Edit Symbol List
Enter up to 25 symbols separated by commas or spaces in the text box below. These symbols will be available during your session for use on applicable pages.
Don't know the stock symbol? Use the
Symbol Lookup tool.
Alphabetize the sort order of my symbols
Investing just got easier…
Sign up now to become a NASDAQ.com member and begin receiving instant notifications when key events occur that affect the stocks you follow.Access Now X
Q2 2013 Earnings Call
August 01, 2013 2:00 pm ET
Jonathan M. Rubin - Senior Vice President of Investor Relations and Financial Planning
Michael D. White - Chairman, Chief Executive Officer and President
Previous Statements by DTV
» DIRECTV (DTV) Management Discusses Q2 2013 Results (Webcast)
» DIRECTV Management Discusses Q1 2013 Results - Earnings Call Transcript
» DIRECTV's Management Presents at Deutsche Bank's DbAccess 21st Annual Media and Telecom Conference (Transcript)
Patrick T. Doyle - Chief Financial Officer and Executive Vice President
Benjamin Swinburne - Morgan Stanley, Research Division
Douglas D. Mitchelson - Deutsche Bank AG, Research Division
John C. Hodulik - UBS Investment Bank, Research Division
Bryan D. Kraft - Evercore Partners Inc., Research Division
Matthew J. Harrigan - Wunderlich Securities Inc., Research Division
Jason B. Bazinet - Citigroup Inc, Research Division
Jessica Reif Cohen - BofA Merrill Lynch, Research Division
Marci Ryvicker - Wells Fargo Securities, LLC, Research Division
Vijay A. Jayant - ISI Group Inc., Research Division
Philip Cusick - JP Morgan Chase & Co, Research Division
Craig Moffett - Moffett Research, LLC
Jason Armstrong - Goldman Sachs Group Inc., Research Division
Tuna N. Amobi - S&P Capital IQ Equity Research
Richard Greenfield - BTIG, LLC, Research Division
Good day, ladies and gentlemen. My name is Stephanie, and I will be your conference operator today. At this time, I would like to welcome everyone to DIRECTV's Second Quarter 2013 Earnings Conference Call. [Operator Instructions] It is now my pleasure to turn the call over to your host, Jonathan Rubin, Senior Vice President of Investor Relations and Financial Planning. Sir, you may begin.
Jonathan M. Rubin
Thank you, operator. And thank you, everyone, for joining us for our second quarter 2013 financial results and outlook conference call. With me today on the call are Mike White, our President and CEO; Pat Doyle, CFO; Bruce Churchill, President of DIRECTV Latin America; and Larry Hunter, General Counsel. In a moment, I'll hand the call over to Mike, Bruce and Pat for some introductory remarks. But first, I'll read to you the following:
On this call, we make statements that may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve known and unknown risks, uncertainties and other factors that could cause actual results to be materially different from those expressed or implied by the relevant forward-looking statements. Factors that could cause actual results to differ materially are described in the Risk Factors section and elsewhere in each of DIRECTV's annual reports on Form 10-K, quarterly reports on Form 10-Q and our other filings with the SEC, which are available at www.sec.gov.
Examples of forward-looking statements include, but are not limited to, statements we make related to our business strategy and regarding our outlook for financial results, liquidity and capital resources. Additionally, in accordance with the SEC's Regulation G that requires companies reporting non-GAAP financial measures to reconcile these measures to the most directly comparable GAAP measure, we provide reconciliation schedules for the non-GAAP measures, which are attached to our earnings release and are posted on our website at directv.com.
So with that, I am pleased to introduce Mike.
Michael D. White
Thanks, John. And you get to read that faster every time I hear it. And thanks, everyone, for joining us today.
Look, on balance, I think DIRECTV's second quarter consolidated results were solid. In the U.S. business, our results continue to reflect our goal to smartly balance top line sales and bottom line profitability through various strategic initiatives that heighten our focus on quality and the profitability of our subscribers, the overall customer experience and, of course, cost management all across the enterprise.
In Latin America, even with the macroeconomic and operational challenges, which I'll touch on briefly more in a moment, we're continuing to see robust demand for DIRECTV and Sky's differentiated products and services. And these results across both the U.S. and Latin America, coupled with our share repurchase program, drove mid- to high single-digit revenue and earnings per share growth along with solid free cash flow growth in the quarter.
Now before I turn the call over to Bruce and Pat for a more detailed review of Latin America and the U.S. businesses, let me offer just a few observations. Let me begin with Latin America, where, as I said, strong consumer demand for DIRECTV and Sky's leading brands, attractive products and segmented offers drove gross additions in the quarter to a DIRECTV all-time high. Consistent with recent trends, this record performance was driven by strong growth from our middle market segments as well as continued momentum in the higher-end -- what we call A and B households.
However, as we previously disclosed in our 8-K filing in June, higher churn in the quarter did drive net additions below expectations in Brazil. We attribute this increase in churn to several factors. First, there was a churn of something on the order of 200,000 subscribers related to the termination of Sky Brazil customers who got retention credits during late 2012 and early 2013 that were inconsistent with authorized policies. Second, a combination of a slowing economy overall in Brazil and continued competition is placing upward pressure on churn, most especially among the middle market subscribers. To address the improper credits issued in Brazil, we've already taken appropriate disciplinary action for the management that was involved and put new rigorous control procedures in place. In addition, we are, of course, tightening our credit screens and reviewing our programming and packaging strategies to better align our offers with consumer income levels and behavior patterns.
Now I should point out, we also took the opportunity to review our practices in PanAmericana, and we're confident that all of our subscriber retention and churn policies continue to be property followed throughout the region. Although unfortunate, I'm confident that Sky Brazil will come out of this process as a stronger company with a smarter management team with a higher-quality and more profitable subscriber base.
Now also, over the last few months, we have seen increased volatility in the global currency markets, which present foreign exchange headwinds, particularly in Venezuela, Brazil and Argentina. However, keep in mind, in local currency, DIRECTV Latin America's top line growth of more than 20% in the second quarter remains very strong and continues to reflect the strength of our leading brands and advantaged competitive position.
As Bruce will cover a bit further, the fluctuations in foreign exchange, coupled with some onetime and ongoing operating cost issues, as well as the subscriber challenges that we spoke about earlier, did unfavorably impact our dollar-reported profit results for the quarter. That said, I believe we're doing a good job navigating through this operating environment, and DIRECTV Latin America is still on track to have a very solid year in terms of net subscriber additions in local currency, revenue and OPBDA growth.