UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
(Mark One)
FOR THE QUARTERLY PERIOD ENDED
OR
FOR THE TRANSITION PERIOD FROM TO .
Commission File Number:
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
(Address of principal executive offices) | (Zip code) |
(
(Registrant’s telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
The |
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Accelerated filer ☐ | ||
Non-accelerated filer ☐ | Smaller reporting company Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ◻
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
As of October 25, 2023, the registrant’s outstanding common stock consisted of
TABLE OF CONTENTS
i | ||
1 | ||
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) | 2 | |
Condensed Consolidated Statements of Changes in Stockholders’ Equity (Deficit) | 3 | |
5 | ||
6 | ||
Management’s Discussion and Analysis of Financial Condition and Results of Operations | 68 | |
106 | ||
106 | ||
106 | ||
106 | ||
115 | ||
Item 3. | Defaults Upon Senior Securities | None |
Item 4. | Mine Safety Disclosures | None |
116 | ||
116 | ||
117 | ||
PART I — FINANCIAL INFORMATION
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
Unless otherwise required by the context, in this report, the words “DISH Network,” the “Company,” “we,” “our” and “us” refer to DISH Network Corporation and its subsidiaries, “EchoStar” refers to EchoStar Corporation and its subsidiaries, and “DISH DBS” refers to DISH DBS Corporation, a wholly-owned, indirect subsidiary of DISH Network, and its subsidiaries.
This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, including, in particular, statements about our plans, objectives and strategies, growth opportunities in our industries and businesses, our expectations regarding future results, financial condition, liquidity and capital requirements, our estimates regarding the impact of regulatory developments and legal proceedings, and other trends and projections. Forward-looking statements are not historical facts and may be identified by words such as “future,” “anticipate,” “intend,” “plan,” “goal,” “seek,” “believe,” “estimate,” “expect,” “predict,” “will,” “would,” “could,” “can,” “may,” and similar terms. These forward-looking statements are based on information available to us as of the date of this Quarterly Report on Form 10-Q and represent management’s current views and assumptions. Forward-looking statements are not guarantees of future performance, events or results and involve known and unknown risks, uncertainties and other factors, which may be beyond our control. Accordingly, actual performance, events or results could differ materially from those expressed or implied in the forward-looking statements due to a number of factors, including, but not limited to, those summarized below:
SUMMARY OF RISK FACTORS
Competition and Economic Risks
| ● | We face intense and increasing competition from providers of video, broadband and/or wireless services, which may require us to further increase subscriber acquisition and retention spending or accept lower subscriber activations and higher subscriber churn. |
| ● | Changing consumer behavior and new technologies in our Pay-TV business may reduce our subscriber activations and may cause our subscribers to purchase fewer services from us or to cancel our services altogether, resulting in less revenue to us. |
| ● | We face certain risks competing in the wireless services industry and operating a facilities-based wireless services business. |
| ● | Our pay-TV competitors may be able to leverage their relationships with programmers to reduce their programming costs and/or offer exclusive content that will place them at a competitive advantage to us. |
| ● | Through the MNSA and the NSA, we depend on T-Mobile and AT&T in providing network services to our Wireless subscribers. Our failure to effectively manage these relationships, including without limitation, our minimum commitments, any system failure in their wireless networks, interruption in the services provided to us, and/or the termination of the MNSA or the NSA could have a material adverse effect on our business, financial condition and results of operations. |
| ● | Changes in how network operators handle and charge for access to data that travels across their networks could adversely impact our Pay-TV business. |
| ● | Economic weakness and uncertainty may adversely affect our ability to grow or maintain our business. |
COVID-19 Pandemic
| ● | The COVID-19 pandemic and its impact on the economic environment generally, and on us specifically, have adversely impacted our business. Furthermore, any continuation or worsening of the pandemic and the economic environment could have a material adverse effect on our business, financial condition and results of operations. |
i
Operational and Service Delivery Risks
| ● | Any deterioration in our operational performance and subscriber satisfaction could adversely affect our business, financial condition and results of operations. |
| ● | If our subscriber activations decrease, or if our subscriber churn rate, subscriber acquisition costs or retention costs increase, our financial performance will be adversely affected. |
| ● | With respect to our Pay-TV business, programming expenses are increasing, which may adversely affect our future financial condition and results of operations. |
| ● | We depend on others to provide the programming that we offer to our Pay-TV subscribers and, if we fail to obtain or lose access to certain programming, our Pay-TV subscriber activations and our subscriber churn rate may be negatively impacted. |
| ● | We may not be able to obtain necessary retransmission consent agreements at acceptable rates, or at all, from local network stations. |
| ● | We have experienced and may continue to experience cyber-attacks or other malicious activities that disrupted or may continue to disrupt our business and any future failure or disruption of our information technology infrastructure and communications systems or those of third parties that we use in our operations, could harm our business. |
| ● | Extreme weather may result in risk of damage to our infrastructure and therefore our ability to provide services, and may lead to changes in federal, state and foreign government regulation, all of which could materially and adversely affect our business, results of operations and financial condition. |
| ● | Our failure to effectively invest in, introduce, and implement new competitive products and services could cause our products and services to become obsolete and could negatively impact our business. |
| ● | We rely on a single vendor or a limited number of vendors to provide certain key products or services to us, and the inability of these key vendors to meet our needs could have a material adverse effect on our business. |
| ● | We depend on independent third parties to solicit orders for our services that represent a meaningful percentage of our total gross new subscriber activations. |
| ● | We have limited satellite capacity and failures or reduced capacity could adversely affect our business, financial condition and results of operations. |
| ● | We may have potential conflicts of interest with EchoStar due to our common ownership and management. |
| ● | We rely on highly skilled personnel for our business, and any inability to hire and retain key personnel or hire qualified personnel may negatively affect our business, financial condition and results of operations. |
| ● | Changes in levels of U.S. government spending or overall spending priorities could impact, among other things, our business, financial condition and results of operations. |
Acquisition and Capital Structure Risks
| ● | We have made substantial investments to acquire certain wireless spectrum licenses and other related assets, and we may be unable to realize a return on these assets. |
| ● | We have made substantial noncontrolling investments in the Northstar Entities and the SNR Entities related to AWS-3 wireless spectrum licenses, and we may be unable to obtain a profitable return on these investments. |
| ● | We may pursue acquisitions and other strategic transactions to complement or expand our business that may not be successful, and we may lose up to the entire value of our investment in these acquisitions and transactions. |
| ● | We have substantial debt outstanding and may incur additional debt. |
| ● | We will need additional capital, which may not be available on favorable terms, to continue investing in our business and to finance acquisitions and other strategic transactions. |
ii
| ● | The conditional conversion features of our 3 3/8% Convertible Notes due 2026 (the “Convertible Notes due 2026”), our 2 3/8% Convertible Notes due 2024 (the “Convertible Notes due 2024”) and 0% Convertible Notes due 2025 (the “Convertible Notes due 2025,” and collectively with the Convertible Notes due 2026 and the Convertible Notes due 2024, the “Convertible Notes”), if triggered, may adversely affect our financial condition. |
| ● | The convertible note hedge and warrant transactions that we entered into in connection with the offering of the Convertible Notes due 2026 may affect the value of the Convertible Notes due 2026 and our Class A common stock. |
| ● | We are subject to counterparty risk with respect to the convertible note hedge transactions. |
| ● | From time to time, a portion of our investment portfolio may be invested in securities that have limited liquidity and may not be immediately accessible to support our financing needs. |
| ● | We are controlled by one principal stockholder who is also our Chairman. |
Legal and Regulatory Risks
| ● | Our business depends on certain intellectual property rights and on not infringing the intellectual property rights of others. |
| ● | We are, and may become, party to various lawsuits which, if adversely decided, could have a significant adverse impact on our business, particularly lawsuits regarding intellectual property. |
| ● | Our services depend on Federal Communications Commission (“FCC”) licenses that can expire or be revoked or modified and applications for FCC licenses that may not be granted. |
| ● | If our internal controls are not effective, our business, our stock price and our investor confidence in our financial results may be adversely affected. |
| ● | We may face other risks described from time to time in periodic and current reports we file with the Securities and Exchange Commission (“SEC”). |
Risks Related to the Merger with EchoStar
| ● | We and EchoStar will be subject to a number of risks while the Merger remains pending, which may have an adverse effect on our respective businesses, and we and EchoStar may not realize the anticipated benefits of the Merger within expected timeframes or at all. |
Other factors that could cause or contribute to such differences include, but are not limited to, those discussed under the caption “Risk Factors” in Part II, Item 1A of this Quarterly Report on Form 10-Q and in Part I, Item 1A of our most recent Annual Report on Form 10-K (the “10-K”) filed with the SEC, those discussed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” herein and in the 10-K and those discussed in other documents we file with the SEC. All cautionary statements made or referred to herein should be read as being applicable to all forward-looking statements wherever they appear. Investors should consider the risks and uncertainties described or referred to herein and should not place undue reliance on any forward-looking statements. The forward-looking statements speak only as of the date made, and we expressly disclaim any obligation to update these forward-looking statements.
iii
Item 1. FINANCIAL STATEMENTS
DISH NETWORK CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share amounts)
(Unaudited)
As of | |||||||
September 30, | December 31, | ||||||
2023 |
| 2022 |
| ||||
Assets | |||||||
Current Assets: | |||||||
Cash and cash equivalents | $ | | $ | | |||
Marketable investment securities | | | |||||
Trade accounts receivable, net of allowance for credit losses of $ | | | |||||
Inventory | | | |||||
Other current assets | | | |||||
Total current assets | | | |||||
Noncurrent Assets: | |||||||
Restricted cash, cash equivalents and marketable investment securities | | | |||||
Property and equipment, net | | | |||||
FCC authorizations | | | |||||
Other investment securities | | | |||||
Operating lease assets | | | |||||
Other noncurrent assets, net | | | |||||
Intangible assets, net | | | |||||
Total noncurrent assets | | | |||||
Total assets | $ | | $ | | |||
Liabilities and Stockholders’ Equity (Deficit) | |||||||
Current Liabilities: | |||||||
Trade accounts payable | $ | | $ | | |||
Deferred revenue and other | | | |||||
Accrued programming | | | |||||
Accrued interest | | | |||||
Other accrued expenses | | | |||||
Current portion of long-term debt and finance lease obligations (Note 9) | | | |||||
Total current liabilities | | | |||||
Long-Term Obligations, Net of Current Portion: | |||||||
Long-term debt and finance lease obligations, net of current portion (Note 9) | | | |||||
Deferred tax liabilities | | | |||||
Operating lease liabilities | | | |||||
Long-term deferred revenue and other long-term liabilities | | | |||||
Total long-term obligations, net of current portion | | | |||||
Total liabilities | | | |||||
Commitments and Contingencies (Note 10) | |||||||
Redeemable noncontrolling interests (Note 2) | | | |||||
Stockholders’ Equity (Deficit): | |||||||
Class A common stock, $ | | | |||||
Class B common stock, $ | | | |||||
Additional paid-in capital | | | |||||
Accumulated other comprehensive income (loss) | ( | ( | |||||
Accumulated earnings (deficit) | | | |||||
Total DISH Network stockholders’ equity (deficit) | | | |||||
Noncontrolling interests | | | |||||
Total stockholders’ equity (deficit) | | | |||||
Total liabilities and stockholders’ equity (deficit) | $ | | $ | | |||
The accompanying notes are an integral part of these condensed consolidated financial statements.
1
DISH NETWORK CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME (LOSS)
(Dollars in thousands, except per share amounts)
(Unaudited)
For the Three Months Ended | For the Nine Months Ended | |||||||||||
September 30, | September 30, | |||||||||||
2023 |
| 2022 |
| 2023 |
| 2022 |
| |||||
Revenue: | ||||||||||||
Service revenue | $ | | $ | | $ | | $ | | ||||
Equipment sales and other revenue | | | | | ||||||||
Total revenue | | | | | ||||||||
Costs and Expenses (exclusive of depreciation): | ||||||||||||
Cost of services | | | | | ||||||||
Cost of sales - equipment and other | | | | | ||||||||
Selling, general and administrative expenses | | | | | ||||||||
Depreciation and amortization | | | | | ||||||||
Total costs and expenses | | | | | ||||||||
Operating income (loss) | ( | | | | ||||||||
Other Income (Expense): | ||||||||||||
Interest income | | | | | ||||||||
Interest expense, net of amounts capitalized | ( | ( | ( | ( | ||||||||
Other, net | ( | | ( | | ||||||||
Total other income (expense) | ( | | ( | | ||||||||
Income (loss) before income taxes | ( | | | | ||||||||
Income tax (provision) benefit, net | | ( | ( | ( | ||||||||
Net income (loss) | ( | | | | ||||||||
Less: Net income (loss) attributable to noncontrolling interests, net of tax | | | | | ||||||||
Net income (loss) attributable to DISH Network | $ | ( | $ | | $ | | $ | | ||||
Weighted-average common shares outstanding - Class A and B common stock: | ||||||||||||
Basic | | | | | ||||||||
Diluted | | | | | ||||||||
Earnings per share - Class A and B common stock: | ||||||||||||
Basic net income (loss) per share attributable to DISH Network | $ | ( | $ | | $ | | $ | | ||||
Diluted net income (loss) per share attributable to DISH Network | $ | ( | $ | | $ | | $ | | ||||
Comprehensive Income (Loss): | ||||||||||||
Net income (loss) | $ | ( | $ | | $ | | $ | | ||||
Other comprehensive income (loss): | ||||||||||||
Foreign currency translation adjustments | | ( | | ( | ||||||||
Unrealized holding gains (losses) on available-for-sale debt securities | ( | | ( | | ||||||||
Recognition of previously unrealized (gains) losses on available-for-sale securities included in net income (loss) | | — | | | ||||||||
Deferred income tax (expense) benefit, net | ( | | ( | | ||||||||
Total other comprehensive income (loss), net of tax | | ( | | ( | ||||||||
Comprehensive income (loss) | ( | | | | ||||||||
Less: Comprehensive income (loss) attributable to noncontrolling interests, net of tax | | | | | ||||||||
Comprehensive income (loss) attributable to DISH Network | $ | ( | $ | | $ | | $ | | ||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
2
DISH NETWORK CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)
(In thousands)
(Unaudited)
| Accumulated | |||||||||||||||||||||
Class A and B | Additional | Other | Accumulated |
| Redeemable | |||||||||||||||||
Common | Paid-In | Comprehensive | Earnings | Noncontrolling | Noncontrolling | |||||||||||||||||
| Stock |
| Capital |
| Income (Loss) |
| (Deficit) |
| Interests |
| Total |
| Interests |
| ||||||||
Balance, December 31, 2021 | $ | | $ | | $ | | $ | | $ | | $ | | $ | | ||||||||
Issuance of Class A common stock: | ||||||||||||||||||||||
Exercise of stock awards | | | — | — | — | | — | |||||||||||||||
Employee Stock Purchase Plan | | | — | — | — | | — | |||||||||||||||
Non-cash, stock-based compensation | — | | — | — | — | | — | |||||||||||||||
Change in unrealized holding gains (losses) on available-for-sale debt securities, net | — | — | ( | — | — | ( | — | |||||||||||||||
Deferred income tax (expense) benefit attributable to other comprehensive income (loss) | — | — | | — | — | | — | |||||||||||||||
Foreign currency translation | — | — | ( | — | — | ( | — | |||||||||||||||
Net income (loss) attributable to noncontrolling interests | — | — | — | — | | | | |||||||||||||||
Net income (loss) attributable to DISH Network | — | — | — | | — | | — | |||||||||||||||
Balance, March 31, 2022 | $ | | $ | | $ | | $ | | $ | | $ | | $ | | ||||||||
Issuance of Class A common stock: | ||||||||||||||||||||||
Exercise of stock awards | — | | — | — | — | | — | |||||||||||||||
Employee benefits | | | — | — | — | | — | |||||||||||||||
Employee Stock Purchase Plan | | | — | — | — | | — | |||||||||||||||
Non-cash, stock-based compensation | — | | — | — | — | | — | |||||||||||||||
Change in unrealized holding gains (losses) on available-for-sale debt securities, net | — | — | | — | — | | — | |||||||||||||||
Deferred income tax (expense) benefit attributable to other comprehensive income (loss) | — | — | ( | — | — | ( | — | |||||||||||||||
Foreign currency translation | — | — | | — | — | | — | |||||||||||||||
Net income (loss) attributable to noncontrolling interests | — | — | — | — | | | | |||||||||||||||
Net income (loss) attributable to DISH Network | — | — | — | | — | | — | |||||||||||||||
Balance, June 30, 2022 | $ | | $ | | $ | | $ | | $ | | $ | | $ | | ||||||||
Issuance of Class A common stock: | ||||||||||||||||||||||
Exercise of stock awards | | — | — | — | — | | — | |||||||||||||||
Employee benefits | — | | — | — | — | | — | |||||||||||||||
Employee Stock Purchase Plan | | | — | — | — | | — | |||||||||||||||
Non-cash, stock-based compensation | — | | — | — | — | | — | |||||||||||||||
Change in unrealized holding gains (losses) on available-for-sale debt securities, net | — | — | | — | — | | — | |||||||||||||||
Deferred income tax (expense) benefit attributable to other comprehensive income (loss) | — | — | | — | — | | — | |||||||||||||||
Foreign currency translation | — | — | ( | — | — | ( | — | |||||||||||||||
Net income (loss) attributable to noncontrolling interests | — | — | — | — | | | | |||||||||||||||
Net income (loss) attributable to DISH Network | — | — | — | | — | | — | |||||||||||||||
Balance, September 30, 2022 | $ | | $ | | ||||||||||||||||||