DISH Network (DISH) - 2024 Q1 - Quarterly Report

PART I — FINANCIAL INFORMATION Disclosure Regarding Forward-Looking Statements The report contains forward-looking statements subject to significant risks, including integration with EchoStar, intense competition, network dependence, substantial debt, and capital needs, which could cause actual results to differ materially - The company warns that forward-looking statements are not guarantees of future performance and are subject to known and unknown risks[9] - Key risks include potential failure to realize expected synergies from the merger with EchoStar[10] - Intense competition from video, broadband, and wireless providers, changing consumer behavior, and dependence on T-Mobile and AT&T networks pose significant competitive and economic risks[11] - Substantial outstanding debt, the need for additional capital to fund obligations and investments, and control by a principal stockholder present acquisition and capital structure risks[15][18] - Dependence on third-party programming and vendors, limited satellite capacity, and vulnerability to cyber-attacks introduce operational and cybersecurity risks[13][14] Financial Statements DISH Network reported a Q1 2024 revenue of $3.64 billion, a net loss of $13.9 million, and a $8 billion asset decrease, with a 'going concern' warning due to insufficient cash for operations and a $1.983 billion debt maturity Condensed Consolidated Financial Statements The condensed consolidated financial statements reveal a significant decline, with total assets falling to $43.4 billion, liabilities rising to $41.9 billion, revenue decreasing 8% to $3.64 billion, and a swing from net income to a $10.2 million net loss Key Financial Data (Q1 2024 vs. Q1 2023) | Financial Metric | Q1 2024 (in thousands) | Q1 2023 (in thousands) | Change (%) | | :--- | :--- | :--- | :--- | | Total Revenue | $3,639,889 | $3,956,982 | -8.0% | | Operating Income | $25,979 | $323,423 | -92.0% | | Net Income (Loss) Attributable to DISH | $(13,879) | $222,705 | N/A | | Total Assets (as of period end) | $43,438,043 | $51,413,031 (as of 12/31/23) | -15.5% | | Total Liabilities (as of period end) | $41,869,667 | $34,182,475 (as of 12/31/23) | +22.5% | | Net Cash from Operating Activities | $360,686 | $737,374 | -51.1% | Notes to Condensed Consolidated Financial Statements The notes detail the December 2023 EchoStar merger, Q1 2024 asset transfers, a critical 'going concern' warning due to insufficient cash and a $1.983 billion debt maturity, and segment operations including Pay-TV, Retail Wireless, and 5G Network Deployment - On December 31, 2023, EchoStar completed its acquisition of DISH Network, making DISH a wholly-owned subsidiary[37] - In Q1 2024, DISH transferred significant assets, including various wireless spectrum licenses, to its parent company, EchoStar, resulting in a $12.003 billion reduction in assets, recorded as a dividend[33][35] - Going Concern Warning: The company states that substantial doubt exists about its ability to continue as a going concern, lacking necessary cash or projected future cash flows to fund Q4 2024 operations or the $1.983 billion debt maturing in November 2024[40][41] - The company operates three primary business segments: Pay-TV (DISH and SLING brands), Retail Wireless (Boost Mobile and Gen Mobile brands), and 5G Network Deployment[44] Subscriber Counts as of March 31, 2024 | Segment | Subscribers (in millions) | | :--- | :--- | | Pay-TV | 8.178 | | - DISH TV | 6.258 | | - SLING TV | 1.920 | | Retail Wireless | 7.297 | Management's Narrative Analysis of Results of Operations Management attributes the 8.0% consolidated revenue decline and 92.0% operating income drop to subscriber losses and increased 5G network deployment costs, reiterating the critical need for additional capital due to 'going concern' doubts Consolidated Financial Summary (Q1 2024 vs Q1 2023) | Metric | Q1 2024 (in millions) | Q1 2023 (in millions) | Change (%) | | :--- | :--- | :--- | :--- | | Total Revenue | $3,640 | $3,957 | -8.0% | | Operating Income | $26 | $323 | -92.0% | | Net Loss Attributable to DISH | $(14) | $223 (Income) | N/A | - The company does not currently have the necessary cash and/or projected cash flows to fund Q4 operations or the November 2024 debt maturity and is in active discussions with funding sources to raise additional capital[267] - The company achieved its 5G network commitment of covering 70% of the U.S. population with average download speeds of 35 Mbps in March 2024, now having 5G VoNR service reaching approximately 200 million Americans[265] Pay-TV Segment Analysis The Pay-TV segment's revenue declined 8.3% to $2.73 billion due to a shrinking subscriber base of 8.178 million, partially offset by a 4.5% ARPU increase to $107.38, with operating income remaining stable at $670 million amid intense competition Pay-TV Segment Performance (Q1 2024 vs Q1 2023) | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Revenue | $2.727 billion | $2.972 billion | | Operating Income | $670.2 million | $675.2 million | | Net Subscriber Losses | 348,000 | 552,000 | | Ending Subscribers | 8.178 million | 9.198 million | | Pay-TV ARPU | $107.38 | $102.71 | | DISH TV Churn Rate | 1.53% | 1.98% | | DISH TV SAC | $1,054 | $1,055 | - The decrease in net subscriber losses was primarily due to a lower DISH TV churn rate, positively impacted by an emphasis on acquiring and retaining higher quality subscribers[322][326] - Pay-TV ARPU increased by 4.5% primarily due to programming price increases for both DISH TV and SLING TV in late 2023 and higher ad sales revenue[330] Retail Wireless Segment Analysis The Retail Wireless segment's revenue declined 7.1% to $906 million, with operating loss widening to $74.4 million, and subscriber base ending at 7.297 million, while the impending end of the ACP poses a risk to approximately 600,000 subscribers Retail Wireless Segment Performance (Q1 2024 vs Q1 2023) | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Revenue | $905.9 million | $974.9 million | | Operating Loss | $(74.4) million | $(18.2) million | | Net Subscriber Losses | 81,000 | 81,000 | | Ending Subscribers | 7.297 million | 7.913 million | | Wireless ARPU | $36.69 | $36.43 | | Wireless Churn Rate | 3.05% | 4.24% | - The lower churn rate was positively impacted by an emphasis on acquiring higher-quality subscribers and was compared against a period in 2023 that was negatively impacted by a major customer system migration[354] - The Affordable Connectivity Program (ACP) was projected to end in April 2024, with DISH having approximately 600,000 ACP subscribers as of March 31, 2024, representing 8% of its total wireless base[345][346] 5G Network Deployment Segment Analysis The 5G Network Deployment segment generated minimal revenue of $29 million, with operating loss expanding significantly to $570 million due to increased network operating costs and depreciation as assets were placed into service 5G Network Deployment Segment Performance (Q1 2024 vs Q1 2023) | Metric | Q1 2024 (in millions) | Q1 2023 (in millions) | | :--- | :--- | :--- | | Revenue | $28.9 | $18.9 | | Operating Loss | $(570.0) | $(333.6) | | OIBDA | $(332.8) | $(236.0) | - The company achieved its June 2023 and March 2024 5G deployment commitments, including providing 5G broadband service to approximately 250 million Americans[363] - The increase in operating loss was primarily due to higher costs for communication towers, transport, and cloud services as the network became operational, and a significant increase in depreciation expense as assets were placed in service[368][370] Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of March 31, 2024, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the reporting period[383] - No changes in internal control over financial reporting occurred during the quarter that materially affected, or are reasonably likely to materially affect, these controls[384] PART II — OTHER INFORMATION Legal Proceedings The company is involved in numerous legal proceedings, including patent infringement, data breach and securities fraud class actions, and a new lawsuit alleging breach of debt indentures due to 2024 asset transfers - The company is involved in a number of legal proceedings, details of which are provided in Note 9 of the financial statements[386] - A new lawsuit was filed on April 26, 2024, by U.S. Bank Trust Company, alleging that intracompany asset transfers in January 2024 breached indentures for certain DISH DBS Corporation notes and constituted fraudulent transfers[204] - The company is defending against a securities fraud class action alleging concealment of problems related to the 5G network buildout[168] - Multiple patent infringement lawsuits are ongoing, including cases brought by ClearPlay, Digital Broadcasting Solutions, Entropic Communications, and TQ Delta, concerning features like AutoHop and various network technologies[147][155][158][191] Risk Factors This section refers to the detailed discussion of risk factors presented in the company's Annual Report on Form 10-K for the year ended December 31, 2023 - The report directs readers to the Risk Factors section of the company's most recent Annual Report on Form 10-K for a detailed discussion of risks[387] Exhibits This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications required by Sarbanes-Oxley Act Sections 302 and 906, and iXBRL formatted financial statements - The exhibits filed with this report include certifications from the Chief Executive Officer and Chief Financial Officer as required by Sections 302 and 906 of the Sarbanes-Oxley Act[390]