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Videocon d2h posts net profit for 2nd straight quarter, adds 0.23 mn subs in Q2

MUMBAI: Videocon d2h, the DTH arm of Videocon Group, has reported profit at the net level for the second consecutive quarter while adding 0.23 million net subscribers for the three-month period ended 30 September 2016.

The Nasdaq-listed company is on course to achieve net profit for the full fiscal for the first time, media analysts said. After Dish TV, Videocon d2h would be the second Indian DTH company to be PAT positive for the full year.

In the fiscal second quarter ended 30 September, Videocon d2h posted net profit of Rs 14.8 crore (Rs 148 million) compared to a net loss of Rs 24.6 crore (Rs 246 million) a year ago. In Q1 of FY17, net profit was at Rs 2.7 crore (Rs 27 million) compared to a net loss of Rs 24.4 crore (Rs 244 million) in the earlier year.

Adjusted EBITDA grew 37.3% year-on-year (YoY) to Rs 263 crore (Rs 2.63 billion). Adjusted EBITDA margin came in at 33.8% during the quarter ended 30 September. On a like to like basis, using the company’s former accounting treatment of entertainment tax, EBITDA margin for Q2 FY17 would have been 31.5%, which is up 380 basis points YoY.

Videocon d2h posts net profit for 2nd straight quarter, adds 0.23 mn subs in Q2

The fiscal second quarter results reflect the company’s change in accounting treatment of entertainment tax effective 1 April 2016. This change resulted in operating revenue being presented net of entertainment tax.

Videocon’s financials and operating highlights for Q1 FY17 have been adjusted to reflect this change. Prior to 1 April 2016, entertainment tax was accounted for under operating expenses, thus operating revenue was presented without deduction of entertainment tax.

As a result, the company’s financials and operating highlights for periods after 1 April 2016 are not comparable with its financials and operating highlights for periods prior to that, Videocon d2h clarified.

Revenue

During the quarter ended 30 September 2016, subscription and activation revenue came in at Rs 711 crore (Rs 7.11 billion). Revenue from operations stood at Rs 776 crore (Rs 7.76 billion). On a like to like basis, using the company’s former accounting treatment of entertainment tax, revenue from operations for Q2 FY17 would have been Rs 832 crore (Rs 8.32 billion), which is up 20.6% YoY. Subscription and activation revenue for Q2 FY17 would have been Rs 767 crore (Rs 7.67 billion), which is up 21.9% YoY.

ARPU

Average revenue per user (ARPU) was impacted in the quarter due to increase in indirect taxes following implementation of Krishi Kalyan cess (agri-welfare tax) starting 1 June 2016.

ARPU for the fiscal second quarter stood at Rs 209.

Effective 1 April 2016, ARPU is calculated by dividing revenue from operations by the average of the company’s net subscribers for the period. Prior to 1 April 2016, ARPU was calculated by dividing the company’s subscription and activation revenue by the average of its net subscribers for the period. Subscription and activation charges were considered on a gross basis without netting off the recharge margins or discounts provided to the distributors. The company revised its calculation of ARPU in order to simplify its ARPU calculation in accordance with feedback received from certain of its investors.

On a like to like basis, using the company’s former definition of ARPU which it applied prior to 1 April 2016, ARPU would have been Rs 216.

Content cost

Content cost came in at 38.7% of revenue. On a like to like basis, using the company’s former accounting treatment, content cost as percentage of revenue during Q2 FY17 would have been 36.1%, which has improved 200 basis points YoY.

Subscriber growth

The company added 0.59 million gross subscribers and 0.23 million net subscribers during the second quarter of fiscal 2017.

Net subscribers totaled 12.52 million as of 30 September 2016.

Churn

Churn came in at 0.95% per month for the quarter as compared to 1.19% during the same quarter last year.

videocon d2h Q2FY17 Operating highlights

Subscriber acquisition cost

Subscriber acquisition cost in the form of hardware subsidies stood at Rs 1,869 per subscriber.

Debt

Videocon d2h had term loans of Rs 1912 crore (Rs 19.12 billion) and total cash and short term investments of Rs 376 crore (Rs 3.76 billion) as of 30 September 2016.

Saurabh DhootCommenting on the results, Videocon d2h executive chairman Saurabh Dhoot said, “I’m pleased to report a terrific quarter with over 37% increase in EBITDA year on year, in spite of the previously announced increase in taxes which impacted ARPU. Our quarterly results performance is consistent with our five point strategy to 1) grow subscriber base, 2) enhance subscriber monetisation, 3) focus on localisation and premium services, 4) lead the market in technological innovation and 5) enhance operational efficiencies and improve margins. These imperatives are driving our success at creating sustainable shareholder value. We are excited and fully prepared to seize the significant subscriber growth opportunity ahead of us through our leading distribution, customer service and Anil Kheradifferentiated content offering, supported by a strong balance sheet.

Speaking on the business outlook, Videocon d2h CEO Anil Khera said, “We are extremely excited with the business growth opportunities ahead of the company. We welcome the regulators’ initiative to review and draft a tariff order that aims to create complete transparency in carriage and content deals and bring in commercial parity amongst distribution platforms.”

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