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DISH Network Corp. (DISH - Analyst Report) declared second-quarter 2013 financial results where both its top and bottom line missed the Zacks Consensus Estimate. Impairment expenses related to satellite purchased through TerreStar, DBSD transactions has severely affected the bottom line of the company.

At the end of the second quarter of 2013, DISH Network had approximately 14.014 million pay-TV subscribers, down 0.3% year over year. The company gained net 61,000 broadband subscribers for the reported quarter.  During the quarter, DISH Network lost 78,000 net subscribers. At the end of the second quarter of 2013, DISH Network had approximately 310,000 broadband subscribers, up 154.1% year over year.

Quarterly GAAP net loss was $11.1 million or 2 cents per share compared with a net income of $225.7 million or 50 cents per share in the year-ago quarter. Second-quarter 2013 loss per share of 2 cents was well below the Zacks Consensus Estimate of 54 cents. Quarterly total revenue was approximately $3,606.1 million, up 1% year over year but below the Zacks Consensus Estimate of $3,654 million.

Segment wise, quarterly Subscriber related revenues were $3,456.5 million, up 4.9% year over year. Equipment and merchandise sales & other revenues were $140.6 million, down 48% year over year. Equipment sales, services, and other revenues from EchoStar were $9 million, up 57.9% year over year.

Average monthly subscriber churn rate for the pay-TV in the second quarter of 2013 was 1.67% compared with 1.60% in the prior-year quarter. Average revenue per user was $80.90 compared with $77.59 in the year-ago quarter. Average subscriber acquisition cost in the second quarter of 2013 was $882 compared with $800 in the year-ago quarter.

In the reported quarter, Subscriber-related expenses crept up 5.5% year over year to $1,924 million, driven by higher programming content costs and Broadband subscriber-related expenses. Total Subscriber acquisition cost increased 6.9% year over year to $434.5 million. Depreciation and amortization expenses were $300.5 million, up 0.5% year over year.

General and administrative expenses were down 20.1% year over year to $249.9 million. Second-quarter 2013 operating profit was $20.7 million compared with $468.4 million in the prior-year quarter. Accordingly, quarterly EBITDA was just $422.4 million compared with $760.2 million in the year-ago quarter.

At the end of the first six months of 2013, DISH Network generated $1,231.3 million of cash from operations compared with $1,348.1 million in the prior-year period. Free cash flow (cash flow from operations less capital expenditures) at the end of the first half of 2013 was $637.6 million compared with $927.9 million in the year-ago period.

At the end of the second quarter of 2013, DISH Network had $9,527.1 million of cash and marketable securities and $13,633 million of outstanding debt on its balance sheet compared with $7,237.7 million of cash and marketable securities and $11,350.4 million of outstanding debt on its balance sheet at the end of 2012.

DISH Network – the second-largest satellite operator in the U.S. after DIRECTV (DTV - Analyst Report) – currently has a Zacks Rank #3 (Hold).

Our Take

DISH Network is slowly transforming itself from a low-priced leader in the U.S. pay-TV industry to a premium service provider, in order to reduce its subscribers’ churn rate. Moreover, the plan to deploy triple-play services coupled with increased rollout of its popular hopper devices will help the company to not only drive subscriber growth but at the same time counter stiff competition from Netflix, Inc. (NFLX - Analyst Report) and AT&T Inc.’s (T - Analyst Report) U-Verse pay-TV service.

 

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