13th Annual Merrill Lynch Media &
Entertainment 2006 Fall Preview
Conference

September 12th, 2006

Michael Palkovic
Chief...
Cautionary Statement
This presentation may include or incorporate by reference certain statements that we believe are, or
...
Non-GAAP Financials
This presentation includes financial measures that are not determined in accordance with accounting
pr...
Solid 2nd Quarter Results
                                 2Q 2006   2Q 2005     Change
 DIRECTV U.S.

 Revenue           ...
DIRECTV Market Share
                                         DIRECTV has Maintained or Increased its Share of Industry
  ...
Improving Subscriber Quality
 (Residential Subscribers)
                   39%    30%      24%      18%    14%     15%    ...
Higher Quality Subscribers = Lower Churn

         Monthly Churn
                        1.89%
                           ...
Continued Strong ARPU Growth
• DIRECTV continues to generate industry-leading ARPU
  driven by price increases and:
   • U...
Increasing Sales of HD and DVRs

Penetration of Total Subscriber Base
                                                    ...
HD Local Market Rollout
Today: 39 Markets Reaching 60%
        of U.S. TV HHs
                                   2H 2006 H...
Stabilizing Subscriber Acquisition Costs
                Q2   Q2 3-Year
               2006 2005 Trend Comments
          ...
Controlling Upgrade and Retention Costs
                   Q2       Q2     2-3 Yr.
                  2006     2005    Tren...
DIRECTV U.S.
Capital Expenditures*
                                               HD Ground
             $782M
           ...
DIRECTV Latin America
          A Great Opportunity to Unlock Value
                                                      ...
DIRECTV Latin America
                   Potential Valuation
                                                             ...
Strong Balance Sheet
• $1.4.B net debt position as of 2Q 2006:
     Total Debt                 $3.4B
     Cash and Short T...
Summary
         DIRECTV is poised for significant
               cash flow growth

• Leading digital multichannel TV serv...
18
Non-GAAP Financial Reconciliation Schedules
                                          DIRECTV Holdings LLC (U.S.)
 Reconci...
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direc tv group The DIRECTV Group, Inc. at Merrill Lynch Media & Entertainment Conference

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direc tv group The DIRECTV Group, Inc. at Merrill Lynch Media & Entertainment Conference

  1. 1. 13th Annual Merrill Lynch Media & Entertainment 2006 Fall Preview Conference September 12th, 2006 Michael Palkovic Chief Financial Officer, DIRECTV 1
  2. 2. Cautionary Statement This presentation may include or incorporate by reference certain statements that we believe are, or may be considered to be, “forward-looking statements” within the meaning of various provisions of the Securities Act of 1933 and of the Securities Exchange Act of 1934. These forward-looking statements generally can be identified by use of statements that include phrases such as “believe,” “expect,” “estimate,” “anticipate,” “intend,” “plan,” “foresee,” “project” or other similar words or phrases. Similarly, statements that describe our objectives, plans or goals also are forward-looking statements. All of these forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or from those expressed or implied by the relevant forward-looking statement. Such risks and uncertainties include, but are not limited to: economic conditions; product demand and market acceptance; ability to simplify aspects of our business model; improve customer service; create new and desirable programming content and interactive features; achieve anticipated economies of scale; government action; local political or economic developments in or affecting countries where we have operations, including political, economic and social uncertainties in many Latin American countries in which DTVLA operates; foreign currency exchange rates; competition; the outcome of legal proceedings; ability to achieve cost reductions; ability to renew programming contracts under favorable terms; technological risk; limitations on access to distribution channels; the success and timeliness of satellite launches; in-orbit performance of satellites, including technical anomalies; loss of uninsured satellites; theft of satellite programming signals; and our ability to access capital to maintain our financial flexibility; and we may face other risks described from time to time in periodic reports filed by us with the SEC. 2
  3. 3. Non-GAAP Financials This presentation includes financial measures that are not determined in accordance with accounting principles generally accepted in the United States of America, or GAAP, such as Operating Profit before Depreciation and Amortization, Free Cash Flow, Pre-SAC margin and Cash Flow before Interest and Taxes. These financial measures should be used in conjunction with other GAAP financial measures and are not presented as an alternative measure of operating results, as determined in accordance with GAAP. DIRECTV management uses these measures to evaluate the profitability of DIRECTV U.S.’ subscriber base for the purpose of allocating resources to discretionary activities such as adding new subscribers, upgrading and retaining existing subscribers and for capital expenditures. A reconciliation of these measures to the nearest GAAP measure is posted on our website. 3
  4. 4. Solid 2nd Quarter Results 2Q 2006 2Q 2005 Change DIRECTV U.S. Revenue $3.32B $2.96B +12% Operating Profit Before Depreciation & Amortization $977M $505M +93% $724M $505M +43% Excluding Lease Accounting Cash Flow Before Interest $450M $154M +192% and Taxes ARPU $71.59 $67.79 +6% SAC $642 $646 - Monthly Churn 1.59% 1.69% (10 basis pts.) 4
  5. 5. DIRECTV Market Share DIRECTV has Maintained or Increased its Share of Industry Gross Additions Despite the Launch of New Cable Services 20% DTV Share of Industry Gross Adds Cable Cable ramps-up ramps-up High Definition VOIP 15% Cable ramps-up Video-on-Demand 10% Cable ramps-up Broadband 5% 2001 2002 2003 2004 2005 2006E 5
  6. 6. Improving Subscriber Quality (Residential Subscribers) 39% 30% 24% 18% 14% 15% Higher Risk 85% Lower Risk 61% 70% 76% 82% 86% Q1 Q2 Q3 Q4 Q1 Q2 2005 2006 # of Higher Risk 430K 275K 255K 170K 125K 120K Gross Adds # of Lower Risk 710K 660K 640K 740K 785K 745K 6 Gross Adds
  7. 7. Higher Quality Subscribers = Lower Churn Monthly Churn 1.89% Key Factors 2Q 2Q 1.69% 2006 2005 1.70% Lower Involuntary .53% .71% Churn 1.49% 1.59% Lower Churn from 2.2% 2.7% 1.45% 1st Year Subscribers 1Q 2Q 3Q 4Q 2005 Monthly Churn 2006 Monthly Churn 7
  8. 8. Continued Strong ARPU Growth • DIRECTV continues to generate industry-leading ARPU driven by price increases and: • Unique and differentiated programming • DVR and HD services • Advertising revenues • A few recent examples: • First–ever Interactive TV content for MLB: • Player Tracker - Up-to-the-minute statistics, box • Red Zone Channel scores and scoreboards • Game Mix - Bonus Cam • Short Cuts • First–ever Interactive TV coverage of a major U.S. tennis event: • CD USA - Mix Channel (up to 5 matches • Network Live simultaneously) - Statistics and info on demand 8
  9. 9. Increasing Sales of HD and DVRs Penetration of Total Subscriber Base Penetration of New 25% HD Subs Subscribers 24% DVR Subs (% of Gross Adds) 21% 19% 2Q 2Q 17% 16% 2006 2005 DVR 17% 8% HD 6% 2% Total 23% 10% Q1 Q2 Q3 Q4 Q1 Q2 2005 2006 9
  10. 10. HD Local Market Rollout Today: 39 Markets Reaching 60% of U.S. TV HHs 2H 2006 HD Market Launches Milwaukee Atlanta • Over 20 additional markets bringing the Phoenix Boston cumulative total to more than 70% of Salt Lake City Chicago U.S. TV HHs St. Louis Dallas-Ft Worth Indianapolis Detroit Seattle Houston 2H 2007 HD Market Launches Baltimore Los Angeles • Capacity to reach 100% of U.S. TV Charlotte New York HHs Cleveland Philadelphia - 1500 local HD channels Denver San Francisco - 150 national HD channels Fresno Tampa Hartford Washington, D.C • Positions DIRECTV to have the most Miami Birmingham HD capacity in the U.S. Orlando Columbus Raleigh Kansas City W. Palm Beach Minneapolis Memphis Nashville San Antonio Pittsburgh Portland Sacramento 10 San Diego
  11. 11. Stabilizing Subscriber Acquisition Costs Q2 Q2 3-Year 2006 2005 Trend Comments Higher sales of HD and DVR receivers Hardware $230 $250 Higher partially offset by set-top cost reductions and lease program benefits More complex installations offset by Installation 160 160 Flat improved efficiencies/technologies Higher dealer incentives for quality subs Commission/ 180 180 Flat offset by higher upfront fees, dealer Direct Sales chargebacks and Direct Sales efficiencies Marketing dollars roughly proportional to Marketing 70 50 Flat gross adds $640 $650-$700 Total $640 11
  12. 12. Controlling Upgrade and Retention Costs Q2 Q2 2-3 Yr. 2006 2005 Trend Comments Higher sales of HD and DVR receivers HD/DVRs $100M $50M Higher partially offset by set-top cost reductions and lease program benefits Basic Boxes/ Cumulative STBs/home of 2.4 is Local Channel approaching national average of 2.6; SD 40 60 Lower local upgrade program is winding down Upgrades Movers program should be roughly Flat to Movers/Other 100 110 proportionate to revenues; other programs Slightly Programs are largely discretionary Higher Total $240M $220M $1.1B-1.2B/year (excluding MPEG-4 swaps) 12 Note: MPEG-4 HD swap program expected to cost $300-400M over 2-3 years
  13. 13. DIRECTV U.S. Capital Expenditures* HD Ground $782M Maintenance $672M Satellites $300-400M 2004 2005 2006E 2007E 2008E *Excludes lease program 13
  14. 14. DIRECTV Latin America A Great Opportunity to Unlock Value Monthly Subs ARPU SAC Churn Value/Sub Value BSkyB 8.2M $60 $450 – 475 0.9% $1,950 $ 16.0B $1,700(1) Sky Italia 3.8M $55 $300 – 325 0.8% $ 6.5B $2,000(1) Sky Mexico 1.4M $40 $260 – 320 1.0% $ 2.7B DIRECTV Latin 2.6M $40 $300 – 350 1.5% - - America(2) DIRECTV U.S 15.5M $70 $650 – 700 1.6% $1,550 $ 23.2B EchoStar 12.5M $60 $675 – 725 1.7% $1,450 $ 18.0B (1) Analyst consensus (these companies are not publicly traded) (2) Excludes Sky Mexico 14
  15. 15. DIRECTV Latin America Potential Valuation (1) DIRECTV Latin America’s Attributable Subscribers Region Owner- Reported Attributable ship % Subs Subs PanAmericana 100% 1.3 M 1.3 M Brazil 74% 1.3 M 1.0 M Mexico 41% 1.4 M 0.6 M Total 4.0 M 2.9 M DIRECTV Latin America’s Potential Valuation (assumes 2.9M attributable subs) Value/Sub Value Value/Share $500 $1.5 B $1 $1,000 $2.9 B $2 $1,500 $4.4 B $4 $2,000 $5.8 B $5 15 (1) Excludes effect of Darlene’s minority interest
  16. 16. Strong Balance Sheet • $1.4.B net debt position as of 2Q 2006: Total Debt $3.4B Cash and Short Term Inv. $2.0B Net Debt $1.4B • Repurchased approximately 176M shares for $2.8B (as of the 2Q Earnings Call on August 8th, 2006) – Stock buyback program authorized for $3B • Expect significant cash flow growth • Current credit rating provides significant borrowing capacity 16
  17. 17. Summary DIRECTV is poised for significant cash flow growth • Leading digital multichannel TV service provider – 100% digital platform – Unique and exclusive programming – New products/services expected to further differentiate • Strong revenue, OPBD&A and subscriber growth – Increasing margins due to cost controls and operating leverage • Significant upside potential at DIRECTV Latin America • Strong balance sheet with substantial liquidity 17
  18. 18. 18
  19. 19. Non-GAAP Financial Reconciliation Schedules DIRECTV Holdings LLC (U.S.) Reconciliation of Operating Profit Before Depreciation and Amortization to Operating Profit Three Months Ended June 30, 2006 2005 (Dollars in Millions) Operating Profit Before Depreciation and Amortization $ 976.3 $ 504.6 Subtract: Depreciation and amortization expense 202.0 171.4 Operating Profit $ 774.3 $ 333.2 DIRECTV Holdings LLC (U.S.) Reconciliation of Cash Flow before Interest and Taxes and Free Cash Flow to Net Cash Provided by Operating Activities Three Months Ended June 30, 2006 2005 (Dollars in Millions) Cash Flow before Interest and Taxes $ 449.5 $ 153.8 Adjustments: Cash paid for interest (50.3) (31.2) Interest income 17.3 3.7 Income taxes refunded (paid) (192.5) - Subtotal - Free Cash Flow 224.0 126.3 Add Cash Paid For: Property and equipment 121.3 102.5 Subscriber leased equipment - subscriber acquisitions 153.0 - Subscriber leased equipment - upgrade and retention 99.5 - Satellites 48.6 95.2 Net Cash Provided by Operating Activities $ 646.4 $ 324.0 19

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