The DIRECTV Group Announces Fourth Quarter 2007 Results

Business Wire, Feb 13, 2008

EL SEGUNDO, Calif. -- The DIRECTV Group, Inc. (NASDAQ:DTV):

DIRECTV Group Revenues Increase 17% to Nearly $4.9 Billion

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DIRECTV Group Operating Profit Before Depreciation and Amortization Increases 21% to $1.1 Billion

* DIRECTV U.S. Up 14% to $1.0 Billion

* DIRECTV Latin America More than Doubles to $114 Million

DIRECTV Group Net Subscriber Additions Increase 35% to 474,000

* DIRECTV U.S. Net Subscriber Additions of 275,000 Driven by Strong Gross Additions and the Lowest Monthly Churn Rate in 8 Years of 1.42%

* DIRECTV Latin America Net Subscriber Additions More than Double to 199,000 Due to Higher Gross Additions and Low Monthly Churn of 1.35%

The DIRECTV Group, Inc. (NASDAQ:DTV) today reported that fourth quarter 2007 revenues increased 17% to $4.88 billion, operating profit before depreciation and amortization1 (OPBDA) increased 21% to $1.10 billion and operating profit increased 4% to $617 million compared to last year's fourth quarter. The DIRECTV Group reported that fourth quarter net income of $348 million declined 2% and earnings per share increased one cent to $0.30 compared with the same period last year.

"DIRECTV's content and service leadership continue to drive superior results in a tougher marketplace that reflects increasing competition and a slowing economy. Advanced services--including the launch of the industry's best HD programming--played an increasingly important role in DIRECTV U.S.'s top-line and bottom-line results," said Chase Carey, president and CEO of The DIRECTV Group, Inc. "Strong net subscriber additions of 275,000 were punctuated by the lowest monthly churn rate in eight years. This 15 basis point reduction in monthly churn to 1.42% was largely due to the significant growth in customers with HD and DVR services--increasing from about 30% of our subscriber base last year to over 40% this year--as well as tighter credit policies. The continued strong subscriber growth coupled with an 8.3% increase in ARPU drove revenues up 14% to $4.38 billion. As with churn, the strong ARPU growth reflects the improving quality of our customers who are purchasing an array of new services."

Carey continued, "DIRECTV U.S. OPBDA increased 14% to $1.00 billion primarily due to the gross profit generated from the strong revenue growth. OPBDA margin of 23% in the quarter was unchanged from the prior year as operating efficiencies gained in subscriber services and G&A were offset by higher acquisition and upgrade costs associated with the significant increase in new and existing customers purchasing advanced services."

Carey added, "DIRECTV's operating momentum continued in Latin America as these businesses also had very strong fourth quarter results. An 82% increase in gross subscriber additions plus continued low monthly churn of 1.35% drove a more than doubling of net additions to 199,000 in the fourth quarter. In addition, DIRECTV Latin America's revenues increased 41% to $499 million and OPBDA more than doubled to $114 million mostly due to the continued strong subscriber and ARPU growth, as well as favorable exchange rates, primarily in Brazil."

Carey concluded, "We exit 2007 with tremendous operating and financial momentum. We believe we are delivering on our goal to provide the best television experience, including the most extensive HD programming in America. With the launch of our next satellite in a couple of months, we will extend DIRECTV's leadership by introducing even more local and national HD channels. With full awareness of an industry that will be characterized by increasing competition and a slowing economy, we're continuing to target extremely strong results in 2008 highlighted by a material increase in free cash flow driven by DIRECTV's brand and content leadership, along with improved operating scale and efficiencies."

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Fourth Quarter Review

In the fourth quarter of 2007, The DIRECTV Group's revenues of $4.88 billion increased 17% over the same period last year principally due to strong ARPU and subscriber growth at DIRECTV U.S. and DIRECTV Latin America.

Operating profit before depreciation and amortization increased 21% to $1.10 billion and operating profit increased 4% to $617 million primarily due to the gross profit associated with the higher revenues discussed above, partially offset by higher acquisition and upgrade costs at DIRECTV U.S. mostly due to the increased number of new and existing customers adding HD and DVR services. Operating profit was also impacted by higher depreciation and amortization principally due to increased capitalization of customer equipment under the DIRECTV U.S. lease program implemented in March 2006. Net income fell 2% to $348 million compared with the fourth quarter of last year as the higher operating profit was more than offset by higher net interest expense.

Cash flow before interest and taxes2 of $512 million increased 53% compared to the fourth quarter 2006 primarily due to the higher operating profit before depreciation and amortization and lower capital expenditures, partially offset by lower cash provided by working capital. In addition, free cash flow was impacted by higher tax payments and higher net interest expense in the fourth quarter of 2007. The quarter also included share repurchases of $479 million.