EchoStar Announces First Quarter of 2018 Results


May 10, 2018


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Englewood, CO, May 10, 2018—EchoStar Corporation (NASDAQ: SATS) today announced its financial results for the quarter ended March 31, 2018.
 

First Quarter 2018 Financial Highlights:

  • Consolidated revenues of $501.8 million.

  • Consolidated net loss from continuing operations of $21.2 million, consolidated net loss attributable to EchoStar common stock of $21.6 million, and diluted losses per share of $0.22. Included in these amounts are net losses on investments of $36.7 million. Excluding these net losses, diluted earnings per share would have been $0.16.

  • Consolidated EBITDA of $165.7 million, including net losses on investments of $36.7 million.  Excluding these net losses, EBITDA would have been $202.4 million (see discussion and the reconciliation of GAAP to this non-GAAP measure below).

Additional Highlights:

  • Approximately 1,267,000 Hughes broadband subscribers as of March 31, 2018.

  • Cash, cash equivalents and current marketable investment securities of $3.3 billion as of March 31, 2018

On January 1, 2018, we adopted two new accounting pronouncements:

  • Topic 606 relating to revenue recognition and the related costs from contracts with customers.  The adoption decreased our revenue by $1.2 million and increased our net income by $1.1 million for the three months ended March 31, 2018.

  • Topic 321 relating to accounting for investments.  The adoption decreased our net losses on investments by $19.1 million and correspondingly increased our net income by $19.1 million.

Set forth below is a table highlighting certain of EchoStar’s segment results for the three months ended March 31, 2018 and 2017:

 

For the three months ended
March 31,

 

2018

 

2017

 

(Dollars in Thousands)

Revenue

         

Hughes

$

400,818

 

$

329,320

EchoStar Satellite Services

 

96,753

   

100,326

Corporate & Other

 

4,221

   

3,505

Total

$

501,792

 

$

433,151

 

         

EBITDA

         

Hughes

$

136,713

 

$

100,852

EchoStar Satellite Services

 

84,150

   

83,063

Corporate & Other:

         

  Corporate overhead, operating and other

 

(17,870)

   

(18,952)

  Equity in earnings (losses) of unconsolidated affiliates, net

 

(1,009)

   

6,408

  Gains (losses) on investments, net

 

(36,268)

   

11,943

      Sub-total

 

(55,147)

   

(601)

Total

$

165,716

 

$

183,314

 

         

Net income (loss) from continuing operations

$

(21,171)

 

$

30,775

Net income from discontinued operations

$

                  —

 

$

6,577

Net income (loss)

$

(21,171)

 

$

37,352

 

         

Expenditures for property and equipment from continuing operations

$

50,982

 

$

89,950

The following table reconciles GAAP to non-GAAP measurements.

 

For the three months ended March 31,

 

2018

 

2017

 

(Dollars in Thousands)

Net income (loss)

$

(21,171)

 

$

37,352

           

Interest income and expense, net

 

47,116

   

37,105

Income tax benefit, net

 

(5,403)

   

(12)

Depreciation and amortization

 

145,554

   

115,083

Net income from discontinued operations

 

   

(6,577)

Net (income) loss attributable to noncontrolling interests

 

(380)

   

363

EBITDA

$

165,716

 

$

183,314

           
           

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.”  This measure is not determined in accordance with US GAAP. EBITDA is reconciled to “Net income (loss)” in the table above and should not be considered in isolation or as a substitute for operating income, net income or any other measure determined in accordance with GAAP. Our management uses this non-GAAP measure as a measure of our operating efficiency and overall operating financial performance for benchmarking against our peers and competitors. Management believes that this non-GAAP measure provides meaningful supplemental information regarding the underlying operating performance of our business and is appropriate to enhance an overall understanding of our financial performance. Management also believes that EBITDA is useful to investors because it is frequently used by securities analysts, investors, and other interested parties to evaluate the performance of companies in our industry.

The consolidated financial statements of EchoStar for the periods ended March 31, 2018 and 2017 are attached to this press release. Detailed financial data and other information are available in EchoStar’s Quarterly Report on Form 10-Q for the period ended March 31, 2018 filed today with the Securities and Exchange Commission.

EchoStar will host its earnings conference call on Thursday, May 10, 2018 at 11:00 a.m. Eastern Time. The call-in numbers are (877) 815-1625 (toll-free) and (716) 247-5178 (international), Conference ID # 8292996.

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 forwardlooking statements. Although management believes that the expectations reflected in these forwardlooking statements are reasonable, it can give no assurance that these expectations will prove to have been correct. You are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date made. We assume no responsibility for the accuracy of forward-looking statements or information or for updating forward-looking information or statements. These statements are subject to certain risks, uncertainties, and assumptions. See “Risk Factors” in EchoStar’s Annual Report on Form 10-K for the period ended December 31, 2017 and Quarterly Report on Form 10-Q for the period ended March 31, 2018, as filed with the Securities and Exchange Commission and in the other documents EchoStar files with the Securities and Exchange Commission from time to time.

###

Contact Information

EchoStar Investor Relations

EchoStar Media Relations

Deepak V. Dutt

Phone: +1 301-428-1686

Email: deepak.dutt@echostar.com

Dan Brown

Phone: +1 301-601-7216

Email: dan.brown@echostar.com

ECHOSTAR CORPORATION

Consolidated Balance Sheets

   

As of

   

March 31, 2018

 

December 31, 2017

Assets

 

(unaudited)

 

(audited)

Current Assets:

       

Cash and cash equivalents

 

$

2,239,591

   

$

2,431,456

 

Marketable investment securities, at fair value

 

1,060,733

   

814,161

 

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

 

166,182

   

196,840

 

Trade accounts receivable - DISH Network, net

 

56,861

   

43,295

 

Inventory

 

85,995

   

83,595

 

Prepaids and deposits

 

59,751

   

54,533

 

Other current assets

 

13,163

   

91,671

 

Total current assets

 

3,682,276

   

3,715,551

 

Noncurrent Assets:

       

Property and equipment, net

 

3,461,004

   

3,465,471

 

Regulatory authorizations, net

 

536,548

   

536,936

 

Goodwill

 

504,173

   

504,173

 

Other intangible assets, net

 

55,273

   

58,955

 

Investments in unconsolidated entities

 

173,601

   

161,427

 

Other receivables - DISH Network

 

93,287

   

92,687

 

Other noncurrent assets, net

 

255,582

   

214,814

 

Total noncurrent assets

 

5,079,468

   

5,034,463

 

Total assets

 

$

8,761,744

   

$

8,750,014

 

Liabilities and Stockholders’ Equity

       

Current Liabilities:

       

Trade accounts payable

 

$

103,785

   

$

108,406

 

Trade accounts payable - DISH Network

 

3,742

   

4,753

 

Current portion of long-term debt and capital lease obligations

 

41,424

   

40,631

 

Contract liabilities

 

65,333

   

65,959

 

Accrued interest

 

57,297

   

47,616

 

Accrued compensation

 

32,905

   

47,756

 

Accrued expenses and other

 

105,291

   

98,769

 

Total current liabilities

 

409,777

   

413,890

 

Noncurrent Liabilities:

       

Long-term debt and capital lease obligations, net

 

3,585,972

   

3,594,213

 

Deferred tax liabilities, net

 

433,174

   

436,023

 

Other noncurrent liabilities

 

127,306

   

128,503

 

Total noncurrent liabilities

 

4,146,452

   

4,158,739

 

Total liabilities

 

4,556,229

   

4,572,629

 

Commitments and contingencies (Note 15)

       

Stockholders’ Equity:

       

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

 

   

 

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

       

Class A common stock, $.001 par value, 1,600,000,000 shares authorized, 53,932,336 shares issued and 48,400,018 shares outstanding at March 31, 2018 and 53,663,859 shares issued and 48,131,541 shares outstanding at December 31, 2017

 

54

   

54

 

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

 

48

   

48

 

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

 

   

 

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

 

   

 

Additional paid-in capital

 

3,685,577

   

3,669,461

 

Accumulated other comprehensive loss

 

(111,413)

 

 

(130,154)

 

Accumulated earnings

 

714,423

   

721,316

 

Treasury stock, at cost

 

(98,162)

 

 

(98,162)

 

Total EchoStar Corporation stockholders’ equity

 

4,190,527

   

4,162,563

 

Other noncontrolling interests

 

14,988

   

14,822

 

Total stockholders’ equity

 

4,205,515

   

4,177,385

 

Total liabilities and stockholders’ equity

 

$

8,761,744

   

$

8,750,014

 

ECHOSTAR CORPORATION

Consolidated Statements of Operations

(In thousands)

   

For the three months ended March 31,

   

2018

 

2017

Revenue:

       

Services and other revenue - DISH Network

 

$

103,805

   

$

114,955

 

Services and other revenue - other

 

355,040

   

269,791

 

Equipment revenue

 

42,947

   

48,405

 

Total revenue

 

501,792

   

433,151

 

Costs and expenses:

       

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

 

143,793

   

131,783

 

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

 

44,023

   

43,938

 

Selling, general and administrative expenses

 

103,275

   

82,991

 

Research and development expenses

 

7,137

   

7,705

 

Depreciation and amortization

 

145,554

   

115,083

 

Total costs and expenses

 

443,782

   

381,500

 

Operating income

 

58,010

   

51,651

 
         

Other income (expense):

       

Interest income

 

15,635

   

8,291

 

Interest expense, net of amounts capitalized

 

(62,751)

 

 

(45,396)

 

Gains (losses) on investments, net

 

(36,663)

 

 

12,035

 

Other-than-temporary impairment loss on available-for-sale securities

 

   

(3,298)

 

Equity in earnings (losses) of unconsolidated affiliates, net

 

(1,009)

 

 

6,408

 

Other, net

 

204

   

1,072

 

Total other expense, net

 

(84,584)

 

 

(20,888)

 

Income (loss) from continuing operations before income taxes

 

(26,574)

 

 

30,763

 

Income tax benefit, net

 

5,403

   

12

 

Net income (loss) from continuing operations

 

(21,171)

 

 

30,775

 

Net income from discontinued operations

 

   

6,577

 

Net income (loss)

 

(21,171)

 

 

37,352

 

Less: Net loss attributable to noncontrolling interest in HSS Tracking Stock (Note 1)

 

   

(655)

 

Less: Net income attributable to other noncontrolling interests

 

380

   

292

 

Net income (loss) attributable to EchoStar Corporation

 

(21,551)

 

 

37,715

 

Less: Net loss attributable to Hughes Retail Preferred Tracking Stock (Note 1)

 

   

(1,209)

 

Net income (loss) attributable to EchoStar Corporation common stock

 

$

(21,551)

 

 

$

38,924

 
         

Amounts attributable to EchoStar Corporation common stock:

       

Net income (loss) from continuing operations

 

$

(21,551)

 

 

$

32,347

 

Net income from discontinued operations

 

   

6,577

 

Net income (loss) attributable to EchoStar Corporation common stock

 

$

(21,551)

 

 

$

38,924

 
         

Weighted-average common shares outstanding - Class A and B common stock:

       

Basic

 

95,888

   

94,745

 

Diluted

 

95,888

   

95,893

 
         

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

       

Basic:

       

Continuing operations

 

$

(0.22)

 

 

$

0.34

 

Discontinued operations

 

   

0.07

 

Total basic earnings (losses) per share

 

$

(0.22)

 

 

$

0.41

 

Diluted:

       

Continuing operations

 

$

(0.22)

 

 

$

0.34

 

Discontinued operations

 

   

0.07

 

Total diluted earnings (losses) per share

 

$

(0.22)

 

 

$

0.41

 

 

ECHOSTAR CORPORATION

Consolidated Statements of Cash Flows

(In thousands)

   

For the three months ended March 31,

   

2018

 

2017

Cash flows from operating activities:

       

Net income (loss)

 

$

(21,171)

 

 

$

37,352

 

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

       

Depreciation and amortization

 

145,554

   

126,742

 

Amortization of debt issuance costs

 

1,936

   

1,790

 

Equity in (earnings) losses of unconsolidated affiliates, net

 

1,009

   

(5,249)

 

Loss (gain) and impairment on investments, net

 

36,673

   

(8,737)

 

Stock-based compensation

 

2,765

   

956

 

Deferred tax (benefit) provision

 

(7,036)

 

 

343

 

Dividend received from unconsolidated entity

 

   

7,500

 

Changes in current assets and current liabilities, net

 

(13,313)

 

 

(13,857)

 

Changes in noncurrent assets and noncurrent liabilities, net

 

(13,982)

 

 

(6,003)

 

Other, net

 

2,840

   

518

 

Net cash flows from operating activities

 

135,275

   

141,355

 

Cash flows from investing activities:

       

Purchases of marketable investment securities

 

(562,611)

 

 

(45,905)

 

Sales and maturities of marketable investment securities

 

298,596

   

209,923

 

Expenditures for property and equipment

 

(128,506)

 

 

(102,463)

 

Refunds and other receipts related to capital expenditures

 

77,524

   

 

Sale of investment in unconsolidated entity

 

   

17,781

 

Expenditures for externally marketed software

 

(7,148)

 

 

(10,832)

 

Net cash flows from investing activities

 

(322,145)

 

 

68,504

 

Cash flows from financing activities:

       

Repayment of debt and capital lease obligations

 

(9,368)

 

 

(8,736)

 

Net proceeds from Class A common stock options exercised

 

3,481

   

26,325

 

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

 

2,636

   

2,409

 

Cash exchanged for Tracking Stock (Note 1)

 

   

(651)

 

Other, net

 

(1,508)

 

 

(1,475)

 

Net cash flows from financing activities

 

(4,759)

 

 

17,872

 

Effect of exchange rates on cash and cash equivalents

 

(242)

 

 

715

 

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

 

(191,871)

 

 

228,446

 

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

 

2,432,249

   

2,571,866

 

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

 

$

2,240,378

   

$

2,800,312

 
         

Supplemental disclosure of cash flow information:

       

Cash paid for interest (including capitalized interest)

 

$

55,172

   

$

54,053

 

Capitalized interest

 

$

4,099

   

$

21,824

 

Cash paid for income taxes

 

$

839

   

$

1,035

 

Employee benefits paid in Class A common stock

 

$

7,605

   

$

11,199

 

Property and equipment financed under capital lease obligations

 

$

38

   

$

7,485

 

Increase (decrease) in capital expenditures included in accounts payable, net

 

$

585

   

$

(6,315)

 

Capitalized in-orbit incentive obligations

 

$

   

$

31,000

 

Non-cash net assets exchanged for Tracking Stock (Note 1)

 

$

   

$

299,425