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

ENGLEWOOD, Colo., Aug. 6, 2020 /PRNewswire/ -- EchoStar Corporation (NASDAQ: SATS) today announced its financial results for the three and six months ended June 30, 2020.

Three Months Ended June 30, 2020 Financial Highlights:

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

Six Months Ended June 30, 2020 Financial Highlights:

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

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

Three Months Ended June 30, 2020 - Additional Information:

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

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


                                                                   For the three months                
       
              For the six months
                                                            ended June 30,                                    ended June 30,


                                                   2020                          2019             2020                        2019





     
              Revenue



     Hughes                                            $
           453,172                                $
       451,847                     $
        911,654  $
     897,184



     EchoStar Satellite Services                 4,179                                     3,742                           8,831                 7,775



     Corporate and Other                         2,115                                     4,842                           4,647                 9,854



     Total revenue                                     $
           459,466                                $
       460,431                     $
        925,132  $
     914,813





     
              Adjusted EBITDA



     Hughes                                            $
           186,277                                $
       155,212                     $
        348,496  $
     316,853



     EchoStar Satellite Services                 1,543                                     1,486                           3,573                 3,215



     Corporate & Other:


      Corporate overhead, operating and
       other                                   (22,252)                                 (19,070)                       (42,375)             (37,788)


      Equity in earnings (losses) of
       unconsolidated affiliates, net           (4,668)                                  (2,898)                          (156)              (7,725)



     Total Corporate & Other                  (26,920)                                 (21,968)                       (42,531)             (45,513)



     Total Adjusted EBITDA                             $
           160,900                                $
       134,730                     $
        309,538  $
     274,555




                 Expenditures for property and
                  equipment                              $
           92,300                                $
       107,342                     $
        196,904  $
     219,196

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


                                                            For the three months                               For the six months
                                                    ended June 30,                                   ended June 30,


                                           2020                            2019            2020                       2019





     Net income (loss)                         $
            (14,843)                              $
      (5,060)                       (72,580)                9,948



     Interest income, net             (10,760)                                  (23,213)                      (26,343)                       (47,642)


      Interest expense, net of amounts
       capitalized                       38,258                                     53,749                         74,491                         106,948


      Income tax provision (benefit),
       net                               10,851                                      4,692                          3,359                           7,590


      Depreciation and amortization     129,887                                    120,266                        262,255                         239,244


      Net loss (income) from
       discontinued operations                                                   (24,968)                                                     (44,215)


      Net loss (income) attributable
       to non-controlling interests       3,431                                      (632)                         6,873                         (1,438)



     EBITDA                            156,824                                    124,834                        248,055                         270,435


      (Gains) losses on investments,
       net                                6,090                                   (12,855)                        52,762                        (19,791)



     Litigation Expense                                                           24,504                                                        24,504


      License fee dispute - India,
       net of non-controlling
       interests                          (454)                                                                   (563)


      Foreign currency transaction
       (gains) losses, net              (1,560)                                   (1,753)                         9,284                           (593)



     Adjusted EBITDA                            $
            160,900                               $
      134,730                               $
        309,538        $
     274,555

Note on Use of Non-GAAP Financial Measures

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

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

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

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

About EchoStar Corporation

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

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

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


                                                                                                                                               
              
                ECHOSTAR CORPORATION

                                                                                                                                          
          
                Condensed Consolidated Balance Sheets

                                                                                                                                     
          
                (Amounts in thousands, except per share amounts)




                                                                                                                                                   
              
                As of


                                                                                                                                                June 30, 2020                                              December 31,
                                                                                                                                                                                                           2019


                                           
              
                Assets



     
                Current assets:



     Cash and cash equivalents                                                                                                       $
          1,948,464                                                                 $
           1,519,431



     Marketable investment securities                                                                                                        509,980                                                                          940,623



     Trade accounts receivable and contract assets, net                                                                                      183,379                                                                          196,629



     Other current assets, net                                                                                                               185,699                                                                          179,531



     Total current assets                                                                                                                  2,827,522                                                                        2,836,214



     
                Non-current assets:



     Property and equipment, net                                                                                                           2,399,711                                                                        2,528,738



     Operating lease right-of-use assets                                                                                                     125,996                                                                          114,042



     Goodwill                                                                                                                                509,054                                                                          506,953



     Regulatory authorizations, net                                                                                                          474,463                                                                          478,598



     Other intangible assets, net                                                                                                             22,667                                                                           29,507



     Other investments, net                                                                                                                  275,873                                                                          325,405



     Other non-current assets, net                                                                                                           340,904                                                                          334,841



     Total non-current assets                                                                                                              4,148,668                                                                        4,318,084



     
                Total assets                                                                                                       $
          6,976,190                                                                 $
           7,154,298




                            
              
                Liabilities and Stockholders' Equity



     
                Current liabilities:



     Trade accounts payable                                                                                                            $
          112,748                                                                   $
           124,080



     Current portion of long-term debt, net                                                                                                  896,386



     Contract liabilities                                                                                                                     89,831                                                                          101,060



     Accrued expenses and other current liabilities                                                                                          262,944                                                                          270,879



     Total current liabilities                                                                                                             1,361,909                                                                          496,019



     
                Non-current liabilities:



     Long-term debt, net                                                                                                                   1,494,902                                                                        2,389,168



     Deferred tax liabilities, net                                                                                                           349,973                                                                          351,692



     Operating lease liabilities                                                                                                             110,899                                                                           96,941



     Other non-current liabilities                                                                                                            74,239                                                                           74,925



     Total non-current liabilities                                                                                                         2,030,013                                                                        2,912,726



     
                Total liabilities                                                                                                        3,391,922                                                                        3,408,745





     Commitments and contingencies



     
                Stockholders' equity:


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



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


      Class A common stock, $0.001 par value, 1,600,000,000 shares authorized, 56,988,365 shares issued and 50,306,445 shares
       outstanding at June 30, 2020 and 56,592,251 shares issued and 50,107,330 shares outstanding at December 31, 2019                                              57                                                                        57


      Class B convertible common stock, $0.001 par value, 800,000,000 shares authorized, 47,687,039 shares issued and outstanding at
       both June 30, 2020 and December 31, 2019                                                                                                                      48                                                                        48


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


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



     Additional paid-in capital                                                                                                                              3,311,861                                                                 3,290,483



     Accumulated other comprehensive income (loss)                                                                                                           (206,810)                                                                 (122,138)



     Accumulated earnings (losses)                                                                                                                             558,034                                                                   632,809



     Treasury stock, at cost                                                                                                                                 (137,347)                                                                 (131,454)



     Total EchoStar Corporation stockholders' equity                                                                                                         3,525,843                                                                 3,669,805



     Non-controlling interests                                                                                                                                  58,425                                                                    75,748



     
                Total stockholders' equity                                                                                                                 3,584,268                                                                 3,745,553



     
                Total liabilities and stockholders' equity                                                                                                                            $
              6,976,190                                    $
     7,154,298


                                                                                        
              
                ECHOSTAR CORPORATION

                                                                           
              
                Condensed Consolidated Statements of Operations

                                                                          
              
                (Amounts in thousands, except per share amounts)




                                                                              For the three months                                                 For the six months
                                                                      ended June 30,                                                     ended June 30,


                                                            2020                             2019                      2020                               2019



     
                Revenue:



     Services and other revenue                                  $
             417,043                                         $
              402,786                         $
         825,400          $
       805,454



     Equipment revenue                                   42,423                                       57,645                                          99,732                    109,359



     Total revenue                                      459,466                                      460,431                                         925,132                    914,813


                   Costs and expenses:


      Cost of sales -services and other
       (exclusive of depreciation and
       amortization)                                     141,019                                      142,680                                         286,271                    286,027


      Cost of sales -equipment (exclusive
       of depreciation and amortization)                  32,542                                       46,549                                          78,450                     91,556


      Selling, general and administrative
       expenses                                          113,798                                      149,209                                         239,079                    261,323


      Research and development expenses                    7,448                                        6,388                                          13,702                     13,276


      Depreciation and amortization                      129,887                                      120,266                                         262,255                    239,244



     Total costs and expenses                           424,694                                      465,092                                         879,757                    891,426



     Operating income (loss)                             34,772                                      (4,661)                                         45,375                     23,387


                   Other income (expense):



     Interest income, net                                10,760                                       23,213                                          26,343                     47,642


      Interest expense, net of amounts
       capitalized                                      (38,258)                                    (53,749)                                       (74,491)                 (106,948)


      Gains (losses) on investments, net                 (6,090)                                      12,855                                        (52,762)                    19,791


      Equity in earnings (losses) of
       unconsolidated affiliates, net                    (6,345)                                     (4,754)                                        (3,732)                  (11,107)


      Foreign currency transaction gains
       (losses), net                                       1,560                                        1,753                                         (9,284)                       593



     Other, net                                           (391)                                           7                                           (670)                      (35)


      Total other income (expense), net                 (38,764)                                    (20,675)                                      (114,596)                   (50,064)


      Income (loss) from continuing
       operations before income taxes                    (3,992)                                    (25,336)                                       (69,221)                  (26,677)


      Income tax benefit (provision), net               (10,851)                                     (4,692)                                        (3,359)                   (7,590)


      Net income (loss) from continuing
       operations                                       (14,843)                                    (30,028)                                       (72,580)                  (34,267)


      Net income (loss) from discontinued
       operations                                                                                     24,968                                                                    44,215



     Net income (loss)                                 (14,843)                                     (5,060)                                       (72,580)                     9,948


      Less: Net loss (income) attributable
       to non-controlling interests                        3,431                                        (632)                                          6,873                    (1,438)


      Net income (loss) attributable to
       EchoStar Corporation common stock                         $
             (11,412)                                        $
              (5,692)                       $
         (65,707)    8,510




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


      Basic and diluted earnings (losses)
       from continuing operations per share                        $
             (0.12)                                         $
              (0.32)                         $
         (0.67)          $
       (0.37)


      Total basic and diluted earnings
       (losses) per share                                          $
             (0.12)                                         $
              (0.06)                         $
         (0.67)            $
       0.09


                                                                                                              
      
                ECHOSTAR CORPORATION

                                                                                                          
     
       Condensed Consolidated Statements of Cash Flows

                                                                                                          
     
       (Amounts in thousands, except per share amounts)




                                                                                                                                                                               For the six months ended June 30,


                                                                                                                                                                      2020                                  2019



     
                Cash flows from operating activities:



     Net income (loss)                                                                                                                                                     $
       (72,580)                             $
        9,948



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



     Depreciation and amortization                                                                                                                                262,255                                 309,631



     Losses (gains) on investments, net                                                                                                                            52,762                                (19,791)



     Equity in losses (earnings) of unconsolidated affiliates, net                                                                                                  3,732                                  11,107



     Foreign currency transaction losses (gains), net                                                                                                               9,284                                   (593)



     Deferred tax provision (benefit), net                                                                                                                        (2,452)                                  7,014



     Stock-based compensation                                                                                                                                       4,509                                   4,833



     Amortization of debt issuance costs                                                                                                                            2,120                                   3,872



     Other, net                                                                                                                                                   (7,295)                                  2,742



     
                Changes in assets and liabilities, net:



     Trade accounts receivable and contract assets, net                                                                                                           (5,262)                                    167



     Other current assets, net                                                                                                                                   (11,642)                                  (129)



     Trade accounts payable                                                                                                                                      (11,701)                                  (225)



     Contract liabilities                                                                                                                                        (11,229)                                 34,024



     Accrued expenses and other current liabilities                                                                                                                27,050                                  16,800



     Non-current assets and non-current liabilities, net                                                                                                            5,729                                   1,374



     
                Net cash flows from operating activities                                                                                                        245,280                                 380,774





     
                Cash flows from investing activities:



     Purchases of marketable investment securities                                                                                                              (555,367)                              (504,264)



     Sales and maturities of marketable investment securities                                                                                                     977,532                               1,621,481



     Expenditures for property and equipment                                                                                                                    (196,904)                              (219,440)



     Expenditures for externally marketed software                                                                                                               (19,237)                               (15,329)



     
                Net cash flows from investing activities                                                                                                        200,524                                 882,448





     
                Cash flows from financing activities:



     Repurchase and maturity of the 2019 Senior Secured Notes                                                                                                                                          (920,923)



     Payment of finance lease obligations                                                                                                                           (421)                               (20,008)



     Payment of in-orbit incentive obligations                                                                                                                    (1,021)                                (3,778)



     Net proceeds from Class A common stock options exercised                                                                                                         436                                  61,503



     Net proceeds from Class A common stock issued under the Employee Stock Purchase Plan                                                                           5,300                                   5,074



     Treasury share purchase                                                                                                                                      (5,893)



     Contribution by non-controlling interest holder                                                                                                               10,000



     Purchase of non-controlling interest                                                                                                                                                                (7,313)



     Other, net                                                                                                                                                       674                                   (267)



     
                Net cash flows from financing activities                                                                                                          9,075                               (885,712)





     Effect of exchange rates on cash and cash equivalents                                                                                                       (19,232)                                    121



     Net increase (decrease) in cash and cash equivalents                                                                                                         435,647                                 377,631



     Cash and cash equivalents, including restricted amounts, beginning of period                                                                               1,521,889                                 929,495



     Cash and cash equivalents, including restricted amounts, end of period                                                                                               $
       1,957,536                          $
        1,307,126

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SOURCE EchoStar Corporation