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.
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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