The DIRECTV Group Announces First Quarter 2008 Results

Business Wire,  May 7, 2008  

Tags: DirecTV Group Inc.

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

DIRECTV Group Revenues Increase 17% to Nearly $4.6 Billion

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DIRECTV Group Operating Profit Before Depreciation and Amortization Increases 27% to $1.2 Billion

* DIRECTV U.S. Up 22% to $1.1 Billion

* DIRECTV Latin America Increases 73% to $138 Million

DIRECTV Group Net Subscriber Additions Increase 47% to 475,000

* DIRECTV U.S. Net Subscriber Additions of 275,000 Driven by Higher Gross Additions and the Lowest First Quarter Monthly Churn Rate in 10 Years of 1.36%

* DIRECTV Latin America Net Subscriber Additions More than Double to 200,000 Due to Higher Gross Additions

Board of Directors Approves an Increase in Share Repurchase Program to $3.0 Billion

* Liberty Media Agrees to Limit Voting Power to its Current Ownership Percentage of 47.9%

The DIRECTV Group, Inc. (NASDAQ:DTV) today reported that first quarter 2008 revenues increased 17% to $4.59 billion, operating profit before depreciation and amortization1 (OPBDA) increased 27% to $1.18 billion and operating profit increased 17% to $657 million compared to last year's first quarter. The DIRECTV Group reported that first quarter net income of $371 million increased 10% and earnings per share increased 19% to $0.32 compared with the same period last year.

"DIRECTV's first quarter results highlight the overall operational and financial strength of our company. Our strategy of offering the best television experience to higher quality customers continues to drive superior financial results," said Chase Carey, president and CEO of The DIRECTV Group, Inc. "DIRECTV U.S. revenues were up 14% to $4.05 billion in the quarter due to a 17% increase in net subscriber additions to 275,000 coupled with an 8.6% increase in ARPU. The increased demand for DIRECTV services was primarily driven by our industry-leading content, HD, DVR and interactive services, as well as strong results from our direct sales channel. These factors along with new dealer incentives and tighter credit policies designed to attain higher quality customers contributed to a ten-year-low first quarter monthly churn rate of 1.36%.

"The strong top-line results also contributed to a 22% increase in OPBDA to $1.06 billion," Carey said. "Importantly, OPBDA margin increased by 155 basis points to 26.1% as we started capturing the benefits from cost controls and operating efficiencies in areas such as subscriber services and G&A. Subscriber acquisition costs, or SAC, of $712 was 7% higher than last year primarily due to increased dealer incentives linked to the acquisition of higher quality subscribers and the significant growth in new subscribers purchasing advanced services, partially offset by the savings gained from the substantial reductions in set-top box costs.

"Operating performance was equally strong in Latin America where net subscriber additions more than doubled to 200,000 driven by a 76% increase in gross additions mostly from Brazil, Venezuela and Argentina. In addition, revenues grew 47% to $542 million and OPBDA increased 73% to $138 million primarily due to strong subscriber and ARPU growth, as well as favorable exchange rates."

Carey added, "As we discussed at our Investor Day earlier this year, we expect 2008 to be a year in which we take DIRECTV to a whole new level in terms of profitability and cash flow growth. We took an important step toward this goal in the first quarter as DIRECTV U.S. generated $603 million in cash flow before interest and taxes, representing a 76% increase over the prior year. We are confident that we will build on this momentum through initiatives such as further extending our leadership position in content, HD, DVR and interactive services, launching a video-on-demand service and improving customer service both in terms of cost but more importantly, quality."

Carey concluded, "We are also very pleased to announce this morning that our board of directors has approved an increase in our share repurchase program to $3.0 billion. In connection with these transactions, we have entered into an agreement with Liberty Media which limits their voting power to their current ownership percentage of 47.9%, regardless of the number of shares we buy through the repurchase program."

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First Quarter Review

The DIRECTV Group's first quarter revenues of $4.59 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 27% to $1.18 billion and operating profit increased 17% to $657 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 increase in new and existing customers adding HD and DVR services. Operating profit was also impacted by higher depreciation and amortization principally due to capitalization of customer equipment under the DIRECTV U.S. lease program implemented in March 2006. Net income climbed 10% to $371 million compared with the first quarter of last year as the higher operating profit was partially offset by higher net interest expense and income taxes. Earnings per share increased 19% to $0.32 driven by the higher net income and a reduction in shares outstanding due to recent share repurchase programs.