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d2h Limited Fiscal Year Earnings Release

d2h Limited
Fiscal Year Ended March 31, 2015
Earnings Release

Revenue from Operations grew 32.5% to INR 23.38 billion, Subscription revenue up 38.3%
Adjusted EBITDA1 grew 55.3% to INR 6.09billion (US$ 97.3 million)2

Market leader in India for the 4th consecutive year based on gross and net subscriber additions which include 2.64 million
gross subscribers added in Fiscal 20153

Mumbai, June 3, 2015 : d2h Limited (NASDAQ: VDTH) (""d2h"" or the ""Company"") announced its financial results for the fiscal year ended March 31, 2015. The Company management, led by Saurabh Dhoot, Executive Chairman, will hold two conference calls to discuss the results on June 4, 2015. This is the Company's first earnings release since the listing of its American Depositary Shares on the NASDAQ on April 1, 2015.

Key highlights for Fiscal 2015:

  • - Revenue from operations grew 32.5% to INR 23.38 billion;
  • - Subscription revenue grew 38.3% to INR 20.58 billion;
  • - Adjusted EBITDA grew 55.3% to INR 6.09 billion (excluding one-off securities issue expenses and ESOP scheme impact of INR 135.17 million);
  • - Adjusted EBITDA margin expanded by 390 basis points to 26.1% despite content cost increases;
  • - ARPU grew to INR 196 ahead of guidance, with Q4 ARPU at INR 202;
  • - Market leader in gross and net adds at 2.64 million and 1.74 million subscribers, respectively;
  • - Closing gross subscribers at 13.09 million and net subscribers base at 10.18 million;
  • - Churn came in at 0.8% per month

Commenting on the results, Mr. Dhoot, said ""We are pleased to announce that we successfully listed American Depositary Shares on NASDAQ in April, becoming the most valued Indian company to be listed on the NASDAQ. We are happy to share our results for fiscal 2015. We maintained our market leadership in subscriber growth and reported key financial metrics ahead of the guidance provided during the listing process. We believe, with our strong balance sheet and continued momentum, we are well-positioned for the future.""

Speaking on the growth outlook for the DTH sector, Mr. Anil Khera, CEO of d2h, said ""The Pay TV segment in India is positioned for extraordinary growth over the next few years with millions of new TV homes being created on account of strong economic outlook in India as well as the Government of India's initiative to roll out its digitalization mandate across the country. We believe that 90-100 million homes will be making the switch to digital platforms which will be available to the DTH and digital cable operators. We are well positioned to benefit from this and we believe we will take the largest share of this opportunity, as we have in the past. With strong economic growth outlook for India, overall media sector is expected to grow in the years to come. We believe, this will help grow ARPU, TV penetration and increase HD uptake leading to stronger revenue growth for Pay TV in general and d2h in particular.""

1) Adjusted EBITDA is calculated after one off Securities issues expenses and impact of ESOP Plan 2014
2) Exchange rate of 1US$ to INR at 62.59 as of March 31, 2015 (Source: Reserve Bank of India) 3) 3 Source: MPA 2014 and company data

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 2015 up from nine percent four years ago. Last year the Company continued to lead the market in gross subscriber additions as well as incremental net subscribers for the fourth consecutive year.

The Company is also seeing a pick-up in its High-definition (""HD"") subscriber base. In Fiscal 2015, almost 30% of incremental net subscribers opted for the HD service. The Company's HD subscribers base now represent almost 10% of the total net subscriber base, up from 5% in Fiscal 2014. The Company expects HD penetration to increase in the coming fiscal year, with an attendant impact on ARPU.

The Company believes it maintains its competitive advantage for several reasons, including:

  • Latest technology enjoyed by all subscribers (MPEG4 DVB S2), more compression and bandwidth advantage, and thus more channels and HD offerings;
  • Largest distribution network with over 150,000 retail outlets across India serving new customers and convenient recharges;
  • Strong focus on customer service; being the only operator in India with a exclusive service network, approximately 97% of the Company's new subscribers get set top boxes installed on the same day; and
  • Unique control of box supply chain and R&D with development of local manufacturing capabilities.

Financial Summary

(inINR million, unless otherwise indicated)

Key financial metrics Fiscal 201 Fiscal 2015 % growth
Revenue from operations 17,644 23,377 32.5%
Subscription revenue 14,877 20,581 38.3%
Adjusted EBITDA 3,920 6,091 55.3%
Adjusted EBITDA margin 22.2% 26.1%  
Net loss (3,195) (2,727) 14.7%
Content cost (% of revenue) 34.1% 36.2%  
Key operating metrics
Gross subscribers (million) 10.45 13.09 25.2%
Net subscribers (million) 8.44 10.18 20.6%
Churn 0.76% 0.80%  

The Company achieved strong subscription revenue and revenue from operations growth of 38.3% and 32.5%, respectively, year on year to INR 20.58 billion in fiscal 2015 as compared to INR 14.87 billion in Fiscal 2014 and INR 23.38 billion in Fiscal 2015 as compared to INR 17.64 billion in Fiscal 2014, primarily due to increased net subscribers and ARPU growth.

The Company achieved Adjusted EBITDA of INR 6.09 billion for Fiscal 2015 against INR 3.92 billion for Fiscal 2014, a growth of 55.3%. This Adjusted EBITDA is before accounting for INR 135.17 million in one off security issue expenses and ESOP impact in Q4 of Fiscal 2015.

Adjusted EBITDA margin expanded 390 basis points to 26.1%, despite increase in content costs as a percentage of revenue in the second half of the fiscal year as the Company began operating under new content agreements. These new agreements provide predictability on content costs over the next 3-4 years, with better operating leverage and improved margins as subscriber base and ARPU and revenue increase over time.

Net loss for the year came in at INR 2.73 billion, a 14.7% improvement over the prior year.

d2h was able to push through an inflation linked APRU increase in February 2015. As a result, Q4 Fiscal 2015 ARPU was INR 202, 11.7% increase over Fiscal 2014.

NASDAQ IPO

The Company completed a listing of its American Depositary Shares on NASDAQ on April 1, 2015 under the ticker VDTH, in a business combination transaction with Silver Eagle Acquisition Corp. (OTC: EAGL). To commemorate this momentous event, Company management rang the opening bell at the NASDAQ market site.

Capital Structure and Balance Sheet

The Company has 393 million equity shares outstanding which is equivalent to 98.25 million American Depository Shares after closing of the business combination with Silver Eagle Acquisition Corp. We received US$ 273 million in net proceeds after payment of transaction expenses and have repaid gross debt of approximately US$100 million. The remaining proceeds shall be utilized for additional debt repayments and business expansion. The gross debt of the Company was INR 25.9 billion and cash and bank balance (including restricted cash) was approximately INR 13.0 billion in Fiscal 2015.

Corporate Governance

Following the NASDAQ listing, Harry Sloan and Jeff Sagansky are awaiting the regulatory approvals/clearance to join the board of directors of d2h. In the coming months, we expect the Dhoot family to have only one out of the eight board seats. The Company has established corporate governance practices and policies, including those pertaining to related party transactions, intends to follow NASDAQ, Indian and other international best practices.

Forward looking statements

This announcement may contain forward-looking statements, as defined in the safe harbor provisions of the US Private Securities Litigation Reform Act of 1995. In addition to statements which are forward-looking by reason of context, the words ""may"", ""will"", ""should"", ""expects"", ""plans"", ""intends"", ""anticipates"", ""believes"", ""estimates"", ""predicts"", ""potential"", or ""continue"" and similar expressions identify forward-looking statements. We caution you that reliance on any forward-looking statement involves risks and uncertainties that might cause actual results to differ materially from those expressed or implied by such statements. These and other factors are more fully discussed in the d2h's registration statement on Form F-4 filed with the SEC and available at http://www.sec.gov. All information provided in this announcement is as of the date hereof, unless the context otherwise requires. Other than as required by law, d2h does not undertake to update any forward-looking statements or other information in this announcement.

Detailed financial statements are available on SEC web site or our own web site www.d2h.com