EchoStar Announces Financial Results for Three and Nine Months Ended September 30, 2019


November 7, 2019


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Englewood, CO, November 7, 2019—EchoStar Corporation (NASDAQ: SATS) today announced its financial results for the three and nine months ended September 30, 2019.

Three Months Ended September 30, 2019 Financial Highlights:

  • Consolidated revenues of $472.3 million.
  • Consolidated net loss of $21.1 million, consolidated net loss attributable to EchoStar common stock of $18.3 million, and diluted loss per share of $0.19.
  • Consolidated Adjusted EBITDA of $148.3 million (see discussion and the reconciliation of GAAP to this non-GAAP measure below).

Nine Months Ended September 30, 2019 Financial Highlights:

  • Consolidated revenues of $1.4 billion.
  • Consolidated net loss of $11.2 million, consolidated net loss attributable to EchoStar common stock of $9.8 million, and diluted loss per share of $0.10.
  • Consolidated Adjusted EBITDA of $422.7 million (see discussion and the reconciliation of GAAP to this non-GAAP measure below).

“I am pleased with our performance in the third quarter of 2019,” commented Michael Dugan, CEO and President of EchoStar.  “On September 10th, we completed the spin-off to DISH of the BSS business and ancillary assets and liabilities in exchange for DISH shares that were distributed to EchoStar shareholders. As a result, the BSS business has been presented as discontinued operations in our current financial results.  We can now focus on the growing broadband market, additional satellite opportunities, and strategic investments.  We grew our consumer subscriber base by approximately 22,000 driven by our international markets and launched a consumer service in Mexico on October 1st.  Our North American capacity is relatively full with the EchoStar 24/J3 satellite scheduled for launch in 2021.  We continue to work to complete our previously announced JVs with Yahsat in Brazil and Bharti Airtel in India and also announced the acquisition of Helios Wire Corporation on October 25th.   The Helios acquisition lays the foundation for the creation of worldwide S-band capabilities.”

Three Months Ended September 30, 2019 - Additional Information:

  • Consolidated revenue increased 4% or $16.0 million year over year.
  • An accrual of $20.7 million was booked during the quarter related to a license fee dispute with the Government of India.  This impacted SG&A expenses by $7.1 million and Interest expense, net of amounts capitalized, by $13.6 million.  Net income (loss) attributable to noncontrolling interests had a corresponding offset of $3.2 million.  This fee dispute dates back over a decade and has affected the entire Indian Telecom industry.
  • Adjusted EBITDA decreased 4% or $6.0 million year over year.
    • Hughes segment Adjusted EBITDA increased by $1.9 million which includes the impact of the industry wide fee dispute with the Government of India.
    • ESS segment Adjusted EBITDA decreased by $2.9 million primarily due to lower revenue.
    • Corporate and Other segment Adjusted EBITDA decreased by $5.0 million driven primarily by transaction related legal costs and increased losses on equity in earnings of unconsolidated affiliates.
  • Net loss from continuing operations was $23.2 million, the loss increasing by $20.0 million from last year.  The decline was primarily due to higher unrealized losses on foreign currency of $11.0 million, higher depreciation and amortization expense of $7.0 million, increased equity losses of unconsolidated affiliates of $3.6 million, partially offset by higher gains of investments of $5.4 million.
  • Hughes broadband subscribers are approximately 1,437,000 as of September 30, 2019 including approximately 192,000 subscribers in Central and South America.
  • Cash, cash equivalents and current marketable investment securities of $2.5 billion as of September 30, 2019.

 

Set forth below is a table highlighting certain of EchoStar’s segment results for the three and nine months ended September 30, 2019 and 2018 (amounts in thousands):

 

 

 

For the three months
ended September 30,

 

For the nine months
ended September 30,

 

 

2019

 

2018

 

2019

 

2018

 

 

 

 

 

 

 

 

 

Revenue

 

 

 

 

 

 

 

 

Hughes

 

$

463,735

 

 

$

444,762

 

 

$

1,360,919

 

 

$

1,271,886

 

EchoStar Satellite Services

 

4,098

 

 

6,802

 

 

11,873

 

 

22,562

 

Corporate and Other

 

4,429

 

 

4,710

 

 

14,283

 

 

14,207

 

Total revenue

 

$

472,262

 

 

$

456,274

 

 

$

1,387,075

 

 

$

1,308,655

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA

 

 

 

 

 

 

 

 

Hughes

 

$

169,358

 

 

$

167,492

 

 

$

486,212

 

 

$

465,724

 

EchoStar Satellite Services

 

1,791

 

 

4,687

 

 

5,006

 

 

15,478

 

Corporate & Other:

 

 

 

 

 

 

 

 

Corporate overhead, operating and other

 

(21,028

)

 

(18,231

)

 

(58,968

)

 

(54,489

)

Equity in earnings (losses) of unconsolidated affiliates, net

 

(1,782

)

 

416

 

 

(9,507

)

 

(2,651

)

Total Corporate & Other

 

(22,810

)

 

(17,815

)

 

(68,476

)

 

(57,141

)

Total Adjusted EBITDA

 

$

148,339

 

 

$

154,364

 

 

$

422,742

 

 

$

424,061

 

 

 

 

 

 

 

 

 

 

Net income (loss) from continuing operations

 

$

(23,161

)

 

$

(3,195

)

 

$

(57,581

)

 

$

(3,828

)

Expenditures for property and equipment

 

$

95,155

 

 

$

167,144

 

 

$

314,351

 

 

$

337,625

 

 

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

 

 

For the three months
ended September 30,

 

For the nine months
ended September 30,

 

 

2019

 

2018

 

2019

 

2018

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

(21,106

)

 

$

16,502

 

 

$

(11,158

)

 

$

73,015

 

Interest income and expense, net

 

32,690

 

 

33,529

 

 

91,996

 

 

107,801

 

Income tax provision, net

 

5,016

 

 

7,963

 

 

12,607

 

 

8,275

 

Depreciation and amortization

 

122,374

 

 

115,325

 

 

361,619

 

 

338,737

 

Net (income) loss from discontinued operations

 

(2,055

)

 

(19,697

)

 

(46,423

)

 

(76,843

)

Net (income) loss attributable to noncontrolling interests

 

2,797

 

 

(450

)

 

1,359

 

 

(1,292

)

EBITDA

 

139,716

 

 

153,172

 

 

410,000

 

 

449,693

 

(Gains) losses on investments, net

 

(8,295

)

 

(2,873

)

 

(28,087

)

 

(31,606

)

Litigation expense (1)

 

1,824

 

 

 

 

26,328

 

 

 

Vendor settlement

 

 

 

 

 

 

 

(9,571

)

Unrealized (gains) losses on foreign currency

 

15,094

 

 

4,065

 

 

14,501

 

 

15,545

 

Adjusted EBITDA

 

$

148,339

 

 

$

154,364

 

 

$

422,742

 

 

$

424,061

 

 

 

 

 

 

 

 

 

 

(1) Does not include license fee dispute with the Government of India.

 

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.”

Adjusted EBITDA is defined as EBITDA excluding “Gains and losses on investments, net,” unrealized gains (losses) on foreign currency, 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 September 30, 2019 and 2018 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, 2019 filed today with the Securities and Exchange Commission.

EchoStar will host its earnings conference call on Thursday, November 7, 2019 at 11:00 a.m. Eastern Time. The call-in numbers are (877) 815-1625 (toll-free) and (716) 247-5178 (international), Conference ID 3877704.

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, 2018 and Quarterly Report on Form 10-Q for the period ended September 30, 2019, as filed with the Securities and Exchange Commission and in the other documents EchoStar files with the Securities and Exchange Commission from time to time.

 

ECHOSTAR CORPORATION

Condensed Consolidated Balance Sheets

(Amounts in thousands, except per share amounts)

 

 

Asof

 

 

September 30, 2019

 

December 31, 2018

Assets

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

1,547,162

 

 

$

928,306

 

Marketable investment securities, at fair value

 

1,000,165

 

 

2,282,152

 

Trade accounts receivable and contract assets, net (Note 3)

 

200,779

 

 

201,096

 

Trade accounts receivable - DISH Network

 

16,125

 

 

14,200

 

Inventory

 

83,397

 

 

75,379

 

Prepaids and deposits

 

63,210

 

 

57,691

 

Other current assets

 

17,382

 

 

18,539

 

Current assets of discontinued operations

 

5,866

 

 

3,486

 

Total current assets

 

2,934,086

 

 

3,580,849

 

Noncurrent assets:

 

 

 

 

Property and equipment, net

 

2,444,157

 

 

2,534,666

 

Operating lease right-of-use assets

 

112,263

 

 

 

Goodwill

 

504,173

 

 

504,173

 

Regulatory authorizations, net

 

426,189

 

 

430,039

 

Other intangible assets, net

 

33,188

 

 

44,231

 

Investments in unconsolidated entities

 

225,908

 

 

262,473

 

Other receivables - DISH Network

 

93,321

 

 

95,114

 

Other noncurrent assets, net

 

264,465

 

 

247,316

 

Noncurrent assets of discontinued operations

 

 

 

962,433

 

Total noncurrent assets

 

4,103,664

 

 

5,080,445

 

Total assets

 

$

7,037,750

 

 

$

8,661,294

 

Liabilities and Stockholders’ Equity

 

 

 

 

Current liabilities:

 

 

 

 

Trade accounts payable

 

$

122,319

 

 

$

121,437

 

Trade accounts payable - DISH Network

 

714

 

 

1,698

 

Current portion of long-term debt and finance lease obligations

 

407

 

 

919,582

 

Contract liabilities

 

109,557

 

 

72,284

 

Accrued interest

 

37,039

 

 

45,350

 

Accrued compensation

 

42,810

 

 

54,242

 

Accrued taxes

 

17,465

 

 

16,013

 

Accrued expenses and other

 

126,865

 

 

64,395

 

Current liabilities of discontinued operations

 

4,565

 

 

50,136

 

Total current liabilities

 

461,741

 

 

1,345,137

 

Noncurrent liabilities:

 

 

 

 

Long-term debt and finance lease obligations, net

 

2,388,931

 

 

2,386,202

 

Deferred tax liabilities, net

 

331,498

 

 

287,420

 

Operating lease liabilities

 

94,332

 

 

 

Other noncurrent liabilities

 

77,333

 

 

80,304

 

Noncurrent liabilities of discontinued operations

 

 

 

406,757

 

Total noncurrent liabilities

 

2,892,094

 

 

3,160,683

 

Total liabilities

 

3,353,835

 

 

4,505,820

 

Commitments and contingencies (Note 16)

 

 

 

 

Stockholders’ equity:

 

 

 

 

Preferred stock, $0.001 par value, 20,000,000 shares authorized, none issued and outstanding at both September 30, 2019 and December 31, 2018

 

 

 

 

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

 

 

 

 

ClassA common stock, $0.001 par value, 1,600,000,000 shares authorized, 56,383,893 shares issued and 49,898,972 shares outstanding at September 30, 2019 and 54,142,566 shares issued and 47,657,645 shares outstanding at December31, 2018

 

56

 

 

54

 

ClassB convertible common stock, $0.001 par value, 800,000,000 shares authorized, 47,687,039 shares issued and outstanding at both September 30, 2019 and December31, 2018

 

48

 

 

48

 

ClassC convertible common stock, $0.001 par value, 800,000,000 shares authorized, none issued and outstanding at both of September 30, 2019 and December31, 2018

 

 

 

 

ClassD common stock, $0.001 par value, 800,000,000 shares authorized, none issued and outstanding at both September 30, 2019 and December31, 2018

 

 

 

 

Additional paid-in capital

 

3,251,808

 

 

3,702,522

 

Accumulated other comprehensive loss

 

(131,664

)

 

(125,100

)

Accumulated earnings

 

685,927

 

 

694,129

 

Treasury stock, at cost

 

(131,454

)

 

(131,454

)

Total EchoStar Corporation stockholders’ equity

 

3,674,721

 

 

4,140,199

 

Noncontrolling interests

 

9,194

 

 

15,275

 

Total stockholders’ equity

 

3,683,915

 

 

4,155,474

 

Total liabilities and stockholders’ equity

 

$

7,037,750

 

 

$

8,661,294

 

 

ECHOSTAR CORPORATION

Condensed Consolidated Statements of Operations

(Amounts in thousands, except per share amounts)

 

 

 

For the three months
ended September 30,

 

For the nine months
ended September 30,

 

 

2019

 

2018

 

2019

 

2018

 

 

 

 

 

 

 

 

 

Revenue:

 

 

 

 

 

 

 

 

Services and other revenue - DISH Network

 

$

13,232

 

 

$

17,054

 

 

$

42,532

 

 

$

57,410

 

Services and other revenue - other

 

393,305

 

 

382,374

 

 

1,169,459

 

 

1,101,111

 

Equipment revenue

 

65,725

 

 

56,846

 

 

175,084

 

 

150,134

 

Total revenue

 

472,262

 

 

456,274

 

 

1,387,075

 

 

1,308,655

 

 

 

 

 

 

 

 

 

 

Costs and expenses:

 

 

 

 

 

 

 

 

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

 

143,842

 

 

142,290

 

 

429,869

 

 

421,622

 

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

 

51,188

 

 

46,318

 

 

142,744

 

 

127,254

 

Selling, general and administrative expenses

 

122,676

 

 

107,540

 

 

384,152

 

 

314,040

 

Research and development expenses

 

6,136

 

 

6,544

 

 

19,411

 

 

20,328

 

Depreciation and amortization

 

122,374

 

 

115,325

 

 

361,619

 

 

338,737

 

Total costs and expenses

 

446,216

 

 

418,017

 

 

1,337,795

 

 

1,221,981

 

Operating income

 

26,046

 

 

38,257

 

 

49,280

 

 

86,674

 

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

Interest income

 

17,175

 

 

21,349

 

 

64,817

 

 

56,237

 

Interest expense, net of amounts capitalized

 

(49,865

)

 

(54,878

)

 

(156,813

)

 

(164,038

)

Gains (losses) on investments, net

 

8,295

 

 

2,873

 

 

28,087

 

 

31,606

 

Equity in earnings (losses) of unconsolidated affiliates, net

 

(3,209

)

 

416

 

 

(14,317

)

 

(2,651

)

Other, net

 

(16,587

)

 

(3,249

)

 

(16,028

)

 

(3,381

)

Total other income (expense), net

 

(44,191

)

 

(33,489

)

 

(94,254

)

 

(82,227

)

Income (loss) from continuing operations before income taxes

 

(18,145

)

 

4,768

 

 

(44,974

)

 

4,447

 

Income tax benefit (provision), net

 

(5,016

)

 

(7,963

)

 

(12,607

)

 

(8,275

)

Net loss from continuing operations

 

(23,161

)

 

(3,195

)

 

(57,581

)

 

(3,828

)

Net income from discontinued operations

 

2,055

 

 

19,697

 

 

46,423

 

 

76,843

 

Net income (loss)

 

(21,106

)

 

16,502

 

 

(11,158

)

 

73,015

 

Less: Net income (loss) attributable to noncontrolling interests

 

(2,797

)

 

450

 

 

(1,359

)

 

1,292

 

Net income (loss) attributable to EchoStar Corporation common stock

 

$

(18,309

)

 

$

16,052

 

 

$

(9,799

)

 

$

71,723

 

 

 

 

 

 

 

 

 

 

Earnings per share - ClassA and B common stock:

 

 

 

 

 

 

 

 

Basic loss from continuing operations per share

 

$

(0.21

)

 

$

(0.04

)

 

$

(0.58

)

 

$

(0.05

)

Total basic earnings (loss) per share

 

$

(0.19

)

 

$

0.17

 

 

$

(0.10

)

 

$

0.75

 

Diluted loss from continuing operations per share

 

$

(0.21

)

 

$

(0.04

)

 

$

(0.58

)

 

$

(0.05

)

Total diluted earnings (loss) per share

 

$

(0.19

)

 

$

0.17

 

 

$

(0.10

)

 

$

0.75

 

 

ECHOSTAR CORPORATION

Condensed Consolidated Statements of Cash Flows

(Amounts in thousands, except per share amounts)

 

 

For the nine months ended September 30,

 

 

2019

 

2018

 

 

 

 

 

Cash flows from operating activities:

 

 

 

 

Net income (loss)

 

$

(11,158

)

 

$

73,015

 

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

 

 

 

 

Depreciation and amortization

 

459,054

 

 

444,558

 

Equity in losses of unconsolidated affiliates, net

 

14,317

 

 

2,651

 

Amortization of debt issuance costs

 

4,882

 

 

5,910

 

(Gains) losses on investments, net

 

(28,087

)

 

(33,524

)

Stock-based compensation

 

7,120

 

 

7,771

 

Deferred tax provision

 

22,949

 

 

22,357

 

Dividend received from unconsolidated entity

 

2,716

 

 

5,000

 

Changes in current assets and current liabilities, net:

 

 

 

 

Trade accounts receivable, net

 

(5,439

)

 

(35,811

)

Trade accounts receivable - DISH Network

 

(28,779

)

 

32,323

 

Inventory

 

(8,661

)

 

10,667

 

Other current assets

 

(3,716

)

 

(5,569

)

Trade accounts payable

 

18,180

 

 

2,536

 

Trade accounts payable - DISH Network

 

(984

)

 

(3,342

)

Accrued expenses and other

 

65,245

 

 

19,450

 

Changes in noncurrent assets and noncurrent liabilities, net

 

1,303

 

 

(16,123

)

Other, net

 

24,118

 

 

12,043

 

Net cash flows from operating activities

 

533,060

 

 

543,912

 

Cash flows from investing activities:

 

 

 

 

Purchases of marketable investment securities

 

(655,265

)

 

(2,323,090

)

Sales and maturities of marketable investment securities

 

1,988,078

 

 

1,331,225

 

Expenditures for property and equipment

 

(314,861

)

 

(415,253

)

Refunds and other receipts related to property and equipment

 

 

 

77,524

 

Expenditures for externally marketed software

 

(21,364

)

 

(24,568

)

Investment in unconsolidated entities

 

(7,503

)

 

(991

)

Dividend received from unconsolidated entity

 

2,284

 

 

 

Sale of investment in unconsolidated entity

 

 

 

1,558

 

Net cash flows from investing activities

 

991,369

 

 

(1,353,595

)

Cash flows from financing activities:

 

 

 

 

Repayment of debt and finance lease obligations

 

(29,135

)

 

(27,764

)

Repurchase and maturity of debt

 

(920,923

)

 

 

Purchase of noncontrolling interest

 

(7,313

)

 

 

Repayment of in-orbit incentive obligations

 

(5,269

)

 

(4,601

)

Net proceeds from ClassA common stock options exercised

 

64,143

 

 

4,424

 

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

 

7,724

 

 

7,428

 

Other, net

 

758

 

 

(530

)

Net cash flows from financing activities

 

(890,015

)

 

(21,043

)

Effect of exchange rates on cash and cash equivalents

 

(411

)

 

(3,449

)

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

 

634,003

 

 

(834,175

)

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

 

929,495

 

 

2,432,249

 

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

 

$

1,563,498

 

 

$

1,598,074

 

 

 

 

 

 

Supplemental disclosure of cash flow information:

 

 

 

 

Cash paid for interest, net of amounts capitalized

 

$

161,766

 

 

$

170,303

 

Cash paid for income taxes

 

$

2,119

 

 

$

3,369