DISH Network Corporation (NASDAQ:DISH) Q3 2023 Earnings Call Transcript

DISH Network Corporation (NASDAQ:DISH) Q3 2023 Earnings Call Transcript November 6, 2023

Operator: Good day and welcome to The DISH Network Corporation Q3 2023 Earnings Conference Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Tim Messner, EVP and General Counsel. Please go ahead, sir.

Tim Messner: Thanks, Sofia. Good morning, everyone. Thanks for joining us. We’re joined on the call today by Charlie Ergen, our Chairman; John Swieringa, our President of Technology and COO, Paul Orban, our CFO; Tom Cullen EVP of Corporate Development, Mike Kelly, EVP and Group President of Retail Wireless; and Gary Schanman, Group President of Video Services Before we start, I need to remind you of our Safe Harbors. During this call, we may make forward-looking statements which are subject to risks, uncertainties and other factors that could cause our actual results to differ materially from historical results or from our forecasts, we assume no responsibility for updating forward-looking statements. For more information on factors that may affect future results, please refer to our SEC filings. We don’t have any prepared remarks this morning. So with that, we’ll open it up to questions starting with the analyst community. Thank you.

Operator: [Operator Instructions] Our first analyst question comes from Walter Piecyk with LightShed. Please go ahead. Walter, your line is open. Please go ahead. Walter, if you could please check your mute button. We’re not getting a response from your line. I am not hearing a response. We will move to our next question. And our next question comes from Michael Rollins with Citi. Please go ahead.

Michael Rollins: I was curious, if you could talk more about the retail results for wireless in the quarter. And can you frame what’s happening on the subscriber side? What’s happening in terms of the EBITDA burn, and then break out the Boost Infinite component of those results. Thanks.

Mike Kelly: Good morning. This is Mike Kelly. On the Boost wireless side, I would say this is my first full quarter on the job. There’s a lot of discipline that we brought back into the sales channel over the quarter, which resulted in less net ads than we expected. We put discipline back into the sales process that I felt was necessary. We focused on putting devices in the hands of our customers that will load on the 5G network going forward. We realigned our dealer compensation for the period with a goal of acquiring profitable customers going forward. And we put back in control that we felt was necessary for profitable customers going forward. Paul, if you want to talk a little bit about the EBITDA?

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Q&A Session

Paul Orban: Yes. So marketing was a higher for the quarter, as Mike alluded to, with the change in the commission structure, it was elevated in Q3. You’ll see that abate in Q4, as we get fully under the new commission structure. And also as Mike alluded to, as it relates to equipment COGS, that was high for the quarter, because we had a higher percent of handsets that had our 5G or that are capable to work on our 5G network deployed. That’ll help us in future quarters, as we’ll get owner economics on those phones.

Michael Rollins: And just one follow-up. If you look at the current base of Boost sub 7.5 million, and the revenue that they’re generating, is there a path just for that portion of the business to get that to be significantly profitable again, and that can fund the subscriber acquisition for new Boost Infinite opportunities? Or is it that the current business is dealing with just a higher recurring costs than maybe we’ve seen over the last couple of years?

Charles Ergen: Yes. This is Charlie. I mean, I may be turned over to Mike that I’d say a couple things. One is that when the CDMA shut off that happened, that was kind of devastating for what we expected, because we had to replace all those customers with new phones. So we missed the cycle had that been happening today, we could put them on phones that were compatible with our network. But obviously, when that was done, well, over a year ago, there were no phones that were compatible with our network. So for the most part, those 7.5 million customers, the vast majority of them do not have phones compatible with our network. So that’s an upgrade cycle and that set of economics that we’ll be able to do a portion of those but not the vast majority that would be my guess that because we missed that cycle.

So that’s why we fought so hard to hold T-Mobile to what they said under penalty of perjury to the California regulators. When Mike came in, he didn’t — I will give him a little bit more credit than maybe the Street’s giving him right now. But the customers that we have, we were getting customers, we just weren’t sure which ones were the good — some customers we made money on and some we didn’t. And so I think now everybody we’re putting on now, for the most part, we have high expectation that we’ll make money either because we’re on our network, or because they’re on the MVNO, but they’re just a different class of customer. And so some of that discipline and how you do it, some of the commission structure that he had alluded to, for retailers, they were incentivized to get a customer but they weren’t necessarily incentivized to keep the customer that’s changed.

They’re incentivized to keep the customer today. So they have a lot of control over what customers they put on. So those are things that certainly my fault for not being more on top of that in the early years. But Mike is coming in and made, those changes. And so that’s going to — we’ll have better performance as a result of that on both prepaid and postpaid.

Operator: Our next question comes from Walter Piecyk with LightShed. Please go ahead.

Walter Piecyk: Just a question, I guess, in general about the postpaid business. I mean, the value proposition is obviously very compelling, but it just feels like no one really knows about it. It’s on the Amazon homepage. It’s not really there. Just curious, is there a plan for the ad spend to increase? And if so, how much flexibility do you have in terms of that spend? And then I guess, related, CapEx wise, how much can you cut? I mean, obviously, the CapEx is already starting to come down. But when we head into 2024, how many of the available dollars that you have, you can cut out of CapEx, you can actually use it to tell people about the $25 a month service?

Mike Kelly: Well, I would say first on the Amazon relationship, I would say, we do have flexibility in terms of how we continue to evolve and build out the storefront. A lot of things came together on a very short period of time, towards the end of the quarter. We continue to work with Amazon to improve the overall storefront presentation. So you’ll continue to see that evolve this quarter. And with respect to advertising, we do have a relationship with Amazon to focus on acquiring customers through that channel. So we will be working with their advertising sales team as well.

Paul Orban: Excuse me, and this is Paul. I will take the CapEx question. CapEx, we do expect it to a decrease in Q4 and then going into 2024 decrease also, what you’re seeing is, its cash CapEx. So you had a timing issue. So most of what was paid in Q3, really related to Q2 deployments.

Walter Piecyk: Is more of a 10,000 foot question. I think, guy I’m sorry to interrupt. It’s more of a 10,000 foot question. Not like timing of this quarter versus next. But like if you were spending, whatever it is to seven to five, like, can you take that down to a billion for next year, 500 million? Like how low can you go so you have those dollars to kind of use to tell people about the service because it seems like the service, again, offering is compelling. It’s just like, how do people find out about it?

Charles Ergen: Yes. Like, constructive criticism, are we doing a great job of marketing? The answer is no. Okay, can we do, the messaging probably wasn’t — didn’t have quite the desired effect, as you say, because people don’t know about it. And let me give you examples. If you walk into an Apple Store today, you can’t buy Boost, right, you buy our competitors, we can’t. And when you go to their homepage, digitally, you can’t buy Boost today, we’re not even integrated into their systems that takes time takes an investment on their part. So we’re hopeful that, obviously, their support is there. So we’re not hitting on all cylinders, there. That’s kind of the bad news. The good news is we’ve made that — we make, we do it right online, we make that a better experience and go into a store.