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EchoStar Announces Financial Results for Three and Six Months Ended June 30, 2020

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Englewood, CO, August 6, 2020—EchoStar Corporation (NASDAQ: SATS) today announced its financial results for the three and six months ended June 30, 2020.

Three Months Ended June 30, 2020 Financial Highlights:

  • Consolidated revenues of $459.5 million.
  • Net loss from continuing operations of $14.8 million, consolidated net loss attributable to EchoStar common stock of $11.4 million, and diluted loss per share of $(0.12).
  • Consolidated Adjusted EBITDA of $160.9 million (see discussion and the reconciliation of GAAP to this non-GAAP measure below).

Six Months Ended June 30, 2020 Financial Highlights:

  • Consolidated revenues of $925.1 million.
  • Net loss from continuing operations of $72.6 million, consolidated net loss attributable to EchoStar common stock of $65.7 million, and diluted loss per share of $(0.67).
  • Consolidated Adjusted EBITDA of $309.5 million (see discussion and the reconciliation of GAAP to this non-GAAP measure below).

“The second quarter of 2020 continued to demonstrate that we are in extraordinary times, and despite the ongoing challenges of COVID-19, I am proud of our second quarter performance,” commented Michael Dugan, CEO and President of EchoStar.  “Whether our current environment is a ‘new normal’ or a temporary state, EchoStar remains focused on delivering the connectivity our customers need today and into the future.  Operationally, we increased our consumer subscriber base by approximately 26,000, driven by our international markets, bringing our broadband subscriber total to approximately 1.542 million.  We continue to monitor economic conditions and are prudently managing the business.  We are also excited to be joining the consortium selected to acquire OneWeb out of bankruptcy and to continue as a trusted technology and distribution partner for OneWeb as it emerges from bankruptcy”

Three Months Ended June 30, 2020 - Additional Information:

  • Consolidated revenue was down $0.9 million year over year including an estimated negative foreign exchange impact of $12 million.
  • Adjusted EBITDA increased 19% or $26.2 million year over year.
    • Hughes segment Adjusted EBITDA increased $31.1 million year over year.  The increase was driven by higher margin primarily associated with our consumer service as well as lower sales, marketing, and other operating expenses.
    • ESS segment Adjusted EBITDA increased by $0.1 million year over year.
    • Corporate and Other segment Adjusted EBITDA decreased by $5.0 million.  The decrease was primarily driven by the loss of the revenue and EBITDA associated with the transfer of certain real estate assets to DISH Network Corporation as part of the BSS transaction, which closed in September of 2019, that were not treated as discontinued operations.  The segment also had equity losses in unconsolidated affiliates during the quarter of $4.7 million compared to equity losses of $2.9 million in the same period a year ago.
  • Net loss from continuing operations was $14.8 million, a decrease of loss by $15.2 million from last year.  The lower loss was primarily due to higher operating income of $39.4 million and lower net interest expense of $3 million.  This was partially offset by lower gains on investments, net, of $18.9 million, higher income tax provision, net, of $6.2 million, and higher equity losses of unconsolidated affiliates, net, of $1.6 million.
  • Hughes broadband subscribers are approximately 1,542,000 as of June 30, 2020 including approximately 321,000 subscribers in Latin America.  In response to the continued challenges associated with the COVID-19 pandemic, we extended the FCC’s Keep America Connected Pledge through June 30, 2020, and our subscriber numbers and revenue exclude those whose service would have ordinarily been terminated in the absence of the Pledge.
  • For the three months ended June 30,2020, approximately 71% of Hughes segment revenue was attributable to our consumer customers with approximately 29% attributable to our enterprise customers.
  • Cash, cash equivalents and marketable investment securities were $2.5 billion as of June 30, 2020.

Set forth below is a table highlighting certain of EchoStar’s segment results three and six months ended June 30, 2020 and 2019 (amounts in thousands) from continuing operations (all US GAAP amounts reference results from continuing operations):

 

 

For the three months ended June 30,

 

For the six months ended June 30,

 

 

2020

 

2019

 

2020

 

2019

 

 

 

 

 

 

 

 

 

Revenue

 

 

 

 

 

 

 

 

Hughes

 

$453,172 

 

 

 

$451,847 

 

 

 

$911,654 

 

 

 

$897,184

 

 

EchoStar Satellite Services

 

4,179 

 

 

3,742 

 

 

8,831 

 

 

7,775 

 

Corporate and Other

 

2,115 

 

 

4,842 

 

 

4,647 

 

 

9,854 

 

Total revenue

 

$459,466

 

 

 

$460,431

 

 

 

$925,132

 

 

 

$914,813

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA

 

 

 

 

 

 

 

 

Hughes

 

$186,277

 

 

 

$155,212

 

 

 

$348,496

 

 

 

$316,853

 

 

EchoStar Satellite Services

 

1,543 

 

 

1,486 

 

 

3,573 

 

 

3,215 

 

Corporate & Other:

 

 

 

 

 

 

 

 

Corporate overhead, operating and other

 

(22,252)

 

 

(19,070)

 

 

(42,375)

 

 

(37,788)

 

Equity in earnings (losses) of unconsolidated affiliates, net

 

(4,668)

 

 

(2,898)

 

 

(156)

 

 

(7,725)

 

Total Corporate & Other

 

(26,920)

 

 

(21,968)

 

 

(42,531)

 

 

(45,513)

 

Total Adjusted EBITDA

 

$160,900

 

 

 

$134,730

 

 

 

$309,538

 

 

 

$274,555

 

 

 

 

 

 

 

 

 

 

 

Expenditures for property and equipment

 

$92,300

 

 

 

$107,342 

 

 

 

$196,904

 

 

 

$219,196 

 

 

 

Reconciliation of GAAP to Non-GAAP Measurement (amounts in thousands):

 

 

For the three months ended June 30,

 

For the six months ended June 30,

 

 

2020

 

2019

 

2020

 

2019

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$(14,843)

 

 

 

$(5,060)

 

 

 

(72,580)

 

 

9,948 

 

Interest income, net

 

(10,760)

 

 

(23,213)

 

 

(26,343)

 

 

(47,642)

 

Interest expense, net of amounts capitalized

 

38,258 

 

 

53,749 

 

 

74,491 

 

 

106,948 

 

Income tax provision (benefit), net

 

10,851 

 

 

4,692 

 

 

3,359 

 

 

7,590 

 

Depreciation and amortization

 

129,887 

 

 

120,266 

 

 

262,255 

 

 

239,244 

 

Net loss (income) from discontinued operations

 

— 

 

 

(24,968)

 

 

— 

 

 

(44,215)

 

Net loss (income) attributable to non-controlling interests

 

3,431 

 

 

(632)

 

 

6,873 

 

 

(1,438)

 

EBITDA

 

156,824 

 

 

124,834 

 

 

248,055 

 

 

270,435 

 

(Gains) losses on investments, net

 

6,090 

 

 

(12,855)

 

 

52,762 

 

 

(19,791)

 

Litigation Expense

 

— 

 

 

24,504 

 

 

— 

 

 

24,504 

 

License fee dispute - India, net of non-controlling interests

 

(454)

 

 

— 

 

 

(563)

 

 

— 

 

Foreign currency transaction (gains) losses, net

 

(1,560)

 

 

(1,753)

 

 

9,284 

 

 

(593)

 

Adjusted EBITDA

 

$160,900

 

 

 

$134,730 

 

 

 

$309,538 

 

 

 

$274,555 

 

 

                                 

 

Note on Use of Non-GAAP Financial Measures

EBITDA is defined as “Net income (loss)” excluding “Interest income, net,” Interest expense, net of amounts capitalized,” “Income tax benefit (provision), net,” “Depreciation and amortization,” “Net income (loss) from discontinued operations,” and “Net income (loss) attributable to non-controlling interests.” 

Adjusted EBITDA is defined as EBITDA excluding “Gains and losses on investments, net,” “Foreign currency transaction gains (losses), net,” and other non-recurring or non-operational items.  EBITDA and Adjusted EBITDA are not measures determined in accordance with US GAAP. EBITDA and Adjusted EBITDA are reconciled to “Net income (loss)” in the table above and should not be considered in isolation or as a substitute for operating income, net income or any other measure determined in accordance with US GAAP. Our management uses EBITDA and Adjusted EBITDA as measures of our operating efficiency and overall financial performance for benchmarking against our peers and competitors. Management believes that these non-GAAP measures provide meaningful supplemental information regarding the underlying operating performance of our business and are appropriate to enhance an overall understanding of our financial performance. Management also believes that EBITDA and Adjusted EBITDA are useful to investors because they are frequently used by securities analysts, investors, and other interested parties to evaluate the performance of companies in our industry.

The consolidated financial statements of EchoStar for the periods ended June 30, 2020 and 2019 are attached to this press release. Detailed financial data and other information are available in EchoStar’s Quarterly Report on Form 10-Q for the period ended June 30, 2020 filed today with the Securities and Exchange Commission.

EchoStar will host a conference call to discuss its earnings on Thursday, August 6, 2020 at 11:00 a.m. Eastern Time. The call-in numbers are (877) 815-1625 (toll-free) and (716) 247-5178 (international), Conference ID 3563538.

About EchoStar Corporation

EchoStar Corporation (NASDAQ:  SATS) is a premier global provider of satellite communications solutions.  Headquartered in Englewood, Colo., and conducting business around the globe, EchoStar is a pioneer in secure communications technologies through its Hughes Network Systems and EchoStar Satellite Services business segments.

Safe Harbor Statement under the US Private Securities Litigation Reform Act of 1995

This press release may contain statements that are forward looking, as that term is defined by the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on management’s beliefs, as well as assumptions made by, and information currently available to, management. When used in this release, the words “believe,” “anticipate,” “estimate,” “expect,” “intend,” “project,” “plans,” and similar expressions and the use of future dates are intended to identify forward‑looking statements. Although management believes that the expectations reflected in these forward‑looking statements are reasonable, it can give no assurance that these expectations will prove to have been correct. You are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date made. We assume no responsibility for the accuracy of forward-looking statements or information or for updating forward-looking information or statements. These statements are subject to certain risks, uncertainties, and assumptions. See “Risk Factors” in EchoStar’s Annual Report on Form 10-K for the period ended December 31, 2019 and Quarterly Report on Form 10-Q for the period ended June 30, 2020 as filed with the Securities and Exchange Commission and in the other documents EchoStar files with the Securities and Exchange Commission from time to time.

 

ECHOSTAR CORPORATION

Condensed Consolidated Balance Sheets

(Amounts in thousands, except per share amounts)

 

 

As of

 

 

 

June 30, 2020

 

December 31, 2019

 

Assets

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$1,948,464

 

 

 

$1,519,431

 

 

 

Marketable investment securities

 

509,980 

 

 

940,623 

 

 

Trade accounts receivable and contract assets, net

 

183,379 

 

 

196,629 

 

 

Other current assets, net

 

185,699 

 

 

179,531 

 

 

Total current assets

 

2,827,522 

 

 

2,836,214 

 

 

Non-current assets:

 

 

 

 

 

Property and equipment, net

 

2,399,711 

 

 

2,528,738 

 

 

Operating lease right-of-use assets

 

125,996 

 

 

114,042 

 

 

Goodwill

 

509,054 

 

 

506,953 

 

 

Regulatory authorizations, net

 

474,463 

 

 

478,598 

 

 

Other intangible assets, net

 

22,667 

 

 

29,507 

 

 

Other investments, net

 

275,873 

 

 

325,405 

 

 

Other non-current assets, net

 

340,904 

 

 

334,841 

 

 

Total non-current assets

 

4,148,668 

 

 

4,318,084 

 

 

Total assets

 

$6,976,190

 

 

 

$7,154,298

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Trade accounts payable

 

$112,748

 

 

 

$124,080

 

 

 

Current portion of long-term debt, net

 

896,386 

 

 

— 

 

 

Contract liabilities

 

89,831 

 

 

101,060 

 

 

Accrued expenses and other current liabilities

 

262,944 

 

 

270,879 

 

 

Total current liabilities

 

1,361,909 

 

 

496,019 

 

 

Non-current liabilities:

 

 

 

 

 

Long-term debt, net

 

1,494,902 

 

 

2,389,168 

 

 

Deferred tax liabilities, net

 

349,973 

 

 

351,692 

 

 

Operating lease liabilities

 

110,899 

 

 

96,941 

 

 

Other non-current liabilities

 

74,239 

 

 

74,925 

 

 

Total non-current liabilities

 

2,030,013 

 

 

2,912,726 

 

 

Total liabilities

 

3,391,922 

 

 

3,408,745 

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

Preferred stock, $0.001 par value, 20,000,000 shares authorized, none issued and outstanding at both June 30, 2020 and December 31, 2019

 

— 

 

 

— 

 

Common stock, $0.001 par value, 4,000,000,000 shares authorized:

 

 

 

 

Class A common stock, $0.001 par value, 1,600,000,000 shares authorized, 56,988,365 shares issued and 50,306,445 shares outstanding at June 30, 2020 and 56,592,251 shares issued and 50,107,330 shares outstanding at December 31, 2019

 

57 

 

 

57 

 

Class B convertible common stock, $0.001 par value, 800,000,000 shares authorized, 47,687,039 shares issued and outstanding at both June 30, 2020 and December 31, 2019

 

48 

 

 

48 

 

Class C convertible common stock, $0.001 par value, 800,000,000 shares authorized, none issued and outstanding at both June 30, 2020 and December 31, 2019

 

— 

 

 

— 

 

Class D common stock, $0.001 par value, 800,000,000 shares authorized, none issued and outstanding at both June 30, 2020 and December 31, 2019

 

— 

 

 

— 

 

Additional paid-in capital

 

3,311,861 

 

 

3,290,483 

 

Accumulated other comprehensive income (loss)

 

(206,810)

 

 

(122,138)

 

Accumulated earnings (losses)

 

558,034 

 

 

632,809 

 

Treasury stock, at cost

 

(137,347)

 

 

(131,454)

 

Total EchoStar Corporation stockholders’ equity

 

3,525,843 

 

 

3,669,805 

 

Non-controlling interests

 

58,425 

 

 

75,748 

 

Total stockholders’ equity

 

3,584,268 

 

 

3,745,553 

 

Total liabilities and stockholders’ equity

 

$6,976,190

 

 

 

$7,154,298

 

 

                               

 

ECHOSTAR CORPORATION

Condensed Consolidated Statements of Operations

(Amounts in thousands, except per share amounts)

 

 

For the three months ended June 30,

 

For the six months ended June 30,

 

 

2020

 

2019

 

2020

 

2019

Revenue:

 

 

 

 

 

 

 

 

Services and other revenue

 

$417,043 

 

 

 

$402,786

 

 

 

$825,400

 

 

 

$805,454 

 

 

Equipment revenue

 

42,423 

 

 

57,645 

 

 

99,732 

 

 

109,359 

 

Total revenue

 

459,466 

 

 

460,431 

 

 

925,132 

 

 

914,813 

 

Costs and expenses:

 

 

 

 

 

 

 

 

Cost of sales - services and other (exclusive of depreciation and amortization)

 

141,019 

 

 

142,680 

 

 

286,271 

 

 

286,027 

 

Cost of sales - equipment (exclusive of depreciation and amortization)

 

32,542 

 

 

46,549 

 

 

78,450 

 

 

91,556 

 

Selling, general and administrative expenses

 

113,798 

 

 

149,209 

 

 

239,079 

 

 

261,323 

 

Research and development expenses

 

7,448 

 

 

6,388 

 

 

13,702 

 

 

13,276 

 

Depreciation and amortization

 

129,887 

 

 

120,266 

 

 

262,255 

 

 

239,244 

 

Total costs and expenses

 

424,694 

 

 

465,092 

 

 

879,757 

 

 

891,426 

 

Operating income (loss)

 

34,772 

 

 

(4,661)

 

 

45,375 

 

 

23,387 

 

Other income (expense):

 

 

 

 

 

 

 

 

Interest income, net

 

10,760 

 

 

23,213 

 

 

26,343 

 

 

47,642 

 

Interest expense, net of amounts capitalized

 

(38,258)

 

 

(53,749)

 

 

(74,491)

 

 

(106,948)

 

Gains (losses) on investments, net

 

(6,090)

 

 

12,855 

 

 

(52,762)

 

 

19,791 

 

Equity in earnings (losses) of unconsolidated affiliates, net

 

(6,345)

 

 

(4,754)

 

 

(3,732)

 

 

(11,107)

 

Foreign currency transaction gains (losses), net

 

1,560 

 

 

1,753 

 

 

(9,284)

 

 

593 

 

Other, net

 

(391)

 

 

 

 

(670)

 

 

(35)

 

Total other income (expense), net

 

(38,764)

 

 

(20,675)

 

 

(114,596)

 

 

(50,064)

 

Income (loss) from continuing operations before income taxes

 

(3,992)

 

 

(25,336)

 

 

(69,221)

 

 

(26,677)

 

Income tax benefit (provision), net

 

(10,851)

 

 

(4,692)

 

 

(3,359)

 

 

(7,590)

 

Net income (loss) from continuing operations

 

(14,843)

 

 

(30,028)

 

 

(72,580)

 

 

(34,267)

 

Net income (loss) from discontinued operations

 

— 

 

 

24,968 

 

 

— 

 

 

44,215 

 

Net income (loss)

 

(14,843)

 

 

(5,060)

 

 

(72,580)

 

 

9,948 

 

Less: Net loss (income) attributable to non-controlling interests

 

3,431 

 

 

(632)

 

 

6,873 

 

 

(1,438)

 

Net income (loss) attributable to EchoStar Corporation common stock

 

$(11,412)

 

 

 

$(5,692)

 

 

 

$(65,707)

 

 

 

8,510 

 

 

 

 

 

 

 

 

 

 

Earnings (losses) per share - Class A and B common stock:

 

 

 

 

 

 

 

 

Basic and diluted earnings (losses) from continuing operations per share

 

$(0.12)

 

 

 

$(0.32)

 

 

 

$(0.67)

 

 

 

$(0.37)

 

 

Total basic and diluted earnings (losses) per share

 

$(0.12)

 

 

 

$(0.06)

 

 

 

$(0.67)

 

 

 

$0.09 

 

 

 

ECHOSTAR CORPORATION

Condensed Consolidated Statements of Cash Flows

(Amounts in thousands, except per share amounts)

 

 

For the six months ended June 30,

 

 

2020

 

2019

Cash flows from operating activities:

 

 

 

 

Net income (loss)

 

$(72,580)

 

 

 

$9,948 

 

 

Adjustments to reconcile net income (loss) to net cash flows from operating activities:

 

 

 

 

Depreciation and amortization

 

262,255 

 

 

309,631 

 

Losses (gains) on investments, net

 

52,762 

 

 

(19,791)

 

Equity in losses (earnings) of unconsolidated affiliates, net

 

3,732 

 

 

11,107 

 

Foreign currency transaction losses (gains), net

 

9,284 

 

 

(593)

 

Deferred tax provision (benefit), net

 

(2,452)

 

 

7,014 

 

Stock-based compensation

 

4,509 

 

 

4,833 

 

Amortization of debt issuance costs

 

2,120 

 

 

3,872 

 

Other, net

 

(7,295)

 

 

2,742 

 

Changes in assets and liabilities, net:

 

 

 

 

Trade accounts receivable and contract assets, net

 

(5,262)

 

 

167 

 

Other current assets, net

 

(11,642)

 

 

(129)

 

Trade accounts payable

 

(11,701)

 

 

(225)

 

Contract liabilities

 

(11,229)

 

 

34,024 

 

Accrued expenses and other current liabilities

 

27,050 

 

 

16,800 

 

Non-current assets and non-current liabilities, net

 

5,729 

 

 

1,374 

 

Net cash flows from operating activities

 

245,280 

 

 

380,774 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

Purchases of marketable investment securities

 

(555,367)

 

 

(504,264)

 

Sales and maturities of marketable investment securities

 

977,532 

 

 

1,621,481 

 

Expenditures for property and equipment

 

(196,904)

 

 

(219,440)

 

Expenditures for externally marketed software

 

(19,237)

 

 

(15,329)

 

Net cash flows from investing activities

 

200,524 

 

 

882,448 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

Repurchase and maturity of the 2019 Senior Secured Notes

 

— 

 

 

(920,923)

 

Payment of finance lease obligations

 

(421)

 

 

(20,008)

 

Payment of in-orbit incentive obligations

 

(1,021)

 

 

(3,778)

 

Net proceeds from Class A common stock options exercised

 

436 

 

 

61,503 

 

Net proceeds from Class A common stock issued under the Employee Stock Purchase Plan

 

5,300 

 

 

5,074 

 

Treasury share purchase

 

(5,893)

 

 

— 

 

Contribution by non-controlling interest holder

 

10,000 

 

 

— 

 

Purchase of non-controlling interest

 

— 

 

 

(7,313)

 

Other, net

 

674 

 

 

(267)

 

Net cash flows from financing activities

 

9,075 

 

 

(885,712)

 

 

 

 

 

 

Effect of exchange rates on cash and cash equivalents

 

(19,232)

 

 

121 

 

Net increase (decrease) in cash and cash equivalents

 

435,647 

 

 

377,631 

 

Cash and cash equivalents, including restricted amounts, beginning of period

 

1,521,889 

 

 

929,495 

 

Cash and cash equivalents, including restricted amounts, end of period

 

$1,957,536 

 

 

 

$1,307,126