Log in
E-mail
Password
Remember
Forgot password ?
Become a member for free
Sign up
Sign up
New member
Sign up for FREE
New customer
Discover our services
Settings
Settings
Dynamic quotes 
OFFON

MarketScreener Homepage  >  Equities  >  Nasdaq  >  EchoStar Corporation    SATS

ECHOSTAR CORPORATION

(SATS)
  Report
SummaryQuotesChartsNewsRatingsCalendarCompanyFinancialsConsensusRevisions 
SummaryMost relevantAll NewsPress ReleasesOfficial PublicationsSector newsMarketScreener Strategies

ECHOSTAR : MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)

share with twitter share with LinkedIn share with facebook
08/06/2020 | 07:10am EDT
Unless the context indicates otherwise, the terms "we," "us," "EchoStar," the
"Company" and "our" refer to EchoStar Corporation and its subsidiaries. The
following Management's Discussion and Analysis of our Financial Condition and
Results of Operations ("Management's Discussion and Analysis") should be read in
conjunction with our accompanying Condensed Consolidated Financial Statements
and notes thereto ("Accompanying Condensed Consolidated Financial Statements")
in Item 1 of this Quarterly Report on Form 10-Q ("Form 10-Q").  This
Management's Discussion and Analysis is intended to help provide an
understanding of our financial condition, changes in our financial condition and
our results of operations.  Many of the statements in this Management's
Discussion and Analysis are forward-looking statements that involve assumptions
and are subject to risks and uncertainties that are often difficult to predict
and beyond our control.  Actual results could differ materially from those
expressed or implied by such forward-looking statements.  Refer to the
Disclosure Regarding Forward-Looking Statements in this Form 10-Q for further
discussion.  For a discussion of additional risks, uncertainties and other
factors that could impact our results of operations or financial condition,
refer to the Risk Factors in Part II, Item 1A of this Form 10-Q and in
Part I, Item 1A of our most recent Annual Report on Form 10-K ("Form 10-K")
filed with the Securities and Exchange Commission ("SEC").  Further, such
forward-looking statements speak only as of the date of this Form 10-Q and we
undertake no obligation to update them.

EXECUTIVE SUMMARY

EchoStar is a global provider of broadband satellite technologies, broadband internet services for consumer customers, which include home and small to medium-sized businesses, and satellite services. We also deliver innovative network technologies, managed services and communications solutions for enterprise customers, which include aeronautical and government enterprises.


In September 2019, pursuant to a master transaction agreement (the "Master
Transaction Agreement") with DISH and a wholly-owned subsidiary of DISH ("Merger
Sub"), (i) we transferred certain real property and the various businesses,
products, licenses, technology, revenues, billings, operating activities, assets
and liabilities primarily related to the former portion of our ESS segment that
managed, marketed and provided (1) broadcast satellite services primarily to
DISH and its subsidiaries (together with DISH, "DISH Network") and our joint
venture Dish Mexico, S. de R.L. de C.V. ("Dish Mexico") and its subsidiaries,
and (2) telemetry, tracking and control ("TT&C") services for satellites owned
by DISH Network and a portion of our other businesses (collectively, the "BSS
Business") to one of our former subsidiaries, EchoStar BSS Corporation ("BSS
Corp."), (ii) we distributed to each holder of shares of our Class A or Class B
common stock entitled to receive consideration in the transaction an amount of
shares of common stock of BSS Corp., par value $0.001 per share ("BSS Common
Stock"), equal to one share of BSS Common Stock for each share of our Class A or
Class B common stock owned by such stockholder (the "Distribution"); and (iii)
immediately after the Distribution, (1) Merger Sub merged with and into BSS
Corp. (the "Merger"), such that BSS Corp. became a wholly-owned subsidiary of
DISH and with DISH then owning and operating the BSS Business, and (2) each
issued and outstanding share of BSS Common Stock owned by EchoStar stockholders
was converted into the right to receive 0.23523769 shares of DISH Class A common
stock, par value $0.001 per share ("DISH Common Stock") ((i) - (iii)
collectively, the "BSS Transaction").

Following the consummation of the BSS Transaction, we no longer operate the BSS
Business, which was a substantial portion of our ESS segment. As a result of the
BSS Transaction, the financial results of the BSS Business, except for certain
real estate that transferred in the transaction, are presented as discontinued
operations and, as such, excluded from continuing operations and segment results
for the three and six months ended June 30, 2019 in our Accompanying Condensed
Consolidated Financial Statements. Refer to Note 4. Discontinued Operations in
our Accompanying Condensed Consolidated Financial Statements in Item 1 of this
Form 10-Q.

We currently operate in two business segments: Hughes and ESS. These segments
are consistent with the way we make decisions regarding the allocation of
resources, as well as how operating results are reviewed by our chief operating
decision maker, who is the Company's Chief Executive Officer.

Our operations also include various corporate departments (primarily Executive,
Treasury, Strategic Development, Human Resources, IT, Finance, Accounting, Real
Estate and Legal) and other activities that have not been assigned to our
business segments such as costs incurred in certain satellite development
programs and other business development activities, and gains or losses from
certain of our investments. These activities, costs and income, as well as
eliminations of intersegment transactions, are accounted for in Corporate and
Other.
                                       47

--------------------------------------------------------------------------------

Table of Contents

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED



All amounts presented in this Management's Discussion and Analysis reference
results from continuing operations unless otherwise noted and are expressed in
thousands of United States ("U.S.") dollars, except share and per share amounts
and unless otherwise noted.

Highlights from our financial results are as follows:

Consolidated Results of Operations for the Three Months Ended June 30, 2020:


•Revenue of $459.5 million
•Operating income (loss) of $34.8 million
•Net income (loss) from continuing operations of $(14.8) million
•Net income (loss) attributable to EchoStar common stock of $(11.4) million and
basic earnings (loss) per share of common stock of $(0.12)
•Earnings before interest, taxes, depreciation and amortization, net income
(loss) from discontinued operations and net income (loss) attributable to
non-controlling interests ("EBITDA") of $156.8 million (refer to the
reconciliation of this non-GAAP measure in Results of Operations)

Consolidated Financial Condition as of June 30, 2020:


•Total assets of $7.0 billion
•Total liabilities of $3.4 billion
•Total stockholders' equity of $3.6 billion
•Cash and cash equivalents and marketable investment securities of $2.5 billion

Hughes Segment


Our Hughes segment is a global provider of broadband satellite technologies and
broadband internet services to consumer customers and broadband network
technologies, managed services, equipment, hardware, satellite services and
communications solutions to consumer and enterprise customers. The Hughes
segment also designs, provides and installs gateway and terminal equipment to
customers for other satellite systems. In addition, our Hughes segment designs,
develops, constructs and provides telecommunication networks comprising
satellite ground segment systems and terminals to mobile system operators and
our enterprise customers.

We incorporate advances in technology to reduce costs and to increase the
functionality and reliability of our products and services.  Through advanced
and proprietary methodologies, technologies, software and techniques, we
continue to improve the efficiency of our networks.  We invest in technologies
to enhance our system and network management capabilities, specifically our
managed services for enterprises.  We also continue to invest in next generation
technologies that can be applied to our future products and services.

We continue to focus our efforts on growing our consumer revenue by maximizing
utilization of our existing satellites while planning for new satellites to be
launched or acquired. Our consumer revenue growth depends on our success in
adding new and retaining existing subscribers in our domestic and international
markets across wholesale and retail channels. Service costs related to ongoing
support for our direct and indirect customers and partners are typically
impacted most significantly by our growth. The growth of our enterprise
businesses relies heavily on global economic conditions and the competitive
landscape for pricing relative to competitors and alternative technologies. As a
result of the COVID-19 pandemic, in accordance with instructions received from
some of our enterprise customers, we have deferred or canceled the delivery of
some products or services. We expect to recognize revenue for those deferred
products and services in the second half of 2020 and in 2021.

Our Hughes segment currently uses capacity from three of our satellites (the
SPACEWAY 3 satellite, the EchoStar XVII satellite and the EchoStar XIX
satellite), our Al Yah 3 Brazilian payload and additional satellite capacity
acquired from third-party providers to provide services to our customers. Growth
of our consumer subscriber base
                                       48

--------------------------------------------------------------------------------

Table of Contents

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED


in certain areas in the U.S. continues to be constrained where we are nearing or
have reached maximum capacity.  While these constraints are not expected to be
resolved until we launch new satellites, we continue to focus on revenue growth
in all areas and consumer subscriber growth in the areas where we have available
capacity.

In May 2019, we entered into an agreement with Al Yah Satellite Communications
Company PrJSC ("Yahsat") pursuant to which, in November 2019, Yahsat contributed
its satellite communications services business in Brazil to us in exchange for a
20% ownership interest in our existing Brazilian subsidiary that conducts our
satellite communications services business in Brazil (the "Yahsat Brazil JV
Transaction"). The combined business provides broadband internet services and
enterprise solutions in Brazil using the Telesat T19V satellite, the Eutelsat
65W satellite and Yahsat's Al Yah 3 satellite.  Under the terms of the
agreement, Yahsat may also acquire, for further cash investments, additional
minority ownership interests in the business in the future provided certain
conditions are met.

In May 2019, we also entered into an agreement with Bharti Airtel Limited
("BAL") and its subsidiary, Bharti Airtel Services Limited (together with BAL,
"Bharti"), pursuant to which Bharti will contribute its very small aperture
terminal ("VSAT") telecommunications services and hardware business in India to
our two existing Indian subsidiaries that conduct our VSAT services and hardware
business. The combined entities will provide broadband satellite and hybrid
solutions for enterprise networks. Upon consummation of the transaction, Bharti
will have a 33% ownership interest in the combined business. The completion of
the transaction is subject to customary regulatory approvals and closing
conditions. No assurance can be given that the transaction will be consummated
on the terms agreed to or at all.

In August 2018, we entered into an agreement with Yahsat to establish a new
entity, Broadband Connectivity Solutions (Restricted) Limited (together with its
subsidiaries, "BCS"), to provide commercial Ka-band satellite broadband services
across Africa, the Middle East and southwest Asia operating over Yahsat's Al
Yah 2 and Al Yah 3 Ka-band satellites. The transaction was consummated in
December 2018 when we invested $100.0 million in cash in exchange for a 20%
interest in BCS. Under the terms of the agreement, we may also acquire, for
further cash investments, additional ownership interests in BCS in the future
provided certain conditions are met. We supply network operations and management
services and equipment to BCS.

In August 2017, we entered into a contract for the design and construction
of the EchoStar XXIV satellite, a new, next-generation, high throughput
geostationary satellite. The EchoStar XXIV satellite is primarily intended to
provide additional capacity for our HughesNet satellite internet service
("HughesNet service") in North, Central and South America as well as enterprise
broadband services. In the first quarter of 2020, Space Systems/Loral, LLC
("SS/L"), the manufacturer of our EchoStar XXIV satellite, invoked the "force
majeure" clause of our contract and notified us of a possible delay in
completion of the satellite due to "shelter-in-place" orders affecting personnel
at SS/L and its subcontractors, and other potential impacts of the COVID-19
pandemic.  Since that time, we have continued to work with SS/L to monitor the
impact of COVID-19 on the anticipated delivery schedule for our EchoStar XXIV
satellite. We currently expect the EchoStar XXIV satellite to be launched no
earlier than the second half of 2021. This or other delays or impediments to
SS/L's meeting its obligations as a result of the COVID-19 pandemic and various
economic and other consequences or otherwise could have a material adverse
impact on our business operations, future revenues, financial position and
prospects, the completion of manufacture of the EchoStar XXIV satellite and our
planned expansion of satellite broadband services throughout North, South and
Central America. Capital expenditures associated with the construction and
launch of the EchoStar XXIV satellite are included in Corporate and Other in our
segment reporting.

In March 2017, we and DISH Network entered into a master service agreement (the
"Hughes Broadband MSA"). Pursuant to the Hughes Broadband MSA, DISH Network,
among other things: (i) has the right, but not the obligation, to market,
promote and solicit orders and upgrades for our HughesNet service and related
equipment and other telecommunication services; and (ii) installs HughesNet
service equipment with respect to activations generated by DISH Network.  As a
result of the Hughes Broadband MSA, we have not earned, and do not expect to
earn in the future, significant equipment revenue from our distribution
agreement with DISH Network.

We continue our efforts to expand our consumer satellite services business outside of the U.S. We have been delivering high-speed consumer satellite broadband services in Brazil since July 2016 and are also providing satellite broadband internet service in several other Latin American countries. Additionally, in September 2015, we

                                       49

--------------------------------------------------------------------------------

Table of Contents

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED


entered into 15-year agreements with affiliates of Telesat Canada for Ka-band
capacity on the Telesat T19V satellite located at the 63 degree west longitude
orbital location, which was launched in July 2018. Telesat T19V was placed in
service during the fourth quarter of 2018 and augmented the capacity being
provided by the EUTELSAT 65 West A satellite and the EchoStar XIX satellite in
South America.

Our broadband subscribers include customers that subscribe to our HughesNet
service in North and Latin America through retail, wholesale and small/medium
enterprise service channels. In connection with the COVID-19 pandemic, we
voluntarily signed on to the Federal Communications Commissions' ("FCC") Keep
Americans Connected Pledge (the "Pledge"), promising not to terminate
residential or small business customers because of their inability to pay their
bills due to the disruptions caused by the COVID-19 pandemic. As a result, we
have provided HughesNet service to consumers who may not have the ability to pay
for such services, but have excluded any subscribers whose HughesNet service
would have ordinarily been terminated in the absence of the Pledge from our
subscriber numbers as of March 31, 2020 and June 30, 2020.

The following table presents our approximate subscribers:

                                                                                       As of
                                                     June 30,                        March 31,                      December 31,
                                                       2020                            2020                             2019
Broadband subscribers in the United
States                                                    1,221,000                       1,249,000                        1,239,000
Broadband subscribers in Latin America                      321,000                         267,000                          238,000
Total broadband subscribers                               1,542,000                       1,516,000                        1,477,000



During the second quarter of 2020, our gross subscriber additions increased by
approximately 1,000 compared to the first quarter of 2020. Our net subscriber
additions for the second quarter decreased by 13,000 compared to the first
quarter of 2020, reflecting higher churn in the second quarter as compared to
the first quarter of 2020. Multiple factors explain this higher churn. First, as
more of our beams are operated at or near capacity particularly with the many
customers working and attending class at home due to the COVID19 pandemic, the
increased network congestion affects HughesNet customer satisfaction in some
cases. In addition, we count a number of HughesNet subscribers as having churned
even though we continue to provide service to them as a result of the Pledge.

As of June 30, 2020 and December 31, 2019, our Hughes segment had $1.1 billion
and $1.4 billion of contracted revenue backlog, respectively. We define Hughes
contracted revenue backlog as our expected future revenue under enterprise
customer contracts that are non-cancelable, including lease revenue. Our
contracted revenue backlog as of June 30, 2020 decreased primarily due to the
bankruptcy of a certain customer and the effects of the COVID-19 pandemic,
including lengthened or delayed sales cycles with some of our enterprise
customers.

ESS Segment


Our ESS segment provides satellite services on a full-time and/or occasional-use
basis to U.S. government service providers, internet service providers,
broadcast news organizations, content providers and private enterprise
customers. We operate our ESS business using primarily the EchoStar IX satellite
and the EchoStar 105/SES-11 satellite and related infrastructure. Revenue in our
ESS segment depends largely on our ability to continuously make use of our
available satellite capacity with existing customers and our ability to enter
into commercial relationships with new customers. Our ESS segment, like others
in the fixed satellite services industry, has encountered, and may continue to
encounter, negative pressure on transponder rates and demand.

As of June 30, 2020 and December 31, 2019, our ESS segment had contracted revenue backlog of $7.4 million and $11.4 million respectively. We define contracted revenue backlog for our ESS segment as contracted future satellite lease revenue.

                                       50

--------------------------------------------------------------------------------

Table of Contents

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED


Other Business Opportunities

Our industry continues to evolve with the increasing worldwide demand for
broadband internet access for information, entertainment and commerce. The
current COVID-19 pandemic has made even more evident the worldwide need and
demand for connectivity and communications to facilitate an ever-increasing
virtual global community and workplace. In addition to fiber and wireless
systems, technologies such as geostationary high throughput satellites,
low-earth orbit ("LEO") networks, medium-earth orbit ("MEO") systems, balloons
and High Altitude Platform Systems are expected to continue to play significant
roles in enabling global broadband access, networks and services. We intend to
use our expertise, technologies, capital, investments, global presence,
relationships and other capabilities to continue to provide broadband internet
systems, equipment, networks and services for information, the
internet-of-things, entertainment, education, remote-connectivity and commerce
across many industries and communities in North America and internationally for
consumer and enterprise customers. We are closely tracking the developments in
next-generation satellite businesses, and we are seeking to utilize our
services, technologies, licenses and expertise to find new commercial
opportunities for our business.

We intend to continue to selectively explore opportunities to pursue
investments, commercial alliances, partnerships, joint ventures, acquisitions,
dispositions and other strategic initiatives and transactions, domestically and
internationally, that we believe may allow us to increase our existing market
share, increase our satellite capacity, expand into new satellite and other
technologies, markets and customers, broaden our portfolio of services, products
and intellectual property, make our business more valuable, align us for future
growth and expansion, maximize the return on our investments and strengthen our
business and relationships with our customers. We may allocate or dispose of
significant resources for long-term value that may not have a short or
medium-term or any positive impact on our revenue, results of operations, or
cash flow.

S-Band Strategy

We continue to explore the development and deployment of S-band technologies and
believe that our products and services will be integrated into new global,
hybrid networks that leverage multiple satellites and terrestrial technologies.
The current COVID-19 pandemic has made even more evident the worldwide need and
demand for such networks. In December 2013, we acquired EchoStar Mobile Limited
("EML"), an entity based in Dublin, Ireland, which is licensed to provide mobile
satellite service ("MSS") and complementary ground component ("CGC") services
covering the European Union and its member states ("EU") using the S-band
spectrum. EML's services in the EU are supported by the EchoStar XXI satellite
and the EUTELSAT 10A payload. In October 2019, we acquired Sirion Global Pty
Ltd., which we have renamed EchoStar Global Australia Pty Ltd ("EchoStar
Global"), which holds global S-band non-geostationary satellite spectrum rights
for MSS. Additionally, we have entered into a contract with Tyvak Nano-Satellite
Systems, Inc. for the design and construction of S-band nano-satellites. We
expect to launch two nano-satellites in the third quarter of 2020.  We expect
our nano-satellites to facilitate our continued growth in the global S-band
market and enable us to leverage our acquisition of EchoStar Global. In
addition, in November 2019, we were granted an S-band spectrum license for
terrestrial rights in Mexico. As of June 30, 2020, we have no material future
commitments in connection with these acquisitions or satellites.

Cybersecurity


As a global provider of satellite technologies and services, internet services
and communications equipment and networks, we may be prone to more targeted and
persistent levels of cyber-attacks than other businesses. These risks may be
more prevalent as we continue to expand and grow our business into other areas
of the world outside of North America, some of which are still developing their
cybersecurity infrastructure maturity. Detecting, deterring, preventing and
mitigating incidents caused by hackers and other parties may result in
significant costs to us and may expose our customers to financial or other harm
that have the potential to significantly increase our liability.

                                       51

--------------------------------------------------------------------------------

Table of Contents

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED


Due to the COVID-19 pandemic, a large portion of our workforce has been working
remotely and we expect certain portions of our workforce to continue to do so
from time to time.  While we have cybersecurity risk management tools to help
protect our technology, information and networks that our employees access
remotely, we cannot guarantee the security of the network that they will be
using, the security status of the other non-company managed devices that might
be on the network to which they are connected or the devices or networks used by
third parties with whom our employees conduct business, such as customers,
suppliers, vendors and other persons.  Additionally, there continues to be a
significant amount of COVID-19 related cyber-fraud and phishing attacks that
continue to target our employees, vendors, suppliers, customers and others.
Accordingly, we continue to focus our efforts and resources on improving
cybersecurity as a result of the COVID-19 pandemic.

We treat cybersecurity risk seriously and are focused on maintaining the
security of our and our partners' systems, networks, technologies and data. We
regularly review and revise our relevant policies and procedures, invest in and
maintain internal resources, personnel and systems and review, modify and
supplement our defenses through the use of various services, programs and
outside vendors. Additionally, we provide resources to assist employees in
better securing their home networks and remote connections.  We also maintain
agreements with third party vendors and experts to assist in our remediation and
mitigation efforts if we experience or identify a material incident or threat.
In addition, senior management and the Audit Committee of our Board of Directors
are regularly briefed on cybersecurity matters.

We are not aware of any cyber-incidents with respect to our owned or leased
satellites or other networks, equipment or systems that have had a material
adverse effect on our business, costs, operations, prospects, results of
operation or financial position during the three and six months ended June 30,
2020 and through August 6, 2020. There can be no assurance, however, that any
such incident can be detected or thwarted or will not have such a material
adverse effect in the future.

                                       52

--------------------------------------------------------------------------------

Table of Contents

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED


RESULTS OF OPERATIONS

Three Months Ended June 30, 2020 Compared to the Three Months Ended June 30, 2019


The following table presents our consolidated results of operations for the
three months ended June 30, 2020 compared to the three months ended June 30,
2019:
                                                                      For the three months ended June
                                                                                    30,                                                Variance
Statements of Operations Data                                             2020                2019              Amounts                        %
Revenue:
Services and other revenue                                           $  417,043$  402,786$ 14,257                          3.5
Equipment revenue                                                        42,423               57,645           (15,222)                       (26.4)
Total revenue                                                           459,466              460,431              (965)                        (0.2)
Costs and expenses:
Cost of sales - services and other                                      141,019              142,680            (1,661)                        

(1.2)

% of total services and other revenue                                      33.8   %             35.4  %
Cost of sales - equipment                                                32,542               46,549           (14,007)                       (30.1)
% of total equipment revenue                                               76.7   %             80.8  %
Selling, general and administrative expenses                            113,798              149,209           (35,411)                       

(23.7)

% of total revenue                                                         24.8   %             32.4  %
Research and development expenses                                         7,448                6,388             1,060                         16.6
% of total revenue                                                          1.6   %              1.4  %
Depreciation and amortization                                           129,887              120,266             9,621                          8.0
Total costs and expenses                                                424,694              465,092           (40,398)                        (8.7)
Operating income (loss)                                                  34,772               (4,661)           39,433                               *
Other income (expense):
Interest income, net                                                     10,760               23,213           (12,453)                       (53.6)
Interest expense, net of amounts capitalized                            (38,258)             (53,749)           15,491                        

(28.8)

Gains (losses) on investments, net                                       (6,090)              12,855           (18,945)                              *
Equity in earnings (losses) of unconsolidated affiliates, net            (6,345)              (4,754)           (1,591)                        33.5
Foreign currency transaction gains (losses), net                          1,560                1,753              (193)                       (11.0)
Other, net                                                                 (391)                   7              (398)                              *
Total other income (expense), net                                       (38,764)             (20,675)          (18,089)                        87.5
Income (loss) from continuing operations before income taxes             (3,992)             (25,336)           21,344                        (84.2)
Income tax benefit (provision), net                                     (10,851)              (4,692)            6,159                              

*

Net income (loss) from continuing operations                            (14,843)             (30,028)           15,185                        

(50.6)

Net income (loss) from discontinued operations                                -               24,968           (24,968)                      (100.0)
Net income (loss)                                                       (14,843)              (5,060)           (9,783)                             

*

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

                                                                 3,431                 (632)            4,063                               *
Net income (loss) attributable to EchoStar Corporation common
stock                                                                $  (11,412)$   (5,692)$ (5,720)                              *

Other data:
EBITDA (1)                                                           $  156,824$  124,834$ 31,990                         25.6
Subscribers, end of period                                            1,542,000            1,415,000           127,000                          

9.0



* Percentage is not meaningful.
(1) A reconciliation of EBITDA to Net income (loss), the most directly
comparable generally accepted accounting principles in the U.S. ("U.S. GAAP")
measure in our Accompanying Condensed Consolidated Financial Statements, is
included in Results of Operations. For further information on our use of EBITDA,
refer to the Explanation of Key Metrics and Other Items.

                                       53

--------------------------------------------------------------------------------

Table of Contents

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED

The following discussion relates to our continuing operations for the three months ended June 30, 2020 and 2019 unless otherwise stated.


Services and other revenue.  Services and other revenue totaled $417.0 million
for the three months ended June 30, 2020, an increase of $14.3 million, or 3.5%,
compared to 2019.

•Services and other revenue from our Hughes segment for the three months ended
June 30, 2020 increased by $16.5 million, or 4.2%, to $410.7 million compared to
2019.  The increase was primarily attributable to increases in sales of
broadband services to our consumer customers of $27.2 million, partially offset
by a decrease in sales of broadband services to our enterprise customers of
$9.4 million. Both of these variances reflect the negative impact of exchange
rate fluctuations.

•Services and other revenue from Corporate and Other for the three months ended
June 30, 2020 decreased by $2.7 million, or 56.3%, to $2.1 million compared to
2019, primarily attributable to a decrease in income from certain real estate
previously leased to DISH Network and transferred as part of the BSS
Transaction.

Equipment revenue.  Equipment revenue totaled $42.4 million for the three months
ended June 30, 2020, a decrease of $15.2 million, or 26.4%, compared to 2019.
The decrease was primarily attributable to a decrease in sales to our
international enterprise customers and the bankruptcy of a certain customer.

Cost of sales - services and other.  Cost of sales - services and other totaled
$141.0 million for the three months ended June 30, 2020, a decrease of
$1.7 million, or 1.2%, compared to 2019. The decrease was primarily attributable
to our Hughes segment due to the decrease in sales of broadband services to our
enterprise customers, partially offset by increases in sales of broadband
services to our consumer customers.

Cost of sales - equipment.  Cost of sales - equipment totaled $32.5 million for
the three months ended June 30, 2020, a decrease of $14.0 million, or 30.1%,
compared to 2019. The decrease was primarily attributable to the corresponding
reduction in equipment revenue.

Selling, general and administrative expenses.  Selling, general and
administrative expenses totaled $113.8 million for the three months ended
June 30, 2020, a decrease of $35.4 million, or 23.7%, compared to 2019. The
decrease was primarily attributable to (i) expenses related to certain legal
proceedings of $24.5 million in 2019, (ii) decreased marketing and promotional
expenses in 2020 of $6.6 million, and (iii) decreases in bad debt expense of
$4.5 million in 2020.

Depreciation and amortization.  Depreciation and amortization expenses totaled
$129.9 million for the three months ended June 30, 2020, an increase of
$9.6 million, or 8.0%, compared to 2019.  The increase was primarily from our
Hughes segment and due to increases in depreciation expense of $8.0 million
relating to our customer premises equipment and $2.4 million relating to the
depreciation of assets acquired in the Yahsat Brazil JV Transaction.

Interest income, net.  Interest income, net totaled $10.8 million for the three
months ended June 30, 2020, a decrease of $12.5 million, or 53.6%, compared to
2019, which was primarily attributable to decreases in the yield of our
marketable investment securities and a decrease in our marketable investment
securities balance.

Interest expense, net of amounts capitalized.  Interest expense, net of amounts
capitalized totaled $38.3 million for the three months ended June 30, 2020, a
decrease of $15.5 million, or 28.8%, compared to 2019.  The decrease was
primarily due to a decrease of $13.0 million in interest expense and in
amortization of deferred financing cost as a result of the repurchase and
maturity in June 2019 of our 6 1/2% Senior Secured Notes due 2019 and an
increase of $1.4 million in capitalized interest in 2020 related to the EchoStar
XXIV satellite and its related infrastructure.

Gains (losses) on investments, net. Gains (losses) on investments, net were $(6.1) million for the three months ended June 30, 2020, compared to $12.9 million for the three months ended June 30, 2019, a decrease of net gains

                                       54

--------------------------------------------------------------------------------

Table of Contents

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED


of $18.9 million. The change was primarily attributable to $12.0 million of net
negative variances on marketable investment securities compared to 2019 and an
$8.5 million loss in Other Equity Investments in 2020.

Equity in earnings (losses) of unconsolidated affiliates, net. Equity in earnings (losses) of unconsolidated affiliates, net totaled $6.3 million in losses for the three months ended June 30, 2020, an increase in losses of $1.6 million, or 33.5%, compared to 2019. The increase in losses was related to increased losses from our investments in our equity method investees.


Income tax benefit (provision), net.  Income tax benefit (provision), net was
$(10.9) million for the three months ended June 30, 2020 compared to
$(4.7) million for the three months ended June 30, 2019. Our effective income
tax rate was (271.8)% and (18.5)% for the three months ended June 30, 2020 and
2019, respectively. The variations in our effective tax rate from the U.S.
federal statutory rate for the three months ended June 30, 2020 were primarily
due to the increase in our valuation allowance associated with certain foreign
losses and the impact of state and local taxes, partially offset by research and
experimentation credits. The variations in our effective tax rate from the U.S.
federal statutory rate for the three months ended June 30, 2019 were primarily
due to the change in net unrealized gains that are capital in nature and
research and experimentation credits, partially offset by the impact of state
and local taxes and the increase in our valuation allowance associated with
certain foreign losses. Additionally, during the three months ended June 30,
2019, we recorded additional tax expense of $2.0 million on deemed mandatory
repatriation of certain deferred foreign earnings as the result of new treasury
regulations.

Net income (loss) attributable to EchoStar Corporation common stock.  Net loss
attributable to EchoStar Corporation common stock totaled $11.4 million for the
three months ended June 30, 2020, compared to net loss attributable to EchoStar
Corporation common stock of $5.7 million for the three months ended June 30,
2019, an increase in loss of $5.7 million as set forth in the following table:
                                                                            

Amounts

Net income (loss) attributable to EchoStar Corporation for the three months ended June 30, 2019

$ (5,692) Increase (decrease) in operating income, including depreciation and amortization

                                                                           39,433

Decrease (increase) in interest expense, net of amounts capitalized

            15,491

Decrease (increase) in net income attributable to non-controlling interests

                                                                               4,063
Increase (decrease) in foreign currency transaction gains, net                           (193)
Increase (decrease) in other, net                                                        (398)

Decrease (increase) in equity in losses of unconsolidated affiliates, net

                                                                                    (1,591)
Decrease (increase) in income tax provision, net                                       (6,159)

Increase (decrease) in interest income, net                                 

(12,453)

Increase (decrease) in gains on investments, net                            

(18,945)

Increase (decrease) in net income from discontinued operations              

(24,968)

Net income (loss) attributable to EchoStar Corporation for the three
months ended June 30, 2020                                                     $      (11,412)



                                       55

--------------------------------------------------------------------------------

Table of Contents

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED

EBITDA. EBITDA is a non-GAAP financial measure and is described under Explanation of Key Metrics and Other Items below. The following table reconciles Net income (loss), the most directly comparable U.S. GAAP measure in our Accompanying Condensed Consolidated Financial Statements, to EBITDA:

                                                      For the three months ended June
                                                                    30,                                                 Variance
                                                          2020                2019             Amounts                  %
Net income (loss)                                    $  (14,843)$  (5,060)$  (9,783)                          *
Interest income, net                                    (10,760)            (23,213)            12,453                    (53.6)
Interest expense, net of amounts capitalized             38,258              53,749            (15,491)                   (28.8)
Income tax provision (benefit), net                      10,851               4,692              6,159                           *
Depreciation and amortization                           129,887             120,266              9,621                      8.0
Net loss (income) from discontinued operations                -             (24,968)            24,968                   (100.0)
Net loss (income) attributable to
non-controlling interests                                 3,431                (632)             4,063                           *
EBITDA                                               $  156,824$ 124,834$  31,990                     25.6

* Percentage is not meaningful.

EBITDA was $156.8 million for the three months ended June 30, 2020, an increase of $32.0 million, or 25.6%, compared to 2019 as set forth in the following table:

Amounts

EBITDA for the three months ended June 30, 2019

$ 124,834 Increase (decrease) in operating income, excluding depreciation and amortization

                                                                           49,054

Decrease (increase) in net income attributable to non-controlling interests

                                                                               4,063
Increase (decrease) in foreign currency transaction gains, net                           (193)
Increase (decrease) in other, net                                                        (398)

Decrease (increase) in equity in losses of unconsolidated affiliates, net

                                                                                    (1,591)
Increase (decrease) in gains on investments, net                            

(18,945)

EBITDA for the three months ended June 30, 2020

$ 156,824

© Edgar Online, source Glimpses


share with twitter share with LinkedIn share with facebook
All news about ECHOSTAR CORPORATION
10/26Blank-check firm backed by billionaire Charles Ergen cuts IPO size
RE
10/01Billionaire Charles Ergen-backed blank-check firm aims to raise $1 bln in IPO
RE
08/29AT&T Exploring Deal For Its DirecTV Unit -- WSJ
DJ
08/28AT&T Again Exploring a Deal For DirecTV--Update
DJ
08/06ECHOSTAR : 2Q Earnings Snapshot
AQ
08/06ECHOSTAR : MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESUL..
AQ
08/06ECHOSTAR : Announces Financial Results for Three and Six Months Ended June 30, 2..
PR
08/04ECHOSTAR : Announces Conference Call For Second Quarter 2020 Financial Results
PU
07/29ECHOSTAR : Hughes Announces New JUPITER System Features to Power Higher Efficien..
PR
07/27ECHOSTAR : Hughes to Join UK Government and Bharti Enterprises in New OneWeb Con..
PR
More news