(Reuters) - TiVo Inc (TIVO.O) reported better-than-expected quarterly results as it saw higher sales of its trademark digital video recorders at customer Virgin Media Inc VMED.O, sending its shares up 5 percent in extended trade.
While TiVo continues to sell its set-top boxes, it also licenses its digital video recording technology to cable operators such as Virgin, Charter, DirecTV DTV.O, Ono, RCN and Suddenlink.
"The number of TiVo subscriptions across the globe grew 41 percent year-over-year this quarter, highlighted by continued success at Virgin Media, which recently reached one million TiVo subscriptions," Chief Executive Tom Rogers said in a statement.
Rogers said Virgin Media contributes the highest number of subscribers to TiVo. Out of a total of 2.7 million subscribers, Virgin Media's share is about 1 million subscribers.
Total subscriptions grew by 230,000 in the second quarter.
TiVo owns hundreds of patents and regularly sues other companies to protect its intellectual property. A good chunk of its revenue comes from litigation settlements.
TiVo has been facing rising legal costs as it fights patent lawsuits against Verizon Communications Inc (VZ.N), Motorola Mobility Inc and Time Warner Cable TWC.N related to video recording technology.
"In the second quarter, litigation cost was about $12.5 million," Rogers told Reuters. "With Motorola, Cisco, Time Warner and Verizon litigations moving forward, those expenses will remain heavy."
The company is preparing to go to trial in October against Verizon.
Verizon, which originally filed six patent claims, recently pulled a fifth patent from its case against TiVo.
"I think once they have the Verizon litigation behind them, they may end up having somewhat lower legal expenses. The biggest period of expenses is right before trial, and we're in there right now," MDC Financial Research analyst Michael Cohen said.
TiVo may also look to settle with Verizon before trial as it did with Verizon's rival AT&T Inc (T.N) in January, when the wireless operator agreed to pay TiVo at least $215 million as well as monthly licensing fees.
Analyst Cohen said any settlement with Verizon could be in the range of $250 million to $400 million.
TiVo expects a net loss in the range of $27 million to $29 million for the third quarter.
Analysts were expecting a net loss of $20.7 million, according to Thomson Reuters I/B/E/S.
Revenue in the second quarter at TiVo rose 7 percent to $65.3 million.
Net loss widened to $27.7 million, or 23 cents per share, in the second quarter, from $19.6 million, or 17 cents per share, a year earlier.
Analysts on average had expected a loss of 24 cents per share on revenue of $54.3 million.
Shares of TiVo were up at $9.80 in extended trade. They closed at $9.36 on the Nasdaq on Wednesday.
Reporting by Chandni Doulatramani in Bangalore; Editing by Sriraj Kalluvila