Dish Network Says Press “Exaggerated” Severity Of February Cyberattack; Shares Climb Despite Q1 Earnings Miss As Company Notes Plan To Explore Strategic Options

Dish Network execs said the company has fully overcome last February’s cyberattack, describing press reports about the severity of the episode as “exaggerated.”

Addressing Wall Street analysts on the company’s first-quarter earnings call, CEO Erik Carlson said customer databases were not breached in the hack, which largely hit the company’s legacy satellite TV operation. Still, he noted, “certain employee-related records and a limited number of other records with personal information” were obtained by hackers. By the time the quarter concluded on March 31, though, the financial impact had largely been minimized, the company maintains.

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After CFO Paul Orban called the hack’s impact on revenue “immaterial,” analyst Walt Piecyk of Lightshed Partners pressed for details. He asked “how that could be” given press reports that customers who had been unable to get help by phone or online after days of outreach had to bring cash to Dish retail stores in order to settle their TV bills. Chairman Charlie Ergen replied, “A lot of the press stuff is exaggerated. It’s really hard to comment on every exaggeration that’s out there.”

Orbon said accounts receivable (the amount owed to the company by customers and vendors) had declined by the end of the January-to-March quarter compared with the end of 2022.

Dish shares, which plunged to a 14-year low after the cyberattack, have continued to drift downward in subsequent weeks. But they rallied 2% Monday after the company’s quarterly report, despite the fact that it undershot analysts’ consensus expectations. Revenue slipped to $3.96 billion from $4.33 billion in the same quarter a year ago, about $100 million shy of Wall Street targets. Earning per share of 35 cents also fell short of the mark, tumbling to nearly half their year-ago level of 68 cents.

Pay-TV losses of 552,000 customers represented a sizable uptick from the 462,000 shed a year ago, with the company conceding that the hack and resulting customer service snarls could have prompted some customers to bail. The company ended the quarter with 9.2 million pay-TV subscribers, 7.1 million on Dish satellite systems and 2.1 million on internet-delivered bundle Sling TV. The total pay-TV subscriber base has shrunk by 30% over the past five years.

As to why a downbeat report from a quarter marred by the cyberattack wouldn’t deter investors, SVB MoffettNathanson analyst Craig Moffett theorized that a certain “upside-down world” logic could apply. He said the hacking episode could wind up undermining the FCC’s confidence in Dish as a wireless provider, meaning it could be forced to sell off some of the wireless spectrum it has accumulated in recent years in an expensive pivot from pay-TV to telecom. Regulators could also be inclined to finally warm up to a long-sought merger by Dish and satellite rival DirecTV, given how many subscribers have defected from both in recent years. “So, in the search for silver linings… well, at least there’s that,” Moffett observed.

The DirecTV merger scenario wasn’t directly addressed in an SEC filing from Dish on Monday morning prior to the call. But the company did say it would “pursue one or more of the following options: raise additional capital, pursue strategic transactions and/or introduce additional cost reduction initiatives.” Asked by one analyst to elaborate on that disclosure, Ergen replied, “We’re good stewards of capital and we realize that right now we’re more of a liquidity story than anything in the market, and obviously we need to address that.”

In the wireless business, he said, “We haven’t proven yet that we can compete.” While he conceded the cyberattack had been a giant distraction as it looks to make strides, Ergen argued that the incident is “behind us” after being dealt with swiftly and effectively. Dish, in the company co-founder’s estimation, ranks “right up there with best-in-class in terms of how to recover from an incident.”

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