DISH Network (DISH) - 2024 Q4 - Annual Report

PART I Item 1. Business DISH Network, a wholly-owned EchoStar subsidiary, operates Pay-TV and Wireless segments, serving 7.778 million and 6.995 million subscribers respectively, while deploying a nationwide 5G O-RAN network - On December 31, 2023, EchoStar completed its acquisition of DISH Network, making DISH a wholly-owned subsidiary[27] - A planned acquisition of DISH's Pay-TV business (DISH DBS) by DIRECTV was terminated in November 2024 after certain conditions were not met[28][29] Subscriber Count by Segment (as of Dec 31, 2024, in millions) | Segment | Brand(s) | Subscriber Count | | :--- | :--- | :--- | | Pay-TV | DISH TV & SLING TV | 7.778 | | | DISH TV | 5.686 | | | SLING TV | 2.092 | | Wireless | Boost Mobile & Gen Mobile | 6.995 | - The company is deploying the nation's first cloud-native, Open Radio Access Network (O-RAN) based 5G network, meeting its June 2023 and December 2024 FCC deployment commitments with deadlines extended to 2026 and potentially 2028[36][37][38] - DISH Network's current investment in Wireless spectrum licenses stands at $24 billion, not including an additional $7 billion in capitalized interest[36][45] Item 1A. Risk Factors The company faces intense competition, operational dependencies, substantial debt, regulatory compliance risks, and cybersecurity threats - The company faces intense and increasing competition from traditional pay-TV providers, broadband providers, and internet-based video services, which may lead to higher subscriber acquisition costs and churn[52] - As an MVNO, the company depends on network services from competitors T-Mobile and AT&T, where failure to manage relationships or meet minimum commitments could materially harm the business[66][67][69] - The company has substantial debt of $21.688 billion as of December 31, 2024, which could make it difficult to satisfy obligations, increase vulnerability to adverse economic conditions, and limit financial flexibility[129] - Significant capital is required to continue the 5G network deployment and commercialize its $24 billion investment in wireless spectrum licenses, with failure to meet FCC build-out requirements potentially resulting in license revocation[131][132] - The business is vulnerable to cybersecurity threats, with past and future cyber-attacks potentially disrupting operations, compromising sensitive data, and resulting in significant financial and reputational damage[117][123][124] - EchoStar is controlled by Chairman Charles W. Ergen, who beneficially owns approximately 90.6% of the total voting power, making EchoStar a "controlled company" under NASDAQ rules[153] Item 1B. Unresolved Staff Comments The company reports that it has no unresolved staff comments from the SEC - There are no unresolved staff comments[162] Item 1C. Cybersecurity The company manages cybersecurity risks through an enterprise-wide information security program, overseen by the CISO, acknowledging past and potential future cyber-attacks - The company has an enterprise-wide information security program designed to manage cybersecurity risks, informed by the NIST Cybersecurity Framework[163][164] - The Chief Information Security Officer (CISO), with over 25 years of experience, leads the information security organization and provides regular reports to senior management and the EchoStar Board of Directors[168][169] - The company has experienced cyber-attacks in the past and acknowledges that future disruptions could harm the business[166] Item 2. Properties The company's principal properties include corporate and wireless offices, customer service centers, data centers, and nine satellites for its Pay-TV segment - Key properties include the corporate headquarters in Englewood, CO, a data center in Cheyenne, WY, and digital broadcast centers in Cheyenne, WY and Gilbert, AZ[173] - The Pay-TV segment utilizes nine satellites, which are a major component of its DISH TV services[173] Item 3. Legal Proceedings The company is involved in various legal proceedings, with detailed information provided in Note 13 of the Consolidated Financial Statements - Information regarding legal proceedings is detailed in Note 13 of the Consolidated Financial Statements[174] PART II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities All 1,000 shares of DISH Network's common stock are held by its parent company, EchoStar, with no public trading market - All 1,000 outstanding shares of the company's common stock are held by EchoStar, and there is no public trading market for the stock[177] Item 7. Management's Narrative Analysis of Results of Operations Consolidated revenue for FY 2024 decreased by 6.6% to $14.293 billion, resulting in an operating loss of $180 million due to declines in both segments and significant 5G network capital requirements Consolidated Revenue and Operating Income (Loss) (in thousands) | Metric | 2024 | 2023 | Variance ($) | Variance (%) | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $14,292,658 | $15,295,088 | $(1,002,430) | (6.6)% | | Pay-TV Revenue | $10,688,204 | $11,571,159 | $(882,955) | (7.6)% | | Wireless Revenue | $3,606,177 | $3,732,160 | $(125,983) | (3.4)% | | Total Operating Income (Loss) | $(179,625) | $175,257 | $(354,882) | N/A | - In January 2024, the company transferred assets, including certain wireless spectrum licenses and a satellite under construction with a net carrying value of $12.003 billion, to its parent, EchoStar, recorded as a dividend[183][184] - In March 2024, the company sold its 700 MHz spectrum to EchoStar for $1.037 billion, using the proceeds to pay off a maturing convertible note[186] - The company experienced negative free cash flow in 2024, primarily due to capital expenditures for the 5G Network Deployment, and expects this trend to continue in 2025[204] Pay-TV Segment Analysis The Pay-TV segment's revenue decreased 7.6% to $10.688 billion due to subscriber declines, partially offset by a 4.2% ARPU increase, while operating income remained stable Pay-TV Segment Performance (FY 2024 vs. FY 2023) | Metric | 2024 | 2023 | Change | | :--- | :--- | :--- | :--- | | Total Revenue | $10.688 B | $11.571 B | (7.6)% | | Operating Income | $2.648 B | $2.700 B | (1.9)% | | Net Subscriber Losses | (0.748 M) | (1.224 M) | Improvement | | Pay-TV ARPU | $108.90 | $104.56 | +4.2% | | DISH TV Churn Rate | 1.46% | 1.69% | (0.23)% | | DISH TV SAC | $999 | $1,118 | (10.6)% | - The decrease in net DISH TV subscriber losses was primarily due to a lower churn rate, positively impacted by an emphasis on acquiring and retaining higher quality subscribers[267][271] - The 4.2% increase in Pay-TV ARPU was primarily attributable to programming price increases for both DISH TV and SLING TV implemented in late 2023[276] - Cost of services decreased 6.2% due to a lower average subscriber base and operational efficiencies, partially offset by higher programming costs per subscriber, particularly for local broadcast channels[277] Wireless Segment Analysis The Wireless segment's revenue decreased 3.4% to $3.606 billion, with operating loss widening by 12.0% to $2.828 billion, despite improved churn, impacted by ACP program end and 5G network costs Wireless Segment Performance (FY 2024 vs. FY 2023) | Metric | 2024 | 2023 | Change | | :--- | :--- | :--- | :--- | | Total Revenue | $3.606 B | $3.732 B | (3.4)% | | Operating Loss | $(2.828 B) | $(2.525 B) | (12.0)% | | Net Subscriber Losses | (0.304 M) | (0.617 M) | Improvement | | Wireless ARPU | $36.57 | $36.15 | +1.2% | | Wireless Churn Rate | 3.00% | 4.17% | (1.17)% | - The conclusion of the Affordable Connectivity Program (ACP) on June 1, 2024, negatively impacted subscriber numbers, as the company had no ACP subscribers by year-end 2024[311][324] - The Wireless churn rate improved significantly to 3.00% from 4.17% in the prior year, positively impacted by a focus on higher quality subscribers and the completion of a disruptive subscriber migration off the T-Mobile TSA in 2023[328] - Beginning Jan 1, 2024, certain 5G network deployment costs (e.g., tower leases, transport) were reclassified from "Cost of sales" to "Cost of services," causing a 53.8% reported increase in Cost of services[325][332] - Depreciation and amortization expense increased by 41.7% to $1.135 billion due to more 5G Network Deployment assets being placed in service[335] Item 7A. Quantitative and Qualitative Disclosures About Market Risk The company's market risk primarily stems from its investment portfolio and substantial fixed-rate debt, limiting immediate interest rate exposure but affecting future financing - As of December 31, 2024, the company had $476 million in unrestricted cash, cash equivalents, and current marketable investment securities, primarily invested for principal preservation[369] - Total debt outstanding was $21.779 billion with an estimated fair value of $20.222 billion, with the main interest rate risk relating to future financing activities due to its primarily fixed-rate nature[373] Item 9A. Controls and Procedures The company's disclosure controls and internal control over financial reporting were deemed effective as of December 31, 2024, with no material changes in the recent quarter - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of December 31, 2024[377] - Management concluded that the company's internal control over financial reporting was effective as of December 31, 2024, based on the COSO framework[381] PART III Item 14. Principal Accounting Fees and Services KPMG LLP served as the independent auditor for FY 2024, with total fees of $9.02 million for the EchoStar consolidated group, all pre-approved Fees Paid to KPMG LLP (in thousands) | Fee Type | 2024 | 2023 | | :--- | :--- | :--- | | Audit Fees | $7,756 | $9,725 | | Audit-Related Fees | $480 | $1,053 | | Tax Compliance Fees | $644 | $859 | | All Other Fees | $142 | $115 | | Total Fees | $9,022 | $11,751 | PART IV Item 15. Exhibits, Financial Statement Schedules This section lists the financial statements, schedules, and exhibits filed as part of the Form 10-K report, including the auditor's report and various agreements - The report includes the Report of KPMG LLP, Consolidated Balance Sheets, Statements of Operations, Statements of Changes in Stockholder's Equity, Statements of Cash Flows, and Notes to Consolidated Financial Statements[392] - No separate financial statement schedules are filed; all required information is included within the consolidated financial statements and notes[392] Financial Statements and Notes Note 1. Organization and Business Activities This note details DISH Network's Pay-TV and Wireless segments, highlighting the December 2023 merger with EchoStar, the terminated DIRECTV transaction, and significant 2024 asset transfers with EchoStar - On January 10, 2024, DISH transferred assets with a net carrying value of $12.003 billion, including various wireless spectrum licenses, to its parent EchoStar, accounted for as a dividend[441][443] - On March 12, 2024, DISH sold its 700 MHz spectrum to EchoStar for $1.037 billion, using the proceeds to pay off a maturing convertible note[445] - In May 2024, EchoStar transferred assets, including the EchoStar XXV satellite under construction, back to DISH, valued at its historical net carrying value of $141 million and recorded as a capital contribution[447] Note 9. Debt, Finance Lease and Other Obligations As of December 31, 2024, total obligations were $21.688 billion, with significant financing activities including new term loans, intercompany loans, and a $689 million gain on debt extinguishment from EchoStar Exchange Offers Debt Summary (as of Dec 31, 2024, in millions) | Debt Instrument | Issuer | Carrying Amount | | :--- | :--- | :--- | | 11 3/4% Senior Secured Notes due 2027 | DISH | $3,500 | | 5 1/4% Senior Secured Notes due 2026 | DDBS | $2,750 | | 5 3/4% Senior Secured Notes due 2028 | DDBS | $2,500 | | 7 3/4% Senior Notes due 2026 | DDBS | $2,000 | | Term Loan due 2029 | DBS SubscriberCo | $1,800 | | Other Notes & Leases | Various | $3,357 | | Intercompany Loans | Intercompany | $5,782 | | Total | | $21,688 | - In November 2024, the EchoStar Exchange Offers resulted in the extinguishment of $4.674 billion (carrying value) of DISH's convertible notes, recorded as a capital contribution from the parent, EchoStar, resulting in a non-cash gain on debt extinguishment of $689 million[600][601][603] - In September 2024, the company received $2.5 billion in New DISH DBS Financing, consisting of term loans and mandatorily redeemable preferred shares, secured by approximately three million DISH TV subscribers and related assets[605][606] - In November 2024, a subsidiary entered into an intercompany loan with EchoStar for up to $4.5 billion, of which $1.015 billion was outstanding at year-end, with interest paid in kind[649] Note 13. Commitments and Contingencies The company has $44.5 billion in future commitments, including debt and 5G network deployment, and faces contingent liabilities from the AWS-3 Auction and ongoing patent infringement lawsuits Future Contractual Obligations (as of Dec 31, 2024, in billions) | Obligation Type | Total | Due in 2025 | | :--- | :--- | :--- | | Long-term debt | $21.8 | $0.9 | | Interest on debt | $5.0 | $1.6 | | Other long-term obligations | $9.7 | $1.9 | | Operating lease obligations | $5.7 | $0.5 | | Purchase obligations | $2.2 | $2.2 | | Total | $44.5 | $7.2 | - The company certified to the FCC in January 2025 that it met its accelerated buildout and 80% nationwide coverage obligations due by December 31, 2024, extending final deployment deadlines to December 2026, with a potential further extension to June 2028[708] - The company faces a contingent liability for a potential "Re-Auction Payment" to the FCC for AWS-3 licenses that its affiliates Northstar and SNR returned, with the payment amount dependent on future re-auction results and potentially substantial[714][717] - Significant ongoing litigation includes a patent infringement case from ClearPlay regarding the AutoHop™ feature, where a $469 million jury verdict was vacated by the trial court but is now on appeal[731] Note 14. Segment Reporting The company reports on two segments, Pay-TV and Wireless, with Pay-TV generating $10.688 billion revenue and $2.648 billion operating income, and Wireless generating $3.606 billion revenue with a $2.828 billion operating loss in FY 2024 - The company realigned its segments, combining the former Retail Wireless and 5G Network Deployment segments into a single "Wireless" segment[803] Segment Performance Summary (FY 2024, in thousands) | Segment | Total Revenue | Operating Income (Loss) | OIBDA | | :--- | :--- | :--- | :--- | | Pay-TV | $10,688,204 | $2,648,134 | $2,985,465 | | Wireless | $3,606,177 | $(2,827,759) | $(1,692,886) | Disaggregated Revenue from External Customers (FY 2024, in thousands) | Category | Revenue | | :--- | :--- | | Pay-TV subscriber and related revenue | $10,613,653 | | Wireless services and related revenue | $3,156,760 | | Pay-TV equipment sales and other revenue | $74,551 | | Wireless equipment sales and other revenue | $449,417 | | Total (before eliminations) | $14,294,381 |