EchoStar(SATS) - 2024 Q2 - Earnings Call Transcript

Financial Data and Key Metrics - Revenue for Q2 2024 was $3.95 billion, down 9% year-over-year, primarily due to subscriber declines across all lines of business [10] - OIBDA was$ 442 million, down $181 million year-over-year, driven by increased operating costs and decreased margins from fewer subscribers [10] - Free cash flow was negative$ 191 million, primarily due to $450 million in cash interest payments, but improved by$ 360 million year-over-year due to decreased capital spending [10] - Cash and cash equivalents plus marketable securities totaled $521 million at the end of Q2 2024 [9] Business Line Performance Pay-TV - Ended Q2 with approximately 8.1 million customers, with improved churn rates and ARPU growth of over 4% [12] - DISH TV SAC (Subscriber Acquisition Cost) was significantly lower compared to Q2 2023, driven by increased marketing efficiency [12] - DISH Connected product rollout continued, contributing to ARPU gains [13] - Hospitality and senior living segments saw growth, with 1.35 million hotel rooms and over 300,000 active units in nursing care and assisted living facilities [13] - Sling TV added 78,000 subscribers, reaching approximately 2 million, with improved customer experience and product performance [15] Broadband and Satellite Services - HughesNet consumer business expanded subscriber acquisition by 14% year-over-year, supported by the Jupiter 3 satellite [16] - HughesNet Enterprise business is growing, with expectations to surpass consumer revenues this year [17] - Hughes Managed LEO business shipped over 5,000 user terminals, with positive feedback and increased demand [17] - Significant orders were received in the enterprise business, including partnerships with TCI, Türksat, Delta Airlines, and Gogo Business Aviation [18] Wireless - Boost Mobile rebranding efforts led to a unified prepaid and postpaid experience, with a 30-day money-back guarantee [19] - Ended Q2 with approximately 7.3 million subscribers, adding 32,000 net retail wireless subscribers excluding ACP losses [21] - Churn rate improved to 2.93%, down 35.5% year-over-year, with ARPU increasing due to higher-quality subscribers [22] - Boost Mobile's 5G network now reaches over 200 million Americans for voice and 250 million for mobile broadband [24] - On-net traffic is accelerating, with third-party benchmarking showing competitive network performance in key markets [25] Market Performance - The company is focused on integrating operations and driving synergies across Pay-TV, wireless, and broadband segments [6] - The Liberty Puerto Rico transaction received approval and is expected to close within 30 days [8] - The company is working to refinance$ 2 billion of debt maturing in November 2024, with constructive discussions ongoing [9] Strategic Direction and Industry Competition - The company is focused on operational efficiency, cost management, and innovation, particularly in its Open RAN wireless network [6] - Boost Mobile's pivot to a unified digital experience and new marketing campaigns aim to increase market share in the wireless sector [19] - The company is transitioning to owner's economics in the wireless business, with a focus on profitable growth and operational efficiencies [20] - The network deployment is progressing, with significant milestones met and plans to meet future FCC requirements [27] Management Commentary on Operating Environment and Future Outlook - Management is optimistic about the progress made in the first half of 2024, particularly in Pay-TV and wireless, with improved ARPU and reduced churn [29] - The company is focused on maintaining liquidity and addressing the $2 billion debt maturity in November 2024 [9] - Management expects to achieve positive net adds in retail wireless for the full year, excluding ACP losses [46] - The company is confident in its ability to meet FCC build-out requirements for 2025, with 90% of the carrying value of spectrum licenses already covered [27] Other Important Information - The company is not considering selling its spectrum assets and is focused on using them as collateral for refinancing [62] - The company is working to improve device compatibility for its 5G network, with most new Android devices and iPhone 15 and newer models being compatible [50] - CapEx for 2024 is expected to be roughly half of 2023 levels, with increased spending anticipated in 2025 to meet FCC requirements [52] Q&A Session Summary Ric Prentiss (Raymond James) - Asked about the timeline for refinancing and the availability of unencumbered spectrum [31] - Management confirmed that the company has sufficient cash to meet obligations until the debt maturity and is working on refinancing options [32] - The company has significant unencumbered spectrum that can be used as collateral [34] - Management did not provide specific guidance on when the wireless business will achieve positive EBITDA but expressed optimism about the progress made [35] - No immediate updates on 5G private networks, but the company is participating in early deployments and sees potential in the market [37][38] Shipra Pandey (Bank of America) - Asked about the company's remaining collateral and the impact of legal liabilities on refinancing discussions [41] - Management emphasized that the spectrum assets are unencumbered and can be used as collateral, with constructive discussions ongoing [42] - The company is focused on maximizing value and addressing liquidity issues without damaging the business [43] Sebastiano Petti (JPMorgan) - Asked about the path to positive net adds in retail wireless and the impact of device compatibility on network traffic [45] - Management confirmed expectations for positive net adds in retail wireless for the full year, excluding ACP losses [46] - Device compatibility is improving, with most new Android devices and iPhone 15 and newer models being compatible with the 5G network [50] - CapEx is expected to increase in 2025 to meet FCC build-out requirements [52] Walter Piecyk (LightShed) - Asked about the company's spectrum coverage and the potential for selling spectrum [55] - Management clarified that 90% of the carrying value of spectrum licenses is covered, with the remaining 10% requiring additional financing [57] - The company is not considering selling spectrum and is focused on using it as collateral for refinancing [61] - Management also discussed friction points in wireless gross adds, including distribution and device unlocking issues [68][70] Jonathan Chaplin (New Street) - Asked about the impact of the lawsuit on refinancing discussions and the potential for disruptive pricing in the wireless market [72] - Management stated that the lawsuit is not hindering refinancing discussions and that the company is focused on fair competition in the wireless market [73][75] - The company is not planning to disrupt the market with aggressive pricing but is focused on providing value to customers [74] Marilyn Pereira (Bank of America) - Asked about working capital trends and seasonality [79] - Management explained that working capital is influenced by seasonality and timing of payments, with expectations for slight improvements by year-end [80][81]