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Analyst Blog

DISH Network Corp. (DISH - Analyst Report) declared weak financial results for the third quarter of 2012, way behind the Zacks Consensus Estimates. However, despite facing stiff competition from  DIRECTV (DTV - Analyst Report) and other cable TV and telecom operators, in the previous quarter, DISH Network lost a net total of 19,000 subscribers compared with a huge net loss of 111,000 subscribers in the year-ago quarter. At the end of the third quarter of 2012, DISH Network had approximately 14.042 million subscribers.

Quarterly GAAP net loss was $158.5 million or 35 cents per share compared with a net income of $319.1 million or 71 cents per share in the year-ago quarter. Second-quarter 2012 loss per share of 35 cents were well below the Zacks Consensus Estimate of an income of 55 cents.

Quarterly total revenue was approximately $3,523.3 million, down 2.2% year over year and also below the Zacks Consensus Estimate of $3,564 million. The poor performance was mainly due to weak Equipment-related revenue.

Segment wise, quarterly Subscriber related revenue was $3,267.4 million, up 1.2% year over year. Equipment and merchandise sales & other revenue were $251.9 million, down 30.4% year over year. Equipment sales, services, and other revenues from EchoStar were $4.1 million, down 63.8% year over year.

Average monthly subscriber churn rate in the third quarter of 2012 was 1.80% compared with 1.83% in the prior-year quarter. Average revenue per user in the reported quarter was $77.57 compared with $76.99 in the year-ago quarter. Average subscriber acquisition cost in the previous quarter was $805 compared with $789 in the year-ago quarter.

In the reported quarter, Subscriber-related expenses crept up 6.3% year over year to $1,810.8 million, driven by higher programming content costs and expenses related to call center operations. Subscriber acquisition cost increased 14.7% year over year to $453 million. Depreciation and amortization expenses were $235.4 million, up 2.7% year over year.

General and administrative expenses grew 13.7% year over year to $330.4 million on higher personnel costs and professional fees to support the network. Third-quarter 2012 operating loss was $273 million compared with an operating income of $624.9 million in the prior-year quarter. Accordingly, quarterly EBITDA was just $37.1 million compared with $874.4 million in the year-ago quarter.

During the first nine months of 2012, DISH Network generated $2,034 million of cash from operations compared with $1,991.2 million in the prior-year period. Free cash flow (cash flow from operations less capital expenditures) in the first nine months of 2012 was $921,352.17.9 million compared with $1,397.2 million in the year-ago period.

 At the end of the third quarter of 2012, DISH Network had $6,400.1 million of cash and marketable securities and $10,140.4 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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