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Videocon D2h Q1 FY16 EBITDA +28.3% Y/Y To Rs1.90 Bil.

Videocon d2h Limited (NASDAQ: VDTH) (“Videocon d2h” or the “Company”) announced its financial results for the quarter ended June 30, 2015. The Company management, led by Saurabh Dhoot, Executive Chairman, will hold two conference calls to discuss the results on July 23, 2015.

Key highlights for the quarter ended June 30, 2015:

  • Subscription revenue grew 32.2% year on year to INR 5.99 billion;
  • Revenue from operations grew 23.3% year on year to INR 6.63 billion;
  • Adjusted EBITDA grew 28.3% year on year to INR 1.90 billion;
  • Adjusted EBITDA margin expanded by 110 basis points year on year to 28.7% despite content cost increases;
  • ARPU grew 9.6% year on year to INR 205
  • Gross and net subscribers increased by 0.61 million and 0.46 million subscribers, respectively;
  • Closing gross subscribers at 13.70 million and net subscribers base at 10.64 million; and
  • Churn came in at 0.46% per month

Commenting on the results, Mr. Dhoot said “We are pleased to declare a strong set of results for the quarter ended June 30, 2015 and are on track to achieve the guidance provided for fiscal 2016. With a strong subscriber growth outlook, DTH sector gaining market share over cable and an improving ARPU scenario; we believe we are just at the beginning of a multi-year strong growth opportunity.

I am happy to share that we recently set up an advertising team to sell ad inventory on our own proprietary channels. We are beginning to see an encouraging response from multiple advertisers. During the quarter, we added three of our own proprietary channels, namely, d2h nursery rhymes, d2h Cinema HD and another music channel. We also launched three Active services, namely, Active Kids, Active Games and Active Learning in this quarter. These are beginning to get traction from our customers.”

Speaking on the growth outlook for the Company, Mr. Anil Khera, CEO of Videocon d2h, said “We believe around 100 mn homes will be up for grabs by digital cable and DTH operators in the next 4-5 years. DTH should gain higher market share in Phase III and IV of the Government of India digitization plan in comparison to the prior phases. We are excited and prepared to take on the significant subscriber growth opportunity ahead of us, as we approach the Phase III digitization deadline. While actual implementation could take time, we continue to believe the government has a strong intent to switch off analog cable as per the plan.”

The Company continues to be the fastest growing Pay TV operator in India, with roughly 20% of the DTH net subscriber market share as on March 31, 2015 up from nine percent four years ago. The Company continues to see a pick-up in its High-definition (“HD”) subscriber base. The Company’s HD subscriber base represents almost 10% of the total net subscriber base.

Following the NASDAQ listing, Harry Sloan and Jeff Sagansky are awaiting the regulatory approvals to join the board of directors of Videocon d2h.

During the quarter, Videocon d2h re-appointed Ernst & Young LLP, India as internal auditors for Fiscal 2016 to support in performing internal audit and testing of internal controls over financial reporting for Videocon d2h. This will help the Company strengthen internal financial and accounting controls and procedures to enable it to produce financial statements on a timely basis, in line with international best practices.

The Company achieved strong subscription revenue growth of 32.2% year on year to INR 5.99 billion in Q1FY16 as compared to INR4.54 billion in Q1FY15, primarily due to increased net subscribers and ARPU growth. Revenue from operations grew 23.3% year on year to INR 6.63 billion. Cost of acquiring a subscriber in form of hardware subsidy was INR 1793 per subscriber during the quarter.

Videocon d2h achieved Adjusted EBITDA of INR 1.90 billion for Q1FY16 as against INR 1.48 billion for Q1FY15, a growth of 28.3%. EBITDA margin expanded 110 basis points year on year to 28.7%, despite significant increase in content costs as a percentage of revenue. The Company began operating under the new long term content agreements in the second half of fiscal 2015.

Net loss for the year came in at INR 244 million, a 56.3% improvement over Q1FY15.

The Company added 0.61 million gross subscribers and 0.46 million net subscribers in Q1FY16. Gross subscribers totaled 13.70 million and net subscribers totaled 10.64 million at end Q1FY16. Churn came in at 0.46% for the quarter as compared to 0.42% in Q1FY15.

Earnout

Pursuant to the Contribution Agreement between Silver Eagle Acquisition Corp. and the Company dated December 31, 2014, as amended (the “Contribution Agreement”), our existing shareholders as of the date of the Contribution Agreement and the Sponsor, Global Eagle Acquisition LLC, are entitled to receive by way of a bonus issue of shares (or such other form of share issue as determined by the independent members of our board of directors) upon satisfaction of certain share price performance hurdles of the ADSs on the Nasdaq being satisfied within three years of the initial listing of the ADSs (the “Earnout”), namely an “Initial Performance Hurdle” and a “Subsequent Performance Hurdle”, each as defined in the Contribution Agreement. In the event that the Company issues shares pursuant to the Earnout by way of a bonus issue or otherwise, the holders of the ADSs (including any holders of equity shares underlying such ADSs), other than the shareholders of the Company as of the date of the Contribution Agreement and the Sponsor, have no interest in or entitlement to such shares issued pursuant to such bonus issue or otherwise, and in the Articles of Association of the Company such holders have been deemed to have waived their interest in or entitlement to such shares issued pursuant to such bonus issue or otherwise. Further, subject to similar stock price performance targets, Mr. Saurabh Dhoot is also entitled to receive certain equity shares of the Company.

The Initial Performance Hurdle is achieved if the last sales price of the Videocon d2h ADSs on NASDAQ (converted into Indian rupees on each such day at the Indian Rupee/U.S. Dollar Exchange Rate on such date) for 20 trading days in a 30-trading day period equals or exceeds 125% of the Listing Price (i.e. price per ADS issued to the SEAC Distribution Record Holders converted into Indian rupees at the Indian Rupee/U.S Dollar Exchange Rate prevailing on the Closing Date, March 31, 2015).

The board of directors of the Company, at their meeting held on July 22, 2015, determined that the Initial Performance Hurdle has been achieved and satisfied.

Khandelwal Jain & Co., an independent statutory auditor of the Company, has also confirmed and certified that the Initial Performance Hurdle has been achieved and satisfied.

Accordingly, the board of directors of the Company has approved, subject to approval of Ministry of Information and Broadcasting and such other approvals and consents as may be required under the applicable regulations, the issuance of 23,360,000 equity shares (equivalent to 5,840,000 ADSs) to the shareholders of the Company as of the date of the Contribution Agreement and the issuance of 3,999,984 equity shares (equivalent to 999,996 ADSs) to the Sponsor by way of a bonus issue, in accordance with the terms of the Contribution Agreement and the Articles of Association of the Company. Further, Mr. Saurabh Dhoot also becomes entitled to receive 1,400,000 (equivalent to 350,000 ADSs) equity shares of the Company.

Capital Structure and Balance Sheet

Post-the issue of ADSs and shares relating to the first earn-out, the Company will have 421.8 million equity shares outstanding which is equivalent to 105.45 million American Depository Shares.

As of June 30, 2015, we had gross debt of Rs. 25.42 billion and total cash and short term investments of Rs, 9.81 billion.

Source: Videocon d2h