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EchoStar Announces Financial Results for Three Months Ended March 31, 2020

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Englewood, CO, May 7, 2020—EchoStar Corporation (NASDAQ: SATS) today announced its financial results for the three months ended March 31, 2020.

Three Months Ended March 31, 2020 Financial Highlights:

  • Consolidated revenues of $465.7 million.
  • Net loss from continuing operations of $57.7 million, consolidated net loss attributable to EchoStar common stock of $54.3 million, and diluted loss per share of $0.56.
  • Consolidated Adjusted EBITDA of $148.6 million (see discussion and the reconciliation of GAAP to this non-GAAP measure below).

“As businesses and families everywhere contend with the impact of COVID-19, EchoStar has focused on keeping our customers connected,” commented Michael Dugan, CEO and President of EchoStar.  “The pandemic has demonstrated that staying connected is a necessity, not a luxury, and our solid performance in the first quarter of 2020, despite the global crisis, reflects this reality.  We grew our revenue and Adjusted EBITDA from the same period in 2019.  Operationally, we increased our consumer subscriber base by approximately 39,000 in the first quarter, driven by both our domestic and international markets, bringing our broadband subscriber total to approximately 1.516 million.  We continuously evaluate the changing economic conditions and associated effect on our customers and vendors and are managing the business appropriately.  Although these are extremely challenging times, the pandemic has made even more evident the worldwide demand for connectivity.”

Three Months Ended March 31, 2020 - Additional Information:

  • Consolidated revenue increased 2% or $11.3 million year over year despite negative foreign exchange impact.
  • Adjusted EBITDA increased 6% or $8.8 million year over year.
    • Hughes segment Adjusted EBITDA was up $0.6 million year over year.  The margin driven by the higher revenue was offset by increased sales, marketing, and operating expense associated primarily with our growing Latin American consumer markets.
    • ESS segment Adjusted EBITDA was higher by $0.3 million year over year.
    • Corporate and Other segment Adjusted EBITDA increased by $7.9 million.  The segment had equity earnings in unconsolidated affiliates during the quarter of $4.5 million compared to equity losses of $4.8 million in the same period a year ago.  This increase was partially offset 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.
  • Net loss from continuing operations was $57.7 million, an increase of loss by $53.5 million from last year.  The increased loss was primarily due to higher unrealized and realized losses on investments of $53.6 million which included the write-off of a strategic investment, higher depreciation and amortization of $13.4 million, and higher unrealized losses on foreign currency of $9.7 million.  This was partially offset by lower net income tax expense of $10.4 million, higher equity in earnings of $8.9 million, and lower net interest expense of $8.1 million.
  • Hughes broadband subscribers are approximately 1,516,000 as of March 31, 2020 including approximately 267,000 subscribers in Latin America.  To help support people working and studying from home, we signed the FCC’s Keeping America Connected Pledge, and our subscriber numbers exclude those whose service would have ordinarily been terminated in the absence of the Pledge.
  • For the three months ended March 31,2020, approximately 66% of Hughes segment revenue was attributable to our consumer customers with approximately 34% attributable to our enterprise customers.
  • Cash, cash equivalents and current marketable investment securities were $2.4 billion as of March 31, 2020.
  • We purchased 196,999 shares of our Class A common stock in the open market.

Set forth below is a table highlighting certain of EchoStar’s segment results three months ended March 31, 2020 and 2019 (amounts in thousands) from continuing operations (all US GAAP amounts reference results from continuing operations):

 

 

 

For the three months
ended March 31,

 

 

2020

 

2019

 

 

 

 

 

Revenue

 

 

 

 

Hughes

 

$458,482

 

 

 

$445,337

 

 

EchoStar Satellite Services

 

4,652

 

 

4,033

 

Corporate and Other

 

2,532

 

 

5,012

 

Total revenue

 

$465,666

 

 

 

$454,382

 

 

 

 

 

 

 

Adjusted EBITDA

 

 

 

 

Hughes

 

$162,219

 

 

 

$161,642

 

 

EchoStar Satellite Services

 

2,030

 

 

1,729

 

Corporate & Other:

 

 

 

 

Corporate overhead, operating and other

 

(20,124)

 

 

(18,719)

 

Equity in earnings (losses) of unconsolidated affiliates, net

 

4,512

 

 

(4,827)

 

Total Corporate & Other

 

(15,612)

 

 

(23,546)

 

Total Adjusted EBITDA

 

$148,637

 

 

 

$139,825

 

 

 

 

 

 

 

Net income (loss) from continuing operations

 

$(57,737)

 

 

 

$(4,239)

 

 

Expenditures for property and equipment

 

$104,604

 

 

 

$111,854

 

 

 

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

 

 

For the three months
ended March 31,

 

 

2020

 

2019

 

 

 

 

 

Net income (loss)

 

$(57,737)

 

 

 

$15,008

 

 

Interest income, net

 

(15,583)

 

 

(24,429)

 

Interest expense, net of amounts capitalized

 

36,233

 

 

53,199

 

Income tax provision (benefit), net

 

(7,492)

 

 

2,898

 

Depreciation and amortization

 

132,368

 

 

118,978

 

Net loss (income) from discontinued operations

 

 

 

(19,247)

 

Net loss (income) attributable to non-controlling interests

 

3,442

 

 

(806)

 

EBITDA

 

91,231

 

 

145,601

 

(Gains) losses on investments, net

 

46,672

 

 

(6,936)

 

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

 

(110)

 

 

 

Foreign currency transaction (gains) losses, net

 

10,844

 

 

1,160

 

Adjusted EBITDA

 

$148,637

 

 

 

$139,825

 

 

 

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 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 March 31, 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 March 31, 2020 filed today with the Securities and Exchange Commission.

EchoStar will host its earnings conference call on Thursday, May 7, 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 9193376.

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 March 31, 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

 

 

March 31, 2020

 

December 31, 2019

Assets

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$1,599,025

 

 

 

$1,519,431

 

 

Marketable investment securities

 

790,361

 

 

940,623

 

Trade accounts receivable and contract assets, net

 

187,919

 

 

196,629

 

Other current assets, net

 

189,887

 

 

179,531

 

Total current assets

 

2,767,192

 

 

2,836,214

 

Non-current assets:

 

 

 

 

Property and equipment, net

 

2,428,543

 

 

2,528,738

 

Operating lease right-of-use assets

 

119,794

 

 

114,042

 

Goodwill

 

509,315

 

 

506,953

 

Regulatory authorizations, net

 

471,164

 

 

478,598

 

Other intangible assets, net

 

25,826

 

 

29,507

 

Other investments, net

 

298,147

 

 

325,405

 

Other non-current assets, net

 

339,640

 

 

334,841

 

Total non-current assets

 

4,192,429

 

 

4,318,084

 

Total assets

 

$6,959,621

 

 

 

$7,154,298

 

 

 

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

 

Current liabilities:

 

 

 

 

Trade accounts payable

 

$107,245

 

 

 

$124,080

 

 

Contract liabilities

 

99,266

 

 

101,060

 

Accrued expenses and other current liabilities

 

239,706

 

 

270,879

 

Total current liabilities

 

446,217

 

 

496,019

 

Non-current liabilities:

 

 

 

 

Long-term debt

 

2,390,218

 

 

2,389,168

 

Deferred tax liabilities, net

 

339,006

 

 

351,692

 

Operating lease liabilities

 

105,482

 

 

96,941

 

Other non-current liabilities

 

73,123

 

 

74,925

 

Total non-current liabilities

 

2,907,829

 

 

2,912,726

 

Total liabilities

 

3,354,046

 

 

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 March 31, 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, 56,760,433 shares issued and 50,078,513 shares outstanding at March 31, 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 March 31, 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 March 31, 2020 and December 31, 2019

 

 

 

 

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

 

 

 

 

Additional paid-in capital

 

3,307,360

 

 

3,290,483

 

Accumulated other comprehensive income (loss)

 

(192,218)

 

 

(122,138)

 

Accumulated earnings (losses)

 

569,446

 

 

632,809

 

Treasury stock, at cost

 

(137,347)

 

 

(131,454)

 

Total EchoStar Corporation stockholders’ equity

 

3,547,346

 

 

3,669,805

 

Non-controlling interests

 

58,229

 

 

75,748

 

Total stockholders’ equity

 

3,605,575

 

 

3,745,553

 

Total liabilities and stockholders’ equity

 

$6,959,621

 

 

 

$7,154,298

 

 

                 

 

ECHOSTAR CORPORATION

Condensed Consolidated Statements of Operations

(Amounts in thousands, except per share amounts)

 

 

 

For the three months
ended March 31,

 

 

2020

 

2019

Revenue:

 

 

 

 

Services and other revenue

 

$408,357

 

 

 

$402,668

 

 

Equipment revenue

 

57,309

 

 

51,714

 

Total revenue

 

465,666

 

 

454,382

 

Costs and expenses:

 

 

 

 

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

 

145,252

 

 

143,347

 

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

 

45,908

 

 

45,007

 

Selling, general and administrative expenses

 

125,281

 

 

112,114

 

Research and development expenses

 

6,254

 

 

6,888

 

Depreciation and amortization

 

132,368

 

 

118,978

 

Total costs and expenses

 

455,063

 

 

426,334

 

Operating income (loss)

 

10,603

 

 

28,048

 

Other income (expense):

 

 

 

 

Interest income, net

 

15,583

 

 

24,429

 

Interest expense, net of amounts capitalized

 

(36,233)

 

 

(53,199)

 

Gains (losses) on investments, net

 

(46,672)

 

 

6,936

 

Equity in earnings (losses) of unconsolidated affiliates, net

 

2,613

 

 

(6,353)

 

Foreign currency transaction gains (losses), net

 

(10,844)

 

 

(1,160)

 

Other, net

 

(279)

 

 

(42)

 

Total other income (expense), net

 

(75,832)

 

 

(29,389)

 

Income (loss) from continuing operations before income taxes

 

(65,229)

 

 

(1,341)

 

Income tax benefit (provision), net

 

7,492

 

 

(2,898)

 

Net income (loss) from continuing operations

 

(57,737)

 

 

(4,239)

 

Net income (loss) from discontinued operations

 

 

 

19,247

 

Net income (loss)

 

(57,737)

 

 

15,008

 

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

 

3,442

 

 

(806)

 

Net income (loss) attributable to EchoStar Corporation common stock

 

$(54,295)

 

 

 

$14,202

 

 

 

 

 

 

 

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

 

 

 

 

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

 

$(0.56)

 

 

 

$(0.05)

 

 

Total basic and diluted earnings (losses) per share

 

$(0.56)

 

 

 

$0.15

 

 

 

ECHOSTAR CORPORATION

Condensed Consolidated Statements of Cash Flows

(Amounts in thousands, except per share amounts)

 

 

For the three months
ended March 31,

 

 

2020

 

2019

Cash flows from operating activities:

 

 

 

 

Net income (loss)

 

$(57,737)

 

 

 

$15,008

 

 

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

 

 

 

 

Depreciation and amortization

 

132,368

 

 

154,221

 

Losses (gains) on investments, net

 

46,672

 

 

(6,418)

 

Equity in losses (earnings) of unconsolidated affiliates, net

 

(2,613)

 

 

6,353

 

Foreign currency transaction losses (gains), net

 

10,844

 

 

1,160

 

Deferred tax provision (benefit), net

 

(10,064)

 

 

6,455

 

Stock-based compensation

 

2,384

 

 

2,628

 

Amortization of debt issuance costs

 

1,050

 

 

2,010

 

Other, net

 

(4,899)

 

 

1,754

 

Changes in assets and liabilities, net:

 

 

 

 

Trade accounts receivable and contract assets, net

 

(7,664)

 

 

(19,231)

 

Other current assets, net

 

(16,127)

 

 

(10,370)

 

Trade accounts payable

 

(9,559)

 

 

8,831

 

Contract liabilities

 

(3,212)

 

 

17,896

 

Accrued expenses and other current liabilities

 

(4,922)

 

 

(9,914)

 

Non-current assets and non-current liabilities, net

 

(5,226)

 

 

5,563

 

Net cash flows from operating activities

 

71,295

 

 

175,946

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

Purchases of marketable investment securities

 

(550,891)

 

 

(325,557)

 

Sales and maturities of marketable investment securities

 

687,579

 

 

712,666

 

Purchase of other investments

 

(5,500)

 

 

 

Expenditures for property and equipment

 

(104,604)

 

 

(111,962)

 

Expenditures for externally marketed software

 

(8,638)

 

 

(7,600)

 

Net cash flows from investing activities

 

17,946

 

 

267,547

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

Repurchase of the 2019 Senior Secured Notes

 

 

 

(8,046)

 

Payment of finance lease obligations

 

(215)

 

 

(9,882)

 

Payment of in-orbit incentive obligations

 

(801)

 

 

(1,573)

 

Net proceeds from Class A common stock options exercised

 

150

 

 

2,047

 

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

 

2,924

 

 

2,749

 

Treasury share purchase

 

(5,893)

 

 

 

Contribution by non-controlling interest holder

 

4,000

 

 

 

Purchase of non-controlling interest

 

 

 

(7,313)

 

Other, net

 

817

 

 

(131)

 

Net cash flows from financing activities

 

982

 

 

(22,149)

 

 

 

 

 

 

Effect of exchange rates on cash and cash equivalents

 

(4,809)

 

 

(133)

 

Net increase (decrease) in cash and cash equivalents

 

85,414

 

 

421,211

 

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

 

$1,607,303

 

 

 

$1,350,706