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EchoStar Announces Financial Results for Three and Twelve Months Ended December 31, 2019

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Englewood, CO, February 20, 2020—EchoStar Corporation (NASDAQ: SATS) today announced its financial results for the three and twelve months ended December 31, 2019.

Three Months Ended December 31, 2019 Financial Highlights:

  • Consolidated revenues of $499.0 million.
  • Net loss from continuing operations of $56.3 million, consolidated net loss attributable to EchoStar common stock of $53.1 million, and diluted loss per share of $(0.55).
  • Consolidated Adjusted EBITDA of $155.9 million (see discussion and the reconciliation of GAAP to this non-GAAP measure below).

Twelve Months Ended December 31, 2019 Financial Highlights:

  • Consolidated revenues of $1.9 billion.
  • Net loss from continuing operations of $113.7 million, consolidated net loss attributable to EchoStar common stock of $62.9 million, and diluted loss per share of $(0.65).
  • Consolidated Adjusted EBITDA of $582.8 million (see discussion and the reconciliation of GAAP to this non-GAAP measure below).

“I am pleased with our performance in the fourth quarter and full year of 2019” commented Michael Dugan, CEO and President of EchoStar.  “We grew our revenue and Adjusted EBITDA from 2018.  We completed a transformative spin-off of our BSS business to DISH Network Corporation as well as additional strategic transactions that allow us to focus on the growing broadband and connectivity markets.  We concluded our joint venture with Yahsat in Brazil in November, and as part of that transaction, acquired approximately 20,000 additional consumer subscribers.  Operationally, we grew our consumer subscriber base by another 20,000 in the fourth quarter driven by our international markets which brings our broadband subscriber total to approximately 1.477 million as of year-end 2019. Until our EchoStar 24/J3 satellite is launched, we are focused on increasing the yield on our existing assets and are continuing to explore opportunities in pursuit of our strategy of being a global connectivity provider.”

Three Months Ended December 31, 2019 - Additional Information:

  • Consolidated revenue increased 10% or $45.0 million year over year.
  • Adjusted EBITDA increased 19% or $25.1 million year over year.
    • Hughes segment Adjusted EBITDA increased by $25.9 million primarily driven by higher revenue and associated margin from our consumer business and enterprise equipment sales.  Adjusted EBITDA excludes all activity related to the India license fee dispute discussed below.
    • ESS segment Adjusted EBITDA was flat.
    • Corporate and Other segment Adjusted EBITDA decreased by $0.5 million.  The segment was impacted 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 that were not treated as discontinued operations as well as continued investment in corporate development activities.  This was partially offset by smaller equity losses of unconsolidated affiliates.  During the fourth quarter, we changed our accounting policy to record our share of net earnings or losses of unconsolidated affiliates on a three month-lag.  Based on this change, our results exclude Q4-19 activity from these equity investments.
  • License fee dispute with the Government of India:
    • In October 2019, the Supreme Court of India issued an order affirming certain license fee assessments, interest, penalties, and interest on the penalties imposed by the Indian Department of Telecommunications (“DOT”) related to a license fee dispute with the Government of India that dates back over a decade and has affected the entire Indian Telecom industry.  On February 14, 2020, the Supreme Court of India denied the petitions filed by us and other telecommunication service providers asking the court to modify the order to permit the DOT to calculate the final amount due and extend the payment deadline.  To date, the DOT has issued us written assessments of $28.4 million for the license fees, penalties and interest.  It is possible the DOT’s assessment may be modified depending on the methodology it uses to calculate interest over the period in question.
    • As a result of the Supreme Court’s decisions and based on the DOT’s current methodology for assessing penalties and interest, we booked an additional accrual of $60.8 million during the quarter which also impacted Net income (loss) attributable to non-controlling interest.  This is summarized as follows (amounts in millions):
expenses_chart


Net loss from continuing operations was $56.3 million, a decrease of loss by $72.5 million from last year.  The decreased loss was primarily due to an impairment of long-lived asset of $65.2 million in Q4-18, higher net gains on investments of $45.0 million, and higher operating income (excluding impairments) of $9.2 million.  This was partially offset by higher net interest expense of $45.5 million which includes $58.5 of interest related to the license fee dispute with the Government of India discussed above.  Excluding the impact of the license fee dispute (tax effected), Net earnings from continuing operations would have been $4.3 million.We now have $80.2 million accrued for this matter as of December 31, 2019.  Any eventual payments made with respect to the ultimate outcome may be different from our accrual and such differences could be significant.

  • Hughes broadband subscribers are approximately 1,477,000 as of December 31, 2019 including approximately 237,000 subscribers in Central and South America.
  • Cash, cash equivalents and current marketable investment securities were $2.5 billion as of December 31, 2019.

Set forth below is a table highlighting certain of EchoStar’s segment results for the three and twelve months ended December 31, 2019 and 2018 (amounts in thousands) from continuing operations (all US GAAP amounts reference results from continuing operations):

 

 

 

For the three months
ended December 31,

 

For the twelve months
ended December 31,

 

 

2019

 

2018

 

2019

 

2018

 

 

 

 

 

 

 

 

 

Revenue

 

 

 

 

 

 

 

 

Hughes

 

$

491,823

 

 

$

444,642

 

 

$

1,852,742

 

 

$

1,716,528

 

EchoStar Satellite Services

 

4,384

 

 

4,669

 

 

16,257

 

 

27,231

 

Corporate and Other

 

2,799

 

 

4,672

 

 

17,082

 

 

18,879

 

Total revenue

 

$

499,006

 

 

$

453,983

 

 

$

1,886,081

 

 

$

1,762,638

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA

 

 

 

 

 

 

 

 

Hughes

 

$

176,738

 

 

$

150,809

 

 

$

666,890

 

 

$

616,532

 

EchoStar Satellite Services

 

1,988

 

 

2,286

 

 

6,994

 

 

17,764

 

Corporate & Other:

 

 

 

 

 

 

 

 

Corporate overhead, operating and other

 

(23,090)

 

 

(18,988)

 

 

(81,859)

 

 

(73,237)

 

Equity in earnings (losses) of unconsolidated affiliates, net

 

250

 

 

(3,303)

 

 

(9,257)

 

 

(5,954)

 

Total Corporate & Other

 

(22,840)

 

 

(22,291)

 

 

(91,116)

 

 

(79,191)

 

Total Adjusted EBITDA

 

$

155,886

 

 

$

130,804

 

 

$

582,768

 

 

$

555,105

 

 

 

 

 

 

 

 

 

 

Net income (loss) from continuing operations

 

$

(56,273)

 

 

$

(128,774)

 

 

$

(113,653)

 

 

$

(132,362)

 

Expenditures for property and equipment

 

$

103,723

 

 

$

139,817

 

 

$

418,074

 

 

$

477,442

 

 

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

 

 

For the three months
ended December 31,

 

For the twelve months
ended December 31,

 

 

2019

 

2018

 

2019

 

2018

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

(63,094)

 

 

$

(111,648)

 

 

$

(74,252)

 

 

$

(38,633)

 

Interest income

 

(17,535)

 

 

(24,038)

 

 

(82,352)

 

 

(80,275)

 

Interest expense, net of amounts capitalized

 

94,203

 

 

55,250

 

 

251,016

 

 

219,288

 

Income tax provision (benefit), net

 

7,882

 

 

(1,698)

 

 

20,488

 

 

6,576

 

Depreciation and amortization

 

129,146

 

 

118,379

 

 

490,765

 

 

457,116

 

Net (income) loss from discontinued operations

 

6,821

 

 

(17,126)

 

 

(39,401)

 

 

(93,729)

 

Net (income) loss attributable to non-controlling interests

 

9,976

 

 

(550)

 

 

11,335

 

 

(1,842)

 

EBITDA

 

167,399

 

 

18,569

 

 

577,599

 

 

468,501

 

(Gains) losses on investments, net

 

(825)

 

 

44,227

 

 

(28,912)

 

 

12,622

 

Impairment of long-lived assets

 

 

 

65,220

 

 

 

 

65,220

 

Litigation expense

 

(627)

 

 

2,750

 

 

25,701

 

 

2,750

 

Vendor settlement

 

 

 

 

 

 

 

(9,571)

 

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

 

(7,150)

 

 

 

 

(3,210)

 

 

 

Foreign currency transaction (gains) losses, net

 

(2,911

)

 

38

 

 

11,590

 

 

15,583

 

Adjusted EBITDA

 

$

155,886

 

 

$

130,804

 

 

$

582,768

 

 

$

555,105

 

 

Note on Use of Non-GAAP Financial Measures

EBITDA is defined as “Net income (loss)” excluding “Interest income and expense, net,” “Income tax benefit (provision), net,” “Depreciation and amortization,” “Net income (loss) from discontinued operations,” and “Net income (loss) attributable to noncontrolling 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 December 31, 2019 and 2018 are attached to this press release. Detailed financial data and other information are available in EchoStar’s Annual Report on Form 10-K for the period ended December 31, 2019 filed today with the Securities and Exchange Commission.

EchoStar will host its earnings conference call on Thursday, February 20, 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 2585784.

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 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 December 31,

 

 

2019

 

2018

 

 

 

 

 

Assets

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

1,519,431

 

 

$

928,306

 

Marketable investment securities

 

940,623

 

 

2,282,152

 

Trade accounts receivable and contract assets, net

 

196,629

 

 

201,096

 

Other current assets

 

179,531

 

 

165,809

 

Current assets of discontinued operations

 

 

 

3,486

 

Total current assets

 

2,836,214

 

 

3,580,849

 

Non-current assets:

 

 

 

 

Property and equipment, net

 

2,528,738

 

 

2,534,666

 

Operating lease right-of-use assets

 

114,042

 

 

 

Goodwill

 

506,953

 

 

504,173

 

Regulatory authorizations, net

 

478,598

 

 

430,039

 

Other intangible assets, net

 

29,507

 

 

44,231

 

Other investments, net

 

325,405

 

 

266,513

 

Other non-current assets, net

 

334,841

 

 

338,390

 

Non-current assets of discontinued operations

 

 

 

962,433

 

Total non-current assets

 

4,318,084

 

 

5,080,445

 

Total assets

 

$

7,154,298

 

 

$

8,661,294

 

 

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

 

Current liabilities:

 

 

 

 

Trade accounts payable

 

$

124,080

 

 

$

121,437

 

Current portion of long-term debt and finance lease obligations

 

486

 

 

919,582

 

Contract liabilities

 

101,060

 

 

72,284

 

Accrued expenses and other current liabilities

 

270,393

 

 

181,698

 

Current liabilities of discontinued operations

 

 

 

50,136

 

Total current liabilities

 

496,019

 

 

1,345,137

 

Non-current liabilities:

 

 

 

 

Long-term debt and finance lease obligations, net of current portion

 

2,389,733

 

 

2,386,202

 

Deferred tax liabilities, net

 

351,692

 

 

287,989

 

Operating lease liabilities

 

96,941

 

 

 

Other non-current liabilities

 

74,360

 

 

80,304

 

Non-current liabilities of discontinued operations

 

 

 

406,188

 

Total non-current liabilities

 

2,912,726

 

 

3,160,683

 

Total liabilities

 

3,408,745

 

 

4,505,820

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

Preferred stock, $0.001 par value, 20,000,000 shares authorized, none issued and outstanding at both December 31, 2019 and 2018

 

 

 

 

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, 56,592,251 shares issued and 50,107,330 shares outstanding at December 31, 2019 and 54,142,566 shares issued and 47,657,645 shares outstanding at December 31, 2018

 

57

 

 

54

 

Class B convertible common stock, $0.001 par value, 800,000,000 shares authorized, 47,687,039 shares issued and outstanding at both December 31, 2019 and 2018

 

48

 

 

48

 

Class C convertible common stock, $0.001 par value, 800,000,000 shares authorized, none issued and outstanding at both December 31, 2019 and 2018

 

 

 

 

Class D common stock, $0.001 par value, 800,000,000 shares authorized, none issued and outstanding at both December 31, 2019 and 2018

 

 

 

 

Additional paid-in capital

 

3,290,483

 

 

3,702,522

 

Accumulated other comprehensive income (loss)

 

(122,138)

 

 

(125,100)

 

Accumulated earnings (losses)

 

632,809

 

 

694,129

 

Treasury stock, at cost

 

(131,454)

 

 

(131,454)

 

Total EchoStar Corporation stockholders’ equity

 

3,669,805

 

 

4,140,199

 

Non-controlling interests

 

75,748

 

 

15,275

 

Total stockholders’ equity

 

3,745,553

 

 

4,155,474

 

Total liabilities and stockholders’ equity

 

$

7,154,298

 

 

$

8,661,294

 

 

 

ECHOSTAR CORPORATION

Condensed Consolidated Statements of Operations

(Amounts in thousands, except per share amounts)

 

 

 

For the years ended December 31,

 

 

2019

 

2018

 

2017

 

 

 

 

 

 

 

Revenue:

 

 

 

 

 

 

Services and other revenue

 

$

1,619,271

 

 

$

1,557,228

 

 

$

1,285,666

 

Equipment revenue

 

266,810

 

 

205,410

 

 

239,489

 

Total revenue

 

1,886,081

 

 

1,762,638

 

 

1,525,155

 

Costs and expenses:

 

 

 

 

 

 

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

 

561,353

 

 

563,907

 

 

500,773

 

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

 

226,002

 

 

176,600

 

 

195,151

 

Selling, general and administrative expenses

 

509,145

 

 

436,088

 

 

370,500

 

Research and development expenses

 

25,739

 

 

27,570

 

 

31,745

 

Depreciation and amortization

 

490,765

 

 

457,116

 

 

385,662

 

Impairment of long-lived assets

 

 

 

65,220

 

 

10,762

 

Total costs and expenses

 

1,813,004

 

 

1,726,501

 

 

1,494,593

 

Operating income (loss)

 

73,077

 

 

36,137

 

 

30,562

 

Other income (expense):

 

 

 

 

 

 

Interest income

 

82,352

 

 

80,275

 

 

44,619

 

Interest expense, net of amounts capitalized

 

(251,016)

 

 

(219,288)

 

 

(184,389)

 

Gains (losses) on investments, net

 

28,912

 

 

(12,622)

 

 

53,453

 

Equity in earnings (losses) of unconsolidated affiliates, net

 

(14,734)

 

 

(5,954)

 

 

16,973

 

Foreign currency transaction gains (losses), net

 

(11,590)

 

 

(15,583)

 

 

1,218

 

Other, net

 

(166)

 

 

11,249

 

 

5,364

 

Total other income (expense), net

 

(166,242)

 

 

(161,923)

 

 

(62,762)

 

Income (loss) from continuing operations before income taxes

 

(93,165)

 

 

(125,786)

 

 

(32,200)

 

Income tax benefit (provision), net

 

(20,488)

 

 

(6,576)

 

 

155,107

 

Net income (loss) from continuing operations

 

(113,653)

 

 

(132,362)

 

 

122,907

 

Net income (loss) from discontinued operations

 

39,401

 

 

93,729

 

 

270,582

 

Net income (loss)

 

(74,252)

 

 

(38,633)

 

 

393,489

 

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

 

(11,335)

 

 

1,842

 

 

928

 

Net income (loss) attributable to EchoStar Corporation

 

(62,917)

 

 

(40,475)

 

 

392,561

 

Less: Net income (loss) attributable to Hughes Retail Preferred Tracking Stock

 

 

 

 

 

(1,209)

 

Net income (loss) attributable to EchoStar Corporation common stock

 

$

(62,917)

 

 

$

(40,475)

 

 

$

393,770

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

Basic earnings (loss) from continuing operations per share

 

$

(1.06)

 

 

$

(1.39)

 

 

$

1.29

 

Total basic earnings (loss) per share

 

$

(0.65)

 

 

$

(0.42)

 

 

$

4.13

 

Diluted earnings (loss) from continuing operations per share

 

$

(1.06)

 

 

$

(1.39)

 

 

$

1.27

 

Total diluted earnings (loss) per share

 

$

(0.65)

 

 

$

(0.42)

 

 

$

4.07

 

 

ECHOSTAR CORPORATION

Condensed Consolidated Statements of Cash Flows

(Amounts in thousands, except per share amounts)

 

 

For the years ended December 31,

 

 

2019

 

2018

 

2017

 

 

 

 

 

 

 

Cash flows from operating activities:

 

 

 

 

 

 

Net income (loss)

 

$

(74,252)

 

 

$

(38,633)

 

 

$

393,489

 

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

 

 

 

 

 

 

Depreciation and amortization

 

588,200

 

 

598,178

 

 

533,849

 

Impairment of long-lived assets

 

 

 

65,220

 

 

10,762

 

Losses (gains) on investments, net

 

(28,912)

 

 

12,109

 

 

(53,453)

 

Equity in losses (earnings) of unconsolidated affiliates, net

 

14,734

 

 

6,037

 

 

(15,814)

 

Foreign currency transaction losses (gains), net

 

11,590

 

 

15,583

 

 

(1,218)

 

Deferred tax provision (benefit), net

 

32,542

 

 

26,327

 

 

(288,577)

 

Stock-based compensation

 

9,353

 

 

9,990

 

 

10,103

 

Amortization of debt issuance costs

 

5,912

 

 

7,923

 

 

7,378

 

Dividends received from unconsolidated affiliates

 

2,716

 

 

10,000

 

 

19,000

 

Proceeds from sale of trading securities

 

 

 

 

 

8,922

 

Changes in current assets and current liabilities, net:

 

 

 

 

 

 

Trade accounts receivable and contract assets, net

 

8,289

 

 

(17,842)

 

 

421

 

Other current assets

 

(39,190)

 

 

18,577

 

 

200,584

 

Trade accounts payable

 

13,149

 

 

9,562

 

 

(78,419)

 

Contract liabilities

 

26,376

 

 

7,867

 

 

5,322

 

Accrued expenses and other current liabilities

 

66,352

 

 

12,183

 

 

7,402

 

Changes in non-current assets and non-current liabilities, net

 

13,166

 

 

(5,070)

 

 

(36,975)

 

Other, net

 

6,297

 

 

(3,489)

 

 

4,116

 

Net cash flows from operating activities

 

656,322

 

 

734,522

 

 

726,892

 

Cash flows from investing activities:

 

 

 

 

 

 

Purchases of marketable investment securities

 

(993,369)

 

 

(2,973,254)

 

 

(855,717)

 

Sales and maturities of marketable investment securities

 

2,391,220

 

 

1,498,463

 

 

580,235

 

Investments in unconsolidated affiliates

 

(2,149)

 

 

(115,991)

 

 

 

Sale of investment in unconsolidated affiliates

 

 

 

1,558

 

 

17,781

 

Dividend received from unconsolidated affiliate

 

2,284

 

 

 

 

 

Purchase of other investments

 

(93,687)

 

 

 

 

 

Expenditures for property and equipment

 

(418,584)

 

 

(555,141)

 

 

(583,211)

 

Refunds and other receipts related to property and equipment

 

 

 

77,524

 

 

4,311

 

Expenditures for externally marketed software

 

(29,310)

 

 

(31,639)

 

 

(31,331)

 

Purchases of regulatory authorizations

 

(34,447)

 

 

 

 

 

Net cash flows from investing activities

 

821,958

 

 

(2,098,480)

 

 

(867,932)

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

Repurchase and maturity of the 2019 Senior Secured Notes

 

(920,923)

 

 

(70,173)

 

 

 

Repayment of other long-term debt and finance lease obligations

 

(29,347)

 

 

(41,019)

 

 

(37,670)

 

Payment of in-orbit incentive obligations

 

(5,447)

 

 

(5,350)

 

 

(5,487)

 

Net proceeds from Class A common stock options exercised

 

67,337

 

 

4,424

 

 

35,536

 

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

 

9,779

 

 

9,368

 

 

8,758

 

Treasury share purchase

 

 

 

(33,292)

 

 

 

Purchase of non-controlling interest

 

(7,313)

 

 

 

 

 

Other, net

 

603

 

 

(521)

 

 

(1,065)

 

Net cash flows from financing activities

 

(885,311)

 

 

(136,563)

 

 

72

 

Effect of exchange rates on cash and cash equivalents

 

(575)

 

 

(2,233)

 

 

1,351

 

Net increase (decrease) in cash and cash equivalents

 

592,394

 

 

(1,502,754)

 

 

(139,617)

 

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

 

929,495

 

 

2,432,249

 

 

2,571,866

 

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

 

$

1,521,889

 

 

$

929,495

 

 

$

2,432,249

 

 

 

 

 

 

 

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

Cash paid for interest (including capitalized interest)

 

$

195,331

 

 

$

240,596

 

 

$

207,617

 

Cash paid for income taxes

 

$

3,575

 

 

$

5,209

 

 

$

11,033