DISH Network Inc. (DISH) declared better-than-expected second quarter 2010 financial results. Second quarter earnings of $257 million or 57 cents per share were higher than $63 million, or 14 cents reported in the year-ago quarter. Quarterly earnings also came in well ahead of the Zacks Consensus Estimate of 53 cents.
Total revenue increased 9.1% to $3.17 billion compared with $2.90 billion in the year-ago quarter. This was mainly attributable to a huge increase in subscriber related revenues. Total revenue was also above the Zacks Consensus Estimate of $3.12 billion.
In the reported quarter, DISH Network lost approximately 19,000 net subscribers, ending the quarter with approximately 14.32 million subscribers. This was primary due to an increased competitive pressure, which negatively impacted both gross activations and churn in the quarter.
During the quarter, Average monthly subscriber churn rate was 1.78%, compared with 1.73% in the year-ago quarter. Average monthly revenue per subscriber (ARPU) was $73.05, compared with $70.73 in the second quarter 2009.
In the second quarter 2010, segment wise, Subscriber related revenues were $3.14 billion, up 9.1% year over year. Equipment sales & other revenues were $16.51 million, down 13.7% year over year. Equipment sales (EchoStar) revenues declined 49.3% to $1.28 million, Transitional services and other (EchoStar) revenues totaled $9.93 million, up 153.1% year over year.
Subscriber-related expenses were up 7.6% year-over-year to $1.65 billion, attributable to higher programming costs. Subscriber acquisition costs rose 4.4% year-over-year to $405.4 million. Litigation expenses related to TiVO (TIVO) were $30.71 million. General and administrative expenses fell 0.58% to $155.0 million. Operating income surged to $525.8 million in the quarter compared with 262.8 million in the prior-year quarter.
During the first half 2010, DISH Network generated $1.12 billion of cash from operations compared with $1.23 billion in the prior-year period. Free cash flow (cash flow from operations less capital expenditures) in the same period was $578.6 million compared with $779.1 million in the prior-year period.
At quarter-end, DISH Network had $2.77 billion of cash and marketable securities and $6.21 billion of outstanding debt on its balance sheet compared with $2.31 billion of cash and marketable securities and $6.19 billion of outstanding debt on its balance sheet at the end of fiscal 2009.
During the first half 2010, DISH Network repurchased 0.8 million shares of its common stock for $14 million.
We maintain our Neutral recommendation on DISH Network. Currently, it is a Zacks #3 Rank (Hold) stock.