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ROVI CORPORATION

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LOGO

On May 5, 2015, Rovi Corporation (the “Company”) posted a slide presentation entitled “Response to the ISS Recommendation” on the Company’s website (the “ISS Recommendation Response”). A copy of the ISS Recommendation Response is filed herewith as Exhibit 1.

 

 

Exhibit 1

ISS Recommendation Response

May 2015
Response to the ISS
Recommendation
Confidential
NASDAQ: ROVI

1
Perspective on the ISS Recommendation
Rovi’s Board of Directors respectfully disagrees with the recommendation made by Institutional Shareholder
Services (ISS) in connection with Rovi’s 2015 Annual Meeting of Stockholders, to be held on May 13, 2015
Note:
Page numbers under the ISS View column to refer to the ISS report published on Rovi Corporations on 4/28/15.
We
believe
the
analysis
used
is
flawed,
in
large
part
because
we
do
not
believe
it
is
appropriate
to
evaluate
a
company
like
Rovi
–
which
has
undergone
broad
repositioning
over
the
past
several
years
–
as
if
it
has
been
operating under ordinary circumstances
ISS
is
generalist
by
nature
–
we
believe
its
analysis
displays
a
serious
lack
of
understanding
of
the
highly
complex
nature of our business, the rapidly-evolving secular changes and challenges affecting our end markets, as well as our
accomplishments through the transformation as a result
Rovi
stockholders
need
to
review
the
facts
carefully
because
our
investors
face
a
fundamental
decision
with
respect
to the Company's strategic direction and the qualifications of our Board of Directors to lead the Company. That
decision requires greater attention to detail than ISS has provided
Fundamentally, recommending new directors without any idea of what direction they will take the company
is risky and irresponsible
Rovi’s additional responses to some of the specific findings made by ISS are included in this presentation

2
Lack of Strategic Plan
ISS View
Rovi View
A dissident slate not seeking
majority control does not need
a plan
(p.14)
Note:
Page numbers under the ISS View column to refer to the ISS report published on Rovi Corporations on 4/28/15.
This is a dangerous and naive view that does not accurately reflect the true
dynamics of a Board room that we strongly disagree with
Adding new directors with no plan while Rovi is in the midst of executing upon a
strategic plan to deliver strong shareholder growth would be very disruptive during a
crucial period of execution for the Company

3
Quality of Nominees
ISS View
Rovi View
Rovi’s Board could benefit from
change and stockholder friendly
nominees
(p.19)
Note:
Page numbers under the ISS View column to refer to the ISS report published on Rovi Corporations on 4/28/15.
We agree that there is value in a slate of stockholder friendly nominees. However,
we strongly believe that any slate of candidates should be compromised of
stockholder friendly QUALIFIED nominees. As part of our search process with the
assistance of a leading executive search firm, we are committed to adding a
stockholder friendly QUALIFIED nominee to augment our Board
We have taken nearly a half dozen highly qualified board candidates suggested by
existing stockholders and added them to our search process
We believe potential new directors should add value, as opposed to simply not doing
harm. Rovi is a complex business at a critical time in its history, and the addition of an
unqualified director would in fact be harmful
We believe Engaged Capital’s nominees are NOT qualified to serve our
stockholders
Glenn
Welling
is
a
hedge
fund
manager
with
no
known
intellectual
property
(IP)
experience
or
demonstrated
operational
ability,
much
less
in
the
technology
field
David Lockwood’s qualifications are inferior and unneeded, as ISS and Glass Lewis
have agreed
Raghavendra Rau and Engaged Capital’s other nominees have clear records of value
destruction at other public companies, as you can see at
http://www.rovicorp.com/content/dam/rovicorp-
ancillary/dm3/corp/proxy_apr15/050415b.pdf

4
Capital Allocation
ISS View
Rovi’s growth products have
not demonstrated results
(p.17-18)
Rovi View
Note:
Page numbers under the ISS View column to refer to the ISS report published on Rovi Corporations on 4/28/15.
Arguments about Rovi’s purported lack of return on investment, including
assertions that we continue to ask for more time without giving investors a good
reason to provide that time, ignore the empirical reality that we are delivering new
revenue today with a clear path to significant growth acceleration
We are perplexed by the observation that “it is possible to invest oneself into
bankruptcy
if
the
answer
is
always
‘the
cycle
is
going
to
take
longer’.”
This
concern does not apply to Rovi
In this public contest, there has been a lot of noise from Engaged Capital about
our purported lack of return on investment in the form of revenue, including
repeated assertions that we continue to ask for more time without giving our
investors a good reason to provide that time
ISS ignores the specific¸
customer-validated traction we are seeing, both in new
product uptake and our increasing ability to deliver multiple classes of product under a
comprehensive platform. ISS ignores these points because it undercuts its conclusion
We have pointed to numerous, proven examples of our traction in core product areas
and licensing –
all of which Engaged Capital has ignored as if they simply did not exist. 
Just some of these examples include our successes with Charter, Dish, Time Warner
Cable, and America Movil
With EBITDA margins of 40+%, there is no relevant discussion in this situation about
“investing oneself into bankruptcy”
These arguments –
and almost all of those that address our levels of spend in the
context
of
our
growth
–
conveniently
ignore
the
empirical
reality
that
we
are
delivering
new revenue today with a clear path to significant growth acceleration

5
Capital Allocation (continued)
Rovi has been unreceptive to
stockholder suggestions on
capital allocation strategy
(p.19)
Note:
Page numbers under the ISS View column to refer to the ISS report published on Rovi Corporations on 4/28/15.
To
the
extent
that
“change”
in
Rovi’s
strategy
is
appropriate,
Rovi’s
Board
and
management have discussed Engaged Capital’s ideas with Engaged, thoughtfully
considered them along with suggestions from other stockholders, and taken
action with respect to the changes that we believe are in Rovi’s best interest
We would never seek to shut-out credible opinions about how we can improve our
trajectory; however, we will continue to strongly resist any transfer of power from those
who understand our markets and customers to those who simply do not
We welcome feedback from all of our stockholders, and have participated in what we
believe has been constructive dialogue with Engaged from the onset. In fact, we’ve
made
changes
to
capital
allocation,
share
buybacks
and
executive
compensation
following suggestions from our stockholders
Rovi View
ISS View

6
Capital Allocation
ISS View
Rovi's product investments
have not yielded the desired
return for stockholders
(p.17)
Some of the failed projects may
be legacy issues from the prior
management
team
–
but
they
are the legacy of this same
board. 
(p.17)
Rovi View
Source:
FactSet.
Note:
Page numbers under the ISS View column to refer to the ISS report published on Rovi Corporations on 4/28/15.
1
High based on closing price as of 01/18/2011.
“3
of
the
4”
“failed
projects“
ISS
cites
relate
to
the
single
Sonic
acquisition
failure.
Rovi’s Board has acknowledged that Sonic was a mistake and the Board has
dramatically changed the company’s strategy, structure and product approach as a
result
If it is appropriate to evaluate our Board on the basis of the Sonic period, equal weight
must be given to the latter period reflecting the Board’s revised strategy our Board has
implemented
It
is
common
knowledge
that
acquisitions
are
difficult
and
very
challenging.
Holding
a
Board of Directors to a zero defect policy, and recommending their replacement based
on a single failed transaction, is insanity based on a complete void of understanding of
the
real-world
risks
in
acquisitions
and
the
challenges
inherent
in
them.
The
Rovi
Board members that Engaged Capital seeks to replace (and that ISS has effectively
recommended for the replacement of) are the same directors that saw the merits of
combining Macrovision Corporation and Gemstar TV-Guide International in 2007. 
Rovi’s
stock
moved
from
a
low
of
$16.65
to
a
high
of
$68.85
following
that
transaction
1
ISS draws conclusions about Rovi’s performance based on calendar year time
periods that disregard the substantial changes Rovi made to its capital allocation
strategies following the Sonic acquisition.  The fact is that Rovi coming out of 2014
was a completely different company than the Rovi that entered 2010, 2011 or 2012

7
Operating Performance
ISS View
Rovi’s overall revenue and core
revenue growth have lagged
despite substantial investment
(p.17)
Rovi View
Note:
Page numbers under the ISS View column to refer to the ISS report published on Rovi Corporations on 4/28/15.
As
many
of
our
stockholders
and
Wall
Street
Analysts
understand,
we
expect
our
Big
4
license renewals to be a significant driver of revenue growth, and they are all tied to
renewal dates later this year and next
Product cycles in our industry are 18-24 months, and even longer when considering
deployment to scale timelines
–
As a result, it is patently unreasonable to rely upon the simplistic view that “despite
the company’s heavy investments, the product segment has not seen the kind of
ramp-up that shareholders may have expected”
Engaged Capital’s failure to understand our product cycle’s should be concerning to
stockholders as it demonstrates a lack of understanding of the industry in which we
operate. ISS should also be held to a higher standard of that understanding in their
“analysis”
Criticizing Rovi’s recent revenue growth disregards key aspects of our business
Our product revenues are an increasingly important piece of our business; with product
revenues increasing to 51% of revenues in Q1’15 from 45% in 2013. This is clear
evidence of our past investments in both IP and products producing results despite the
decline in our analog business revenues from $129 million in 2010 to $30 million in
2014. Our product investment has supported core revenue that is up ~$100 million
since 2010, to offset the decline from our analog business
Both the absolute revenue and share of revenue from our product business has been
increasing, and its strong profitability provides incremental margin to our IP business
The significant synergies that exist between our product and licensing businesses that
we have highlighted before, as well as the continued validation from marquee
customers who utilize both our products and IP, we believe, contradicts the ISS
assertion of a "failed" product investment strategy
Our product business is an increasingly important part of our connected platform

8
Operating Performance (continued)
ISS View
Rovi’s high margins are due to
its IP business
(p.15)
Rovi View
Note:
Page numbers under the ISS View column to refer to the ISS report published on Rovi Corporations on 4/28/15.
Rovi’s
superior
margin
profile
cannot
be
“explained
away”
by
virtue
of
our
IP
business
Rather, Rovi’s margin outperformance was driven by:
Rovi’s margins are high even compared to pure IP companies, or companies for whom
a vast majority of revenue is comprised by IP
Some
of
the
benchmarking
peers
included
pure
IP
companies,
which
have
an
average
CY2014 EBITDA margin of 40%, lower than Rovi’s 43% margin
Importantly, Rovi’s margin performance has exceeded that of these peers despite both
(i)
our
transformation
and
the
reinvestment
it
has
required,
and
(ii)
the
existence
of
our
large and growing product business
Synergies among our various businesses that allow us to achieve revenue across
various Rovi properties with the same dollar of spend
Continued reduction in our cost base, including rationalization of non-strategic assets,
aligning
our
resources
more
carefully
against
our
opportunities,
and
revised
executive
compensation practices

9
Operating Performance (continued)
ISS View
Rovi has experienced a high
degree of volatility in its
earnings
(p.16)
Rovi View
Note:
Page numbers under the ISS View column to refer to the ISS report published on Rovi Corporations on 4/28/15.
Rovi’s net income margin, on a non-GAAP basis, changed from 30% in 2012 to 31% in
2013 and 30% in 2014, all while the Company was investing in strategic growth areas. 
These movements are NOT “remarkable volatility”
Companies like Rovi that serve highly fluid end-markets are less likely to exhibit highly
consistent net income from one year to the next than companies in less dynamic
sectors with established, long-term margin expansion structures and more end-market
stability may be expected to have
Companies
that
have
recently
undergone
(or
that
are
in
the
midst
of)
a
transformation
on the scale of Rovi’s are, we believe, very unlikely to demonstrate linear net income
performance.  Transformations are focused on repositioning for the longer-term rather
than managing to immediate-term net income results
Our
net
income
(excluding
extraordinary
items)
has
NOT
displayed
“remarkable
volatility”
In
2014
our
Non-GAAP
profit
margin
was
30%,
far
above
those
of
IP
and
DaaS
peers of 19% and 2015 proxy peers of 9%
Since 2012, and despite the comprehensive rebuilding of the business, our
cumulative net loss before extraordinary items was only $12.3 million or 0.8% of
cumulative revenue over the same period

10
Operating Performance (continued)
ISS View
Rovi View
Note:
Page numbers under the ISS View column to refer to the ISS report published on Rovi Corporations on 4/28/15.
The company underperformed
selected peers and the S&P 500
in ROA, ROE, revenue growth,
and earnings per share growth
measures
(p.15)
We have spent the last several years investing in strategic growth areas and preparing
for our Big 4 licensing renewals which have required considerable effort
We
expect
the
Big
4
renewals
to
contribute
significantly
–
and
positively
–
to
all
of
these metrics
We believe it is inappropriate to focus on year-on-year EPS growth due to the outsized
and
misleading
impact
of
“small
numbers”
on
that
calculation–
and
positively
–
to
all
of
these metrics
The ISS analysis disregards our stated strategy of reinvestment for growth and
results in a misleading view of Rovi’s performance
As a result of our investments, we have a clear line of sight to achieving sustainable,
profitable growth provided that our strategy is not derailed by outsiders who have
not owned our shares until recently

11
The “Big 4”
Renewals
ISS View
Investors
were
“surprised”
at
the success of the contract
renewal with Charter and this
signifies that investors are not
confident in Rovi’s ability to
renew
the
other
“big”
contracts
(p.18)
Rovi View
Note:
Page numbers under the ISS View column to refer to the ISS report published on Rovi Corporations on 4/28/15.
Rovi stock regularly moves upon perceived indicators with respect to our IP licensing
business, and it was no surprise to us that investors would recognize the significance
of
an
agreement
with
a
sophisticated
service
provider
validating
the
value
of
our
IP
and products
Simply,
we
view
the
8.6%
increase
in
our
stock
price
on
April
20
to
be
clear
evidence
that
our
stockholders
have
material
upside
potential
before
them
if
we
continue
to
execute
This
position
is
nonsensical.
ISS
“logic”
would
have
you
believe
that
any
stock
price
increase on good news signifies lack of investor confidence in the future prior to the
increase, because the stock price prior to the increase is “depressed”.   As opposed
to investors seeing positive proof points of strategy and an increased valuation
of the Company associated with those proof points.  We believe this is another
example of ISS reaching a conclusion before writing their report, and then
manufacturing reasons to support their conclusion.  DON’T VOTE BASED ON
THESE FLAWED CONCLUSIONS
We were perplexed that ISS would attribute our stock gain following the Charter
announcement
to
“surprise”
and
believe
this
betrays
a
lack
of
understanding
regarding our business

12
Corporate Governance
ISS View
Rovi adjusted its executive
compensation structure only
after facing proxy contests from
dissidents
(p.18-19)
Our historical executive compensation plan was designed to attract and retain
talent
during
a
critical
time
in
our
business’
transformation.
We
sought
our
stockholders’
input and made fundamental changes to our plan before Engaged
Capital’s campaign.
Rovi View
Note:
Page numbers under the ISS View column to refer to the ISS report published on Rovi Corporations on 4/28/15.
Our 2012 and 2013 compensation plans were designed to attract and retain talent
during a period of transition for the Company, and thus our performance based awards
lacked a long-term element
During
2013
and
2014
and
before
Engaged
Capital’s
campaign,
we
sought
input
from our stockholders, including Engaged Capital, and made significant changes to
our executive compensation plan. Now with our strategy set, we have introduced real
long-term elements to our compensation plan. ln its report last year dated April 11,
2014, ISS noted: “The company demonstrated responsiveness by engaging with
shareholders and making a number of changes to its compensation programs.”
Rovi proactively changed its peer group well before Engaged Capital launched this
proxy fight 
Notably,
ISS
supports
our
current
say
on
pay
proposal,
citing
the
positive
changes
Rovi has made in addressing concerns of stockholders and ISS in recent years, noting
“The company made a number of improvements to its pay program, including
improving disclosure of performance-target setting, eliminating discretionary bonuses,
making positive modifications to future performance awards, removing several
outsized peers from its peer group and discontinuing benchmarking elements of pay
above
the
market
median.
These
actions
mitigate
several
concerns
raised
by
both
the
dissident and other shareholders.”
Overall Rovi has a shareholder friendly governance profile with low risk scores on
Board and Shareholder Rights under ISS’s Governance QuickScore

13
Total Stockholder Return (TSR)
ISS View
Rovi has underperformed its
selected peers and indexes for
3-
and 5-year periods through
Mar. 11, 2015
(p.14)
Rovi View
Note:
Page numbers under the ISS View column to refer to the ISS report published on Rovi Corporations on 4/28/15.
Market data as of 3/11/2015, consistent with ISS analysis.
Rovi’s peer groups include a broad variety of companies that face dramatically different
circumstances from one another and from Rovi
The broad market averages relied on by ISS may be valuable in assessing large sets
of data and industries, but they ignore unique characteristics of individual companies
and
can
be
particularly
misleading
for
assessing
the
performance
of
a
company
like
Rovi that has undergone significant changes in a relatively short time period
These factors are especially true in the technology sector, an industry in which
companies and public markets change rapidly and unpredictably, and companies’
financial profiles vary widely
Rovi’s Board has taken responsibility for the Sonic acquisition and readily
acknowledges that the acquisition of Sonic Solutions was not a good deal for Rovi and
the Board has subsequently rebuilt Rovi from the ground up
Peer group and market indices comparisons do not tell the whole story here
The
calendar
period
do
not
account
for
the
dramatic
and
decisive
changes
Rovi’s
Board and leadership have implemented
Since
these
changes
were
implemented
beginning
in
July
2012,
our
stock
price
and
trading multiple have improved markedly and well in excess of the indices and peer
groups used by ISS. Specifically, Rovi’s Total Shareholder Return (TSR) has
outperformed peers and indices referenced by ISS by an average of 68%, while Rovi’s
earnings multiple has expanded by nearly 200% more than that of the 2015 proxy
peers
as
well
as
the
IP
and
DaaS
peers.
ISS
ignores
those
points
because
they
undercut its conclusion
Wall
Street
analyst
price
targets,
based
upon
our
articulated
strategy
before
Engaged
Capital
began
its
campaign,
validate
a
belief
in
further
stock
price
appreciation
These time periods present a distorted view in this case.  Investors should assess
Rovi’s performance following the implementation of the Company’s strategy shift
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