DIRECTV reported Q2 revenues increased 5% to $8.11 billion. Operating profit increased 5% to $1.42 billion and reported diluted earnings per share increased 35% to $1.59 compared to last year’s second quarter.
DIRECTV U.S. revenues increased 6% to $6.27 billion compared with Q2 2013 primarily due to strong ARPU growth along with a larger subscriber base. The ARPU increase of 4.6% to $103.26 was driven by price increases on programming packages, higher advanced receiver service fees, higher fees for the new enhanced warranty program, as well as increased commercial business and ad sales revenues.
DIRECTV U.S. net subscriber losses of 34,000 improved compared to the prior year period primarily due to an 8% increase in gross additions to approximately 908,000, partially offset by a slightly higher average monthly churn rate of 1.55% principally resulting from a more competitive environment. The improvement in gross additions was primarily driven by streamlined promotional offers and investments in retail distributors. DIRECTV U.S. ended the quarter with 20.23 million subscribers.
“Building on our first quarter momentum, DIRECTV delivered yet another excellent quarter of operating and financial results,” said Mike White, President and CEO of DIRECTV. “We continue to extend our position as the world’s largest pay TV service with industry leading growth by leveraging the strength of our premier brands and distinctive products and service offerings throughout the Americas.” White added, “DIRECTV Latin America’s second quarter results highlight the tremendous success of our unparalleled FIFA World Cup coverage, while DIRECTV U.S. continues to successfully execute on our overarching goal to balance top line sales with bottom line profitability. Overall, DIRECTV continues to deliver on our strategic imperatives as we prepare for the exciting opportunities that our merger with AT&T will bring to our customers, employees and key stakeholders.”
DIRECTV surpassed 39 million total subscribers in the quarter. Sky Brasil and PanAmericana achieve record-breaking gross subscriber additions resulting in strong Q2 net new customer additions of 543,000.
Revenue was driven by DIRECTV U.S. ARPU growth of 4.6% along with strong DIRECTV Latin America (DTVLA) subscriber growth over the last year. These increases were partially offset by lower ARPU at DTVLA due to unfavorable changes in exchange rates.
Q2 reported net income attributable to DIRECTV increased 22% to $806 million due to the higher reported operating profit, as well as a $44 million improvement in foreign currency translation at Sky Brasil and a $59 million non-cash pre-tax charge in the second quarter of 2013 due to the deconsolidation of DSN Northwest.
Also during the quarter, but not included in free cash flow, were an April 2014 debt redemption by DIRECTV U.S. of $1,000 million principal amount of 4.750% senior notes due in 2014 and cash paid for share repurchases of $491 million. DIRECTV halted share buybacks following the announcement of the proposed transaction with AT&T on May 18, 2014.
DIRECTV’s revenues for the first six months of 2014 of $15.96 billion increased 4% principally due to higher ARPU at DIRECTV U.S. as well as subscriber growth over the last year at DTVLA and DIRECTV U.S. These increases were partially offset by lower ARPU at DTVLA primarily due to unfavorable changes in exchange rates. Adjusted OPBDA increased 5% to $4.38 billion and adjusted operating profit increased 6% to $2.94 billion compared with the same period of 2013. Adjusted OPBDA margin remained relatively unchanged in the period, while adjusted operating profit margin expanded from 18.0% to 18.4% due to the impact of relatively unchanged depreciation expense at DTVLA compared to the prior year period.
DIRECTV Latin America owns approximately 93% of Sky Brasil, 41% of Sky Mexico and 100% of PanAmericana, which covers most of the remaining countries in the region. Sky Mexico, whose results are accounted for as an equity method investment and therefore are not consolidated by DTVLA, had 6.36 million subscribers as of 6/30, bringing the total subscribers in the region to 18.83 million.