EchoStar Communications Corp. had another strong quarter in
terms of adding subscribers, but costs associated with obtaining those customers drove
down its cash-flow and earnings results.
EchoStar added 375,000 subscribers in the third quarter,
raising its customer count as of Sept. 30 to 3 million. Cash flow before marketing
expenses more than doubled to $153 million.
Total revenue at the direct-broadcast satellite company was
$427 million in the quarter, up from $235 million last year. Satellite-television revenue
for the quarter nearly doubled to $356.4 million from $179.5 million a year ago.
But adding those subscribers took its toll during the
quarter, with marketing expenses more than tripling to $200.6 million. As a result,
EchoStar reported earnings before interest, taxes, depreciation and amortization of
negative $47.4 million, compared with positive EBITDA of $8.5 million in 1998.
EchoStar said the additional marketing costs were a result
of the company providing equipment subsidies, which are fully expensed in the quarter when
a subscriber is acquired.
Strong subscriber growth also caused the company's net
losses to more than double during the quarter from $52 million, or 34 cents per share in
1998, to $124.4 million (55 cents). That missed analysts' estimates, which had pegged
EchoStar's loss at about 49 cents per share.
EchoStar's stock took a hit the day of the earnings
release, dropping $2.50 per share to $63.50.
Goldman, Sachs & Co. cable analyst Lou Kerner said
EchoStar's results were in line with his expectations, adding that subscriber growth
and churn rates are on track to meet the company's long-term goals.
"Clearly, this is a company that continues to hit on
all cylinders," Kerner said.
In the nine-month period, revenue rose to $1.1 billion from
$695.6 million in 1998. Revenue from satellite operations in the nine months was $923.3
million, compared with $459.5 million in the year-ago period.
Pre-marketing cash flow for the nine months was $390.6
million, up 85 percent, and net losses were $572.9 million, more than four times the
$147.6 million net loss last year. The EBITDA loss was $101.3 million, compared with an
EBITDA gain of $25.2 million in 1998.