DirecTV (DTV) recently reported second-quarter results achieving high-single digit growth in top-line with bottom-line remaining flat despite a an 11% fall in profit year over year due to higher subscriber acquisition costs, rise in depreciation and amortization, and increased interest expenses.
Quarterly EPS remained flat at $0.40 compared to the year-ago period, but was below the Zacks Consensus Estimate of $0.43. EPS would have been lower but for the 12% reduction in shares outstanding due to the stock buyback last year. Consolidated revenue increased 9% to $5,218 million driven by robust subscriber growth.
DirecTV is set to continue generating healthy free cash flow with reduced capex requirements and vigorous growth in its US and Latin American operations. Free cash flow for the reported quarter ascended 47% to $550 million.
The company’s U.S. sales grew 8% to $4,539 million driven by sustained average monthly revenue per subscriber (ARPU) growth and a larger subscriber base. ARPU rose 2% to $83.16 due to increase in programming package prices and HD and DVR service fees. Revenue for DirecTV Latin America rose 11% to $680 million, primarily on increased subscriber base. However, ARPU fell 3% to $55.28 mainly due to unfavorable exchange rates in Brazil.
Recently, AT&T (T) and DirecTV launched a co-branded satellite service, which along with a rise in demand for HD and DVR services, resulted in 17% jump in gross subscriber additions to 1,048,000 in DirecTV U.S. segment, partially offset by a churn rate of 1.51%. Net subscriber additions were 224,000 up 74%.
On the contrary, net subscriber additions at DirecTV Latin America fell 30% to 128,000. However, the total subscriber base increased 14% to 4,162,000. Gross subscriber additions declined 4% to 362,000.
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