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EchoStar Announces Financial Results for Three and Nine Months Ended September 30, 2018

Englewood, CO, November 8, 2018—EchoStar Corporation (NASDAQ: SATS) today announced its financial results for the three and nine months ended September 30, 2018.

Three Months Ended September 30, 2018 Financial Highlights:

  • Consolidated revenues of $533.0 million.
  • Consolidated net income from continuing operations of $16.5 million, consolidated net income attributable to EchoStar common stock of $16.1 million, and diluted earnings per share of $0.17.  Included in these amounts are net gains on investments of $4.7 million. Excluding these net gains, diluted earnings per share would have been $0.12.
  • Consolidated EBITDA of $220.2 million, including net gains on investments of $4.7 million.  Excluding these net gains, EBITDA would have been $215.5 million (see discussion and the reconciliation of GAAP to this non-GAAP measure below).

Nine Months Ended September 30, 2018 Financial Highlights:

  • Consolidated revenues of $1,560.7 million.
  • Consolidated net income from continuing operations of $73.0 million, consolidated net income attributable to EchoStar common stock of $71.7 million, and diluted earnings per share of $0.74. Included in these amounts are net gains on investments of $33.4 million. Excluding these net gains, diluted earnings per share would have been $0.40.
  • Consolidated EBITDA of $671.7 million, including net gains on investments of $33.4 million.  Excluding these net gains, EBITDA would have been $638.2 million (see discussion and the reconciliation of GAAP to this non-GAAP measure below).

Additional Highlights:

  • Approximately 1,332,000 Hughes broadband subscribers as of September 30, 2018.
  • Cash, cash equivalents and current marketable investment securities of $3.4 billion as of September 30, 2018.

Set forth below is a table highlighting certain of EchoStar’s segment results for the three and nine months ended September 30, 2018 and 2017:

 

 

For the three months
ended September 30,

 

For the nine months
ended September 30,

 

 

2018

 

2017

 

2018

 

2017

 

 

(Dollars in thousands)

Revenue

 

 

 

 

 

 

 

 

Hughes

 

$

444,762

 

 

$

380,061

 

 

$

1,271,886

 

 

$

1,072,143

 

EchoStar Satellite Services

 

84,007

 

 

97,093

 

 

276,185

 

 

295,785

 

Corporate & Other

 

4,184

 

 

4,079

 

 

12,631

 

 

11,532

 

Total

 

$

532,953

 

 

$

481,233

 

 

$

1,560,702

 

 

$

1,379,460

 

 

 

 

 

 

 

 

 

 

EBITDA

 

 

 

 

 

 

 

 

Hughes

 

$

164,135

 

 

$

131,817

 

 

$

452,982

 

 

$

342,693

 

EchoStar Satellite Services

 

72,156

 

 

78,345

 

 

238,789

 

 

241,873

 

Corporate & Other:

 

 

 

 

 

 

 

 

Corporate overhead, operating and other

 

(21,076

)

 

(14,772

)

 

(50,641

)

 

(44,386

)

Equity in earnings (losses) of unconsolidated affiliates, net

 

416

 

 

4,381

 

 

(2,651

)

 

15,620

 

Gains and losses on investments, net

 

4,549

 

 

20,090

 

 

33,171

 

 

32,238

 

Sub-total

 

(16,111

)

 

9,699

 

 

(20,121

)

 

3,472

 

Total

 

$

220,180

 

 

$

219,861

 

 

$

671,650

 

 

$

588,038

 

 

 

 

 

 

 

 

 

 

Net income from continuing operations

 

$

16,502

 

 

$

35,855

 

 

$

73,015

 

 

$

73,221

 

Net income (loss) from discontinued operations

 

 

 

(654

)

 

 

 

6,454

 

Net income

 

$

16,502

 

 

$

35,201

 

 

$

73,015

 

 

$

79,675

 

 

 

 

 

 

 

 

 

 

Expenditures for property and equipment from continuing operations

 

$

167,155

 

 

$

192,131

 

 

$

337,729

 

 

$

410,145

 

 

The following table reconciles GAAP to non-GAAP measurements.

 

 

 

For the three months
ended September 30,

 

For the nine months
ended September 30,

 

 

2018

 

2017

 

2018

 

2017

 

 

(Dollars in thousands)

Net income

 

$

16,502

 

 

$

35,201

 

 

$

73,015

 

 

$

79,675

 

 

 

 

 

 

 

 

 

 

Interest income and expense, net

 

40,737

 

 

43,634

 

 

130,134

 

 

126,156

 

Income tax provision, net

 

12,836

 

 

6,082

 

 

25,235

 

 

9,073

 

Depreciation and amortization

 

150,555

 

 

134,822

 

 

444,558

 

 

379,939

 

Net (income) loss from discontinued operations

 

 

 

654

 

 

 

 

(6,454

)

Net income attributable to noncontrolling interests

 

(450

)

 

(532

)

 

(1,292

)

 

(351

)

EBITDA

 

$

220,180

 

 

$

219,861

 

 

$

671,650

 

 

$

588,038

 

Note on Use of Non-GAAP Financial Measures

EBITDA is defined as “Net income (loss)” excluding “Interest income and expense, net,” “Income tax provision (benefit), net,” “Depreciation and amortization,” “Net income (loss) from discontinued operations,” and “Net income (loss) attributable to noncontrolling interests.”  EBITDA is not determined in accordance with US GAAP.  EBITDA is 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 this non-GAAP measure as a measure of our operating efficiency and overall financial performance for benchmarking against our peers and competitors. Management believes that this non-GAAP measure provides meaningful supplemental information regarding the underlying operating performance of our business and is appropriate to enhance an overall understanding of our financial performance. Management also believes that EBITDA is useful to investors because it is 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 September 30, 2018 and 2017 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 September 30, 2018 filed today with the Securities and Exchange Commission.

EchoStar will host its earnings conference call on Thursday, November 8, 2018 at 11:00 a.m. Eastern Time. The call-in numbers are (877) 815-1625 (toll-free) and (716) 247-5178 (international), Conference ID # 1087737.

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, 2017 and Quarterly Report on Form 10-Q for the period ended September 30, 2018, 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.

Contact Information

EchoStar Investor Relations

EchoStar Media Relations

Deepak V. Dutt

Phone: +1 301-428-1686

Email: deepak.dutt@echostar.com

Sharyn Nerenberg

Phone: +1 301-428-7124

Email: sharyn.nerenberg@echostar.com

ECHOSTAR CORPORATION

Consolidated Balance Sheets

 

 

As of

 

 

September 30, 2018

 

December 31, 2017

Assets

 

(Unaudited)

 

(Audited)

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

1,597,295

 

 

$

2,431,456

 

Marketable investment securities, at fair value

 

1,842,875

 

 

814,161

 

Trade accounts receivable and contract assets, net

 

217,524

 

 

196,840

 

Trade accounts receivable - DISH Network

 

11,065

 

 

43,295

 

Inventory

 

70,061

 

 

83,595

 

Prepaids and deposits

 

56,149

 

 

54,533

 

Other current assets

 

17,222

 

 

91,671

 

Total current assets

 

3,812,191

 

 

3,715,551

 

Noncurrent assets:

 

 

 

 

Property and equipment, net

 

3,442,537

 

 

3,465,471

 

Regulatory authorizations, net

 

525,595

 

 

536,936

 

Goodwill

 

504,173

 

 

504,173

 

Other intangible assets, net

 

47,912

 

 

58,955

 

Investments in unconsolidated entities

 

160,669

 

 

161,427

 

Other receivables - DISH Network

 

94,503

 

 

92,687

 

Other noncurrent assets, net

 

262,866

 

 

214,814

 

Total noncurrent assets

 

5,038,255

 

 

5,034,463

 

Total assets

 

$

8,850,446

 

 

$

8,750,014

 

Liabilities and Stockholders’ Equity

 

 

 

 

Current liabilities:

 

 

 

 

Trade accounts payable

 

$

119,235

 

 

$

108,406

 

Trade accounts payable - DISH Network

 

1,411

 

 

4,753

 

Current portion of long-term debt and capital lease obligations

 

1,030,088

 

 

40,631

 

Contract liabilities

 

74,135

 

 

65,959

 

Accrued interest

 

57,589

 

 

47,616

 

Accrued compensation

 

41,341

 

 

47,756

 

Accrued taxes

 

16,681

 

 

16,122

 

Accrued expenses and other

 

72,464

 

 

82,647

 

Total current liabilities

 

1,412,944

 

 

413,890

 

Noncurrent liabilities:

 

 

 

 

Long-term debt and capital lease obligations, net

 

2,582,819

 

 

3,594,213

 

Deferred tax liabilities, net

 

471,259

 

 

436,023

 

Other noncurrent liabilities

 

124,694

 

 

128,503

 

Total noncurrent liabilities

 

3,178,772

 

 

4,158,739

 

Total liabilities

 

4,591,716

 

 

4,572,629

 

Commitments and contingencies

 

 

 

 

Stockholders’ equity:

 

 

 

 

Preferred stock, $.001 par value, 20,000,000 shares authorized, none issued and outstanding at each of September 30, 2018 and December 31, 2017

 

 

 

 

Common stock, $.001 par value, 4,000,000,000 shares authorized:

 

 

 

 

Class A common stock, $.001 par value, 1,600,000,000 shares authorized, 54,080,228 shares issued and 48,547,910 shares outstanding at September 30, 2018 and 53,663,859 shares issued and 48,131,541 shares outstanding at December 31, 2017

 

54

 

 

54

 

Class B convertible common stock, $.001 par value, 800,000,000 shares authorized, 47,687,039 shares issued and outstanding at each of September 30, 2018 and December 31, 2017

 

48

 

 

48

 

Class C convertible common stock, $.001 par value, 800,000,000 shares authorized, none issued and outstanding at each of September 30, 2018 and December 31, 2017

 

 

 

 

Class D common stock, $.001 par value, 800,000,000 shares authorized, none issued and outstanding at each of September 30, 2018 and December 31, 2017

 

 

 

 

Additional paid-in capital

 

3,694,682

 

 

3,669,461

 

Accumulated other comprehensive loss

 

(160,947

)

 

(130,154

)

Accumulated earnings

 

808,330

 

 

721,316

 

Treasury stock, at cost

 

(98,162

)

 

(98,162

)

Total EchoStar Corporation stockholders’ equity

 

4,244,005

 

 

4,162,563

 

Other noncontrolling interests

 

14,725

 

 

14,822

 

Total stockholders’ equity

 

4,258,730

 

 

4,177,385

 

Total liabilities and stockholders’ equity

 

$

8,850,446

 

 

$

8,750,014

 

 

ECHOSTAR CORPORATION

Consolidated Statements of Operations

(In thousands)

 

 

 

For the three months
ended September 30,

 

For the nine months
ended September 30,

 

 

2018

 

2017

 

2018

 

2017

Revenue:

 

 

 

 

 

 

 

 

Services and other revenue - DISH Network

 

$

87,859

 

 

$

111,135

 

 

$

291,835

 

 

$

339,824

 

Services and other revenue - other

 

388,248

 

 

310,973

 

 

1,118,733

 

 

865,817

 

Equipment revenue

 

56,846

 

 

59,125

 

 

150,134

 

 

173,819

 

Total revenue

 

532,953

 

 

481,233

 

 

1,560,702

 

 

1,379,460

 

 

 

 

 

 

 

 

 

 

Costs and expenses:

 

 

 

 

 

 

 

 

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

 

152,011

 

 

143,048

 

 

451,913

 

 

416,463

 

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

 

46,318

 

 

47,644

 

 

127,254

 

 

141,839

 

Selling, general and administrative expenses

 

107,490

 

 

91,003

 

 

313,839

 

 

263,820

 

Research and development expenses

 

6,544

 

 

8,302

 

 

20,328

 

 

23,444

 

Depreciation and amortization

 

150,555

 

 

134,822

 

 

444,558

 

 

379,939

 

Total costs and expenses

 

462,918

 

 

424,819

 

 

1,357,892

 

 

1,225,505

 

Operating income

 

70,035

 

 

56,414

 

 

202,810

 

 

153,955

 

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

Interest income

 

21,349

 

 

12,012

 

 

56,237

 

 

30,342

 

Interest expense, net of amounts capitalized

 

(62,086

)

 

(55,646

)

 

(186,371

)

 

(156,498

)

Gains and losses on investments, net

 

4,693

 

 

20,090

 

 

33,426

 

 

30,664

 

Equity in earnings (losses) of unconsolidated affiliates, net

 

416

 

 

4,381

 

 

(2,651

)

 

15,620

 

Other, net

 

(5,069

)

 

4,686

 

 

(5,201

)

 

8,211

 

Total other income (expense), net

 

(40,697

)

 

(14,477

)

 

(104,560

)

 

(71,661

)

Income from continuing operations before income taxes

 

29,338

 

 

41,937

 

 

98,250

 

 

82,294

 

Income tax provision, net

 

(12,836

)

 

(6,082

)

 

(25,235

)

 

(9,073

)

Net income from continuing operations

 

16,502

 

 

35,855

 

 

73,015

 

 

73,221

 

Net income (loss) from discontinued operations

 

 

 

(654

)

 

 

 

6,454

 

Net income

 

16,502

 

 

35,201

 

 

73,015

 

 

79,675

 

Less: Net income attributable to noncontrolling interests

 

450

 

 

532

 

 

1,292

 

 

351

 

Net income attributable to EchoStar Corporation

 

16,052

 

 

34,669

 

 

71,723

 

 

79,324

 

Less: Net loss attributable to Hughes Retail Preferred Tracking Stock

 

 

 

 

 

 

 

(1,209

)

Net income attributable to EchoStar Corporation common stock

 

$

16,052

 

 

$

34,669

 

 

$

71,723

 

 

$

80,533

 

 

 

 

 

 

 

 

 

 

Earnings per share - Class A and B common stock:

 

 

 

 

 

 

 

 

Basic earnings from continuing operations per share

 

$

0.17

 

 

$

0.37

 

 

$

0.75

 

 

$

0.78

 

Total basic earnings per share

 

$

0.17

 

 

$

0.36

 

 

$

0.75

 

 

$

0.84

 

Diluted earnings from continuing operations per share

 

$

0.17

 

 

$

0.36

 

 

$

0.74

 

 

$

0.77

 

Total diluted earnings per share

 

$

0.17

 

 

$

0.36

 

 

$

0.74

 

 

$

0.83

 

 

ECHOSTAR CORPORATION

Consolidated Statements of Cash Flows

(In thousands)

 

 

For the nine months ended September 30,

 

 

2018

 

2017

Cash flows from operating activities:

 

 

 

 

Net income

 

$

73,015

 

 

$

79,675

 

Adjustments to reconcile net income to net cash flows from operating activities:

 

 

 

 

Depreciation and amortization

 

444,558

 

 

391,598

 

Equity in (earnings) losses of unconsolidated affiliates, net

 

2,651

 

 

(14,461

)

Amortization of debt issuance costs

 

5,910

 

 

5,479

 

Gains and losses on investments, net

 

(33,524

)

 

(30,664

)

Stock-based compensation

 

7,771

 

 

7,169

 

Deferred tax provision

 

22,357

 

 

7,924

 

Dividends received from unconsolidated entity

 

5,000

 

 

15,000

 

Proceeds from sale of trading securities

 

 

 

8,922

 

Changes in current assets and current liabilities, net:

 

 

 

 

Trade accounts receivable, net

 

(35,811

)

 

5,088

 

Trade accounts receivable - DISH Network

 

32,323

 

 

225,963

 

Inventory

 

10,667

 

 

(26,231

)

Other current assets

 

(5,569

)

 

(11,392

)

Trade accounts payable

 

2,536

 

 

(64,553

)

Trade accounts payable - DISH Network

 

(3,342

)

 

2,534

 

Accrued expenses and other

 

19,450

 

 

13,268

 

Changes in noncurrent assets and noncurrent liabilities, net

 

(16,123

)

 

(23,474

)

Other, net

 

12,043

 

 

91

 

Net cash flows from operating activities

 

543,912

 

 

591,936

 

Cash flows from investing activities:

 

 

 

 

Purchases of marketable investment securities

 

(2,323,090

)

 

(319,912

)

Sales and maturities of marketable investment securities

 

1,331,225

 

 

375,890

 

Expenditures for property and equipment

 

(415,253

)

 

(422,661

)

Refunds and other receipts related to property and equipment

 

77,524

 

 

 

Sale of investment in unconsolidated entity

 

1,558

 

 

17,781

 

Expenditures for externally marketed software

 

(24,568

)

 

(25,447

)

Other

 

(991

)

 

 

Net cash flows from investing activities

 

(1,353,595

)

 

(374,349

)

Cash flows from financing activities:

 

 

 

 

Repayment of debt and capital lease obligations

 

(27,764

)

 

(26,394

)

Net proceeds from Class A common stock options exercised

 

4,424

 

 

33,156

 

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

 

7,428

 

 

6,938

 

Cash exchanged for Tracking Stock

 

 

 

(651

)

Repayment of in-orbit incentive obligations

 

(4,601

)

 

(4,583

)

Other, net

 

(530

)

 

201

 

Net cash flows from financing activities

 

(21,043

)

 

8,667

 

Effect of exchange rates on cash and cash equivalents

 

(3,449

)

 

1,014

 

Net increase (decrease) in cash and cash equivalents, including restricted amounts

 

(834,175

)

 

227,268

 

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

 

2,432,249

 

 

2,571,866

 

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

 

$

1,598,074

 

 

$

2,799,134

 

 

 

 

 

 

Supplemental disclosure of cash flow information:

 

 

 

 

Cash paid for interest, net of amounts capitalized

 

$

170,303

 

 

$

137,955

 

Cash paid for income taxes

 

$

3,369

 

 

$

10,071