DISH Network Corp.
(
DISH
) declared weak financial results for the second quarter of 2012
way behind the Zacks Consensus Estimates. Nevertheless, despite
facing stiff competition from
DIRECTV
(
DTV
) and other cable TV and telecom operators, in the previous
quarter, DISH Network lost a net total of 10,000 subscribers
compared with a huge net loss of 135,000 subscribers in the
year-ago quarter. At the end of the second quarter of 2012, DISH
Network had approximately 14.061 million subscribers.
Quarterly GAAP net income was $225.7 million or 50 cents per
share compared with $334.8 million or 75 cents per share in the
year-ago quarter. Second-quarter 2012 earnings per share of 50
cents were significantly below the Zacks Consensus Estimate of 63
cents.
Quarterly total revenue was approximately $3,571.8 million, down
0.5% year over year and also below the Zacks Consensus Estimate of
$3,650 million. This poor performance was mainly due to weak
Subscriber-related revenue.
Segment wise, quarterly Subscriber related revenue was $3,295.8
million, down 0.5% year over year. Equipment and merchandise sales
& other revenue were $270.3 million, remaining same year over
year. Equipment sales, services, and other revenues from EchoStar
were $5.7 million, down 35.5% year over year.
Average monthly subscriber churn rate in the second quarter of
2012 was 1.60% compared with 1.67% in the prior-year quarter.
Average revenue per user in the reported quarter was $78.11
compared with $78.06 in the year-ago quarter. Average subscriber
acquisition cost in the previous quarter was $806 compared with
$795 in the year-ago quarter.
In the reported quarter, Subscriber-related expenses crept up
5.6% year over year to $1,825.8 million, driven by higher
programming content costs and expenses related to call center
operations. Subscriber acquisition cost increased 18% year over
year to $404.5 million. Depreciation and amortization expenses were
$299.1 million, up 26.2% year over year.
General and administrative expenses grew 0.7% year over year to
$327.7 million on higher personnel costs and professional fees to
support the network. Second-quarter 2012 operating income decreased
by 34.8% to $468.4 million, while operating margin reduced to 13.1%
from the year-ago level of 20%. Accordingly, quarterly EBITDA was
around $760.2 million compared with $935 million in the year-ago
quarter.
During the first half of 2012, DISH Network generated $1,348.1
million of cash from operations compared with $1,258.3 million in
the prior-year period. Free cash flow (cash flow from operations
less capital expenditures) in the first half of 2012 was $927.9
million compared with $855.6 million in the year-ago period.
At the end of the second quarter of 2012, DISH Network had
$4,945.7 million of cash and marketable securities and $9,399.5
million of outstanding debt on its balance sheet compared with
$2,040.9 million of cash and marketable securities and $7,493.8
million of outstanding debt on its balance sheet at the end of
2011.
Recommendation
We maintain our long-term Neutral recommendation on DISH
Network. Currently, it has a short-term Zacks #3 Rank (Hold) on the
stock.
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