 4,266 10,291 9,614
Restructuring and
impairment costs (28) 20 (28) 20
Amortization of
intangible assets 510 530 1,020 1,059
Total operating
expenses 16,252 15,767 34,035 32,660

Loss from operations (4,983) (3,185) (8,485) (5,981)
Interest income 748 898 1,252 1,448
Other expenses (123) (201) (50) (198)
Minority interest 9 10 17 19
Loss before income
taxes (4,349) (2,478) (7,266) (4,712)
Income tax expense 515 14 742 907
Net loss $(4,864) $(2,492) $(8,008) $(5,619)

Net loss per share,
basic and diluted $(0.04) $(0.02) $(0.06) $(0.04)

Shares used in per
share calculation,
basic and diluted 138,659,811 137,392,075 138,576,223 136,684,318

OPENTV CORP.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

Six Months Ended June 30,
2007 2006
Cash flows from operating activities:
Net loss $(8,008) $(5,619)
Adjustments to reconcile net loss to
net cash provided by operating
activities:
Depreciation and amortization of
property and equipment 1,972 1,539
Amortization of intangible
assets 3,402 3,529
Share-based compensation 2,287 2,052
Non-cash employee compensation 76 42
Provision for doubtful accounts 245 (18)
Loss on disposal of fixed assets 2 10
Minority interest (17) (19)
Changes in operating assets and
liabilities:
Accounts receivable 1,764 (573)
Prepaid expenses and other
current assets (186) 1,594
Other assets 938 (1,387)
Accounts payable (1,125) (1,297)
Accrued liabilities, taxes
payable and deferred rent (3,479) 494
Accrued restructuring (301) (232)
Deferred revenue 7,208 1,520
Net cash provided by
operating activities 4,778 1,635

Cash flows from investing activities:
Purchase of property and equipment (1,391) (1,668)
Proceeds from sale of marketable debt
securities 6,995 6,800
Purchase of marketable debt
securities (19,186) (6,555)
Net cash used in investing
activities (13,582) (1,423)

Cash flows from financing activities:
Repurchase of employee stock options (167) -
Capital contribution from the
controlling shareholder 5,395 -
Proceeds from issuance of ordinary
shares 236 772
Net cash provided by
financing activities 5,464 772

Effect of exchange rate changes on
cash and cash equivalents 7 (214)

Net increase (decrease) in cash and
cash equivalents (3,333) 770

Cash and cash equivalents, beginning
of period 48,616 47,229

Cash and cash equivalents, end of
period $45,283 $47,999

Supplemental disclosure of cash flow
information:
Cash paid for income taxes $(1,004) $(340)

Non-cash investing and financing
activities:
Conversion of exchangeable shares $42 $17,491
Value of bonus shares issued to
employees $- $2,658

OPENTV CORP.
UNAUDITED SEGMENT INFORMATION AND RECONCILIATION OF
CONTRIBUTION MARGIN AND ADJUSTED EBITDA TO NET LOSS
(In thousands)

Three Months Ended Six Months Ended
June 30, June 30,
2007 2006 2007 2006

Revenue:
Middleware and integrated
technologies
Royalties and licenses $12,976 $13,829 $29,527 $29,410
Services and other 6,953 4,532 12,076 8,783
Subtotal - Middleware and
integrated technologies 19,929 18,361 41,603 38,193
Applications
Royalties and licenses 1,055 914 2,365 1,704
Services and other 3,148 3,783 6,284 7,080
Subtotal - Applications 4,203 4,697 8,649 8,784
BettingCorp
Royalties and licenses 35 - 35 -
Services and other 99 663 385 1,640
Subtotal - BettingCorp 134 663 420 1,640
Total Revenue $24,266 $23,721 $50,672 $48,617

Contribution Margin:
Middleware and integrated
technologies $4,570 $6,633 $11,274 $14,291
Applications 350 (176) 438 (969)
BettingCorp (827) (905) (1,694) (1,714)

Total Contribution Margin 4,093 5,552 10,018 11,608

Unallocated corporate support (5,179) (5,167) (10,794) (10,407)

Adjusted EBITDA before unusual
items (1,086) 385 (776) 1,201

Restructuring and impairment
costs 28 (20) 28 (20)

Adjusted EBITDA (1,058) 365 (748) 1,181

Depreciation and amortization (1,002) (790) (1,972) (1,539)
Amortization of intangible
assets (1,701) (1,764) (3,402) (3,529)
Share-based and non-cash
compensation (1,222) (996) (2,363) (2,094)
Interest income 748 898 1,252 1,448
Other expenses (123) (201) (50) (198)
Minority interest 9 10 17 19

Loss before income taxes (4,349) (2,478) (7,266) (4,712)
Income tax expense 515 14 742 907

Net loss $(4,864) $(2,492) $(8,008) $(5,619)

First Call Analyst:
FCMN Contact:

Source: OpenTV

CONTACT: Investor, Denise Roche, roche@braincomm.com, or Brad Edwards,
edwards@braincomm.com, both of Brainerd Communicators, +1-212-986-6667; or
Press, Lisa Ruiz-Rogers of Manning, Selvage, and Lee, +1-323-866-6059,
lisa.rogers@mslpr.com, all for OpenTV

Web site:

http://www.opentv.com/

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