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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2022.

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM                               TO                                .

Commission File Number: 001-39144

DISH Network Corporation

(Exact name of registrant as specified in its charter)

Nevada

88-0336997

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

9601 South Meridian Boulevard

Englewood, Colorado

80112

(Address of principal executive offices)

(Zip code)

(303) 723-1000

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Class A common stock, $0.01 par value

DISH

The Nasdaq Stock Market L.L.C.

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes No  

As of April 25, 2022, the registrant’s outstanding common stock consisted of 291,559,614 shares of Class A common stock and 238,435,208 shares of Class B common stock.

TABLE OF CONTENTS

PART I — FINANCIAL INFORMATION

Disclosure Regarding Forward-Looking Statements

i

Item 1.

Financial Statements

Condensed Consolidated Balance Sheets

1

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)

2

Condensed Consolidated Statements of Changes in Stockholders’ Equity (Deficit)

3

Condensed Consolidated Statements of Cash Flows

4

Notes to Condensed Consolidated Financial Statements

5

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

58

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

85

Item 4.

Controls and Procedures

85

PART II — OTHER INFORMATION

Item 1.

Legal Proceedings

85

Item 1A.

Risk Factors

85

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

86

Item 3.

Defaults Upon Senior Securities

None

Item 4.

Mine Safety Disclosures

None

Item 5.

Other Information

None

Item 6.

Exhibits

86

Signatures

87

PART I — FINANCIAL INFORMATION

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

Unless otherwise required by the context, in this report, the words “DISH Network,” the “Company,” “we,” “our” and “us” refer to DISH Network Corporation and its subsidiaries, “EchoStar” refers to EchoStar Corporation and its subsidiaries, and “DISH DBS” refers to DISH DBS Corporation, a wholly-owned, indirect subsidiary of DISH Network, and its subsidiaries.

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, including, in particular, statements about our plans, objectives and strategies, growth opportunities in our industries and businesses, our expectations regarding future results, financial condition, liquidity and capital requirements, our estimates regarding the impact of regulatory developments and legal proceedings, and other trends and projections. Forward-looking statements are not historical facts and may be identified by words such as “future,” “anticipate,” “intend,” “plan,” “goal,” “seek,” “believe,” “estimate,” “expect,” “predict,” “will,” “would,” “could,” “can,” “may,” and similar terms. These forward-looking statements are based on information available to us as of the date of this Quarterly Report on Form 10-Q and represent management’s current views and assumptions. Forward-looking statements are not guarantees of future performance, events or results and involve known and unknown risks, uncertainties and other factors, which may be beyond our control. Accordingly, actual performance, events or results could differ materially from those expressed or implied in the forward-looking statements due to a number of factors, including, but not limited to, those summarized below:

SUMMARY OF RISK FACTORS

COVID-19 Pandemic

The COVID-19 pandemic and its impact on the economic environment generally, and on us specifically, have adversely impacted our business. Furthermore, any continuation or worsening of the pandemic and economic environment could have a material adverse effect on our business, financial condition and results of operations.

Competition and Economic Risks

We face intense and increasing competition from providers of video, broadband and/or wireless services, which may require us to further increase subscriber acquisition and retention spending or accept lower subscriber activations and higher subscriber churn.
Changing consumer behavior and new technologies in our Pay-TV business may reduce our subscriber activations and may cause our subscribers to purchase fewer services from us or to cancel our services altogether, resulting in less revenue to us.
We face certain risks competing in the wireless services industry and operating a facilities-based wireless services business.
Our pay-TV competitors may be able to leverage their relationships with programmers to reduce their programming costs and/or offer exclusive content that will place them at a competitive advantage to us.
Through the MNSA and NSA, we depend primarily on T-Mobile as well as AT&T, respectively, in providing network services to our retail Wireless subscribers, and any system failure in the wireless networks, interruption in the network services (including the shutdown of T-Mobile’s CDMA Network beginning on March 31, 2022), and/or the termination of the MNSA or NSA could negatively impact our subscriber activations, our subscriber churn rate and our subscriber base, which in turn could have a material adverse effect our business, financial condition and results of operations.
Changes in how network operators handle and charge for access to data that travels across their networks could adversely impact our Pay-TV business.
Economic weakness and uncertainty may adversely affect our ability to grow or maintain our business.

i

Operational and Service Delivery Risks

Any deterioration in our operational performance and subscriber satisfaction could adversely affect our business, financial condition and results of operations.
If our subscriber activations decrease, or if our subscriber churn rate, subscriber acquisition costs or retention costs increase, our financial performance will be adversely affected.
With respect to our Pay-TV business, programming expenses are increasing, which may adversely affect our future financial condition and results of operations.
We depend on others to provide the programming that we offer to our Pay-TV subscribers and, if we fail to obtain or lose access to certain programming, our Pay-TV subscriber activations and our subscriber churn rate may be negatively impacted.
We may not be able to obtain necessary retransmission consent agreements at acceptable rates, or at all, from local network stations.
Any failure or inadequacy of our information technology infrastructure and communications systems or those of third parties that we use in our operations, including, without limitation, those caused by cyber-attacks or other malicious activities, could disrupt or harm our business.
Our failure to effectively invest in, introduce, and implement new competitive products and services could cause our products and services to become obsolete and could negatively impact our business.
We rely on a single vendor or a limited number of vendors to provide certain key products or services to us, and the inability of these key vendors to meet our needs could have a material adverse effect on our business.
We depend on independent third parties to solicit orders for our services that represent a meaningful percentage of our total gross new subscriber activations.
We have limited satellite capacity and failures or reduced capacity could adversely affect our business, financial condition and results of operations.
We may have potential conflicts of interest with EchoStar due to our common ownership and management.
We rely on highly skilled personnel for our business, and any inability to hire and retain key personnel or hire qualified personnel may negatively affect our business, financial condition and results of operations.

Acquisition and Capital Structure Risks

We have made substantial investments to acquire certain wireless spectrum licenses and other related assets, and we may be unable to realize a return on these assets.
We have made substantial non-controlling investments in the Northstar Entities and the SNR Entities related to AWS-3 wireless spectrum licenses, and we may be unable to obtain a profitable return on these investments.
We may pursue acquisitions and other strategic transactions to complement or expand our business that may not be successful, and we may lose up to the entire value of our investment in these acquisitions and transactions.
We have substantial debt outstanding and may incur additional debt.
We will need additional capital, which may not be available on favorable terms, to continue investing in our business and to finance acquisitions and other strategic transactions.
The conditional conversion features of our 3 3/8% Convertible Notes due 2026 (the “Convertible Notes due 2026”), our 2 3/8% Convertible Notes due 2024 (the “Convertible Notes due 2024”) and 0% Convertible Notes due 2025 (the “Convertible Notes due 2025,” and collectively with the Convertible Notes due 2026 and the Convertible Notes due 2024, the “Convertible Notes”), if triggered, may adversely affect our financial condition.

ii

The convertible note hedge and warrant transactions that we entered into in connection with the offering of the Convertible Notes due 2026 may affect the value of the Convertible Notes due 2026 and our Class A common stock.
We are subject to counterparty risk with respect to the convertible note hedge transactions.
From time to time a portion of our investment portfolio may be invested in securities that have limited liquidity and may not be immediately accessible to support our financing needs.
We are controlled by one principal stockholder who is also our Chairman.
It may be difficult for a third party to acquire us, even if doing so may be beneficial to our shareholders, because of our ownership structure.

Legal and Regulatory Risks

Our business depends on certain intellectual property rights and on not infringing the intellectual property rights of others.
We are, and may become, party to various lawsuits which, if adversely decided, could have a significant adverse impact on our business, particularly lawsuits regarding intellectual property.
Our services depend on FCC licenses that can expire or be revoked or modified and applications for FCC licenses that may not be granted.
If our internal controls are not effective, our business, stock price and investor confidence in our financial results may be adversely affected.
We may face other risks described from time to time in periodic and current reports we file with the Securities and Exchange Commission (SEC”).

Other factors that could cause or contribute to such differences include, but are not limited to, those discussed under the caption “Risk Factors” in Part I, Item 1A of our most recent Annual Report on Form 10-K (the “10-K”) filed with the SEC, those discussed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” herein and in the 10-K and those discussed in other documents we file with the SEC.  All cautionary statements made or referred to herein should be read as being applicable to all forward-looking statements wherever they appear.  Investors should consider the risks and uncertainties described or referred to herein and should not place undue reliance on any forward-looking statements.  The forward-looking statements speak only as of the date made, and we expressly disclaim any obligation to update these forward-looking statements.

iii

Item 1. FINANCIAL STATEMENTS

DISH NETWORK CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except share amounts)

(Unaudited)

As of  

March 31,

December 31,

2022

    

2021

 

Assets

Current Assets:

Cash and cash equivalents

$

2,696,478

$

2,428,188

Marketable investment securities

538,775

2,975,518

Trade accounts receivable, net of allowance for credit losses of $33,935 and $38,534, respectively

1,089,460

942,561

Inventory

536,893

534,937

Other current assets

433,716

641,978

Total current assets

5,295,322

7,523,182

Noncurrent Assets:

Restricted cash, cash equivalents and marketable investment securities

105,051

5,334,768

Property and equipment, net

3,866,054

3,257,787

FCC authorizations

28,888,467

28,632,665

Other investment securities

141,045

150,941

Operating lease assets

1,972,455

1,493,410

Other noncurrent assets, net (Note 10)

8,297,623

934,293

Intangible assets, net

635,635

674,679

Total noncurrent assets

43,906,330

40,478,543

Total assets

$

49,201,652

$

48,001,725

Liabilities and Stockholders' Equity (Deficit)

Current Liabilities:

Trade accounts payable

$

941,499

$

848,224

Deferred revenue and other

717,127

761,347

Accrued programming

1,277,217

1,376,770

Accrued interest

272,248

288,308

Other accrued expenses

1,265,997

1,179,427

Current portion of long-term debt and finance lease obligations (Note 9)

3,573,506

2,061,810

Total current liabilities

8,047,594

6,515,886

Long-Term Obligations, Net of Current Portion:

Long-term debt and finance lease obligations, net of current portion (Note 9)

17,852,176

19,355,206

Deferred tax liabilities

4,348,632

4,226,266

Operating lease liabilities

1,944,652

1,453,395

Long-term deferred revenue and other long-term liabilities

616,961

527,859

Total long-term obligations, net of current portion

24,762,421

25,562,726

Total liabilities

32,810,015

32,078,612

Commitments and Contingencies (Note 10)

Redeemable noncontrolling interests (Note 2)

411,258

395,222

Stockholders’ Equity (Deficit):

Class A common stock, $.01 par value, 1,600,000,000 shares authorized, 290,746,692 and 290,529,607 shares issued and outstanding, respectively

2,908

2,905

Class B common stock, $.01 par value, 800,000,000 shares authorized, 238,435,208 shares issued and outstanding

2,384

2,384

Additional paid-in capital

4,755,382

4,735,484

Accumulated other comprehensive income (loss)

58

281

Accumulated earnings (deficit)

11,218,268

10,785,617

Total DISH Network stockholders’ equity (deficit)

15,979,000

15,526,671

Noncontrolling interests

1,379

1,220

Total stockholders’ equity (deficit)

15,980,379

15,527,891

Total liabilities and stockholders’ equity (deficit)

$

49,201,652

$

48,001,725

The accompanying notes are an integral part of these condensed consolidated financial statements.

1

DISH NETWORK CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE INCOME (LOSS)

(Dollars in thousands, except per share amounts)

(Unaudited)

For the Three Months Ended 

March 31,

2022

    

2021

Revenue:

Service revenue

$

4,075,122

$

4,209,471

Equipment sales and other revenue

255,498

288,382

Total revenue

4,330,620

4,497,853

Costs and Expenses (exclusive of depreciation):

Cost of services

2,482,642

2,537,665

Cost of sales - equipment and other

502,573

423,541

Selling, general and administrative expenses

618,704

481,686

Depreciation and amortization

176,341

190,385

Total costs and expenses

3,780,260

3,633,277

Operating income (loss)

550,360

864,576

Other Income (Expense):

Interest income

4,849

1,970

Interest expense, net of amounts capitalized

(4,601)

(3,873)

Other, net

42,548

(5,261)

Total other income (expense)

42,796

(7,164)

Income (loss) before income taxes

593,156

857,412

Income tax (provision) benefit, net

(144,310)

(215,849)

Net income (loss)

448,846

641,563

Less: Net income (loss) attributable to noncontrolling interests, net of tax

16,195

11,339

Net income (loss) attributable to DISH Network

$

432,651

$

630,224

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

Basic

529,067

526,570

Diluted

636,470

633,760

Earnings per share - Class A and B common stock:

Basic net income (loss) per share attributable to DISH Network

$

0.82

$

1.20

Diluted net income (loss) per share attributable to DISH Network

$

0.68

$

0.99

Comprehensive Income (Loss):

Net income (loss)

$

448,846

$

641,563

Other comprehensive income (loss):

Foreign currency translation adjustments

(150)

1,842

Unrealized holding gains (losses) on available-for-sale debt securities

(98)

(4)

Recognition of previously unrealized (gains) losses on available-for-sale securities included in net income (loss)

2

(1)

Deferred income tax (expense) benefit, net

23

(498)

Total other comprehensive income (loss), net of tax

(223)

1,339

Comprehensive income (loss)

448,623

642,902

Less: Comprehensive income (loss) attributable to noncontrolling interests, net of tax

16,195

11,339

Comprehensive income (loss) attributable to DISH Network

$

432,428

$

631,563

The accompanying notes are an integral part of these condensed consolidated financial statements.

2

DISH NETWORK CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)

(In thousands)

(Unaudited)

 

Accumulated

Class A and B

Additional

Other 

Accumulated

 

Redeemable

Common

Paid-In

Comprehensive

Earnings

Noncontrolling

Noncontrolling

    

Stock

    

Capital

    

Income (Loss)

    

(Deficit)

    

Interests

    

Total

    

Interests

 

Balance, December 31, 2020

$

5,261

$

5,400,774

$

(855)

$

8,374,975

$

490

$

13,780,645

$

350,648

Issuance of Class A common stock:

Exercise of stock awards

1

2,046

2,047

Employee benefits

9

30,294

30,303

Employee Stock Purchase Plan

2

4,341

4,343

Non-cash, stock-based compensation

19,375

19,375

Change in unrealized holding gains (losses) on available-for-sale debt securities, net

(5)

(5)

Deferred income tax (expense) benefit attributable to other comprehensive income (loss)

(498)

(498)

Foreign currency translation

1,842

1,842

Convertible debt reclassified per ASU 2020-06, net of deferred taxes of $245,778 (Note 2)

(805,566)

(805,566)

Net income (loss) attributable to noncontrolling interests

210

210

11,129

Net income (loss) attributable to DISH Network

630,224

630,224

Balance, March 31, 2021

$

5,273

$

4,651,264

$

484

$

9,005,199

$

700

$

13,662,920

$

361,777

Balance, December 31, 2021

$

5,289

$

4,735,484

$

281

$

10,785,617

$

1,220

$

15,527,891

$

395,222

Issuance of Class A common stock:

Exercise of stock awards

1

253

254

Employee Stock Purchase Plan

2

4,360

4,362

Non-cash, stock-based compensation

15,285

15,285

Change in unrealized holding gains (losses) on available-for-sale debt securities, net

(96)

(96)

Deferred income tax (expense) benefit attributable to other comprehensive income (loss)

23

23

Foreign currency translation

(150)

(150)

Net income (loss) attributable to noncontrolling interests

159

159

16,036

Net income (loss) attributable to DISH Network

432,651

432,651

Balance, March 31, 2022

$

5,292

$

4,755,382

$

58

$

11,218,268

$

1,379

$

15,980,379

$

411,258

The accompanying notes are an integral part of these condensed consolidated financial statements.

3

DISH NETWORK CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

For the Three Months Ended 

March 31,

    

2022

    

2021

 

Cash Flows From Operating Activities:

Net income (loss)

    

$

448,846

$

641,563

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

Depreciation and amortization

176,341

190,385

Realized and unrealized losses (gains) on investments and derivatives and other

(42,546)

6,283

Non-cash, stock-based compensation

15,285

19,375

Deferred tax expense (benefit)

122,386

147,285

Changes in allowance for credit losses

(4,599)

(15,653)

Change in long-term deferred revenue and other long-term liabilities

4,017

(5,117)

Other, net

58,885

9,138

Changes in current assets and current liabilities, net

(73,271)

132,239

Net cash flows from operating activities

705,344

1,125,498

Cash Flows From Investing Activities:

Purchases of marketable investment securities

(55,200)

(139,692)

Sales and maturities of marketable investment securities

2,512,274

381,595

Purchases of property and equipment

(629,374)

(115,096)

Capitalized interest related to FCC authorizations (Note 2)

(266,917)

(281,721)

Refund of FCC authorization deposit

337,490

Purchases of FCC authorizations, including deposits (Note 10)

(7,206,757)

Other, net

3,348

2,006

Net cash flows from investing activities

(5,642,626)

184,582

Cash Flows From Financing Activities:

Repayment of long-term debt and finance lease obligations

(5,818)

(19,149)

Redemption and repurchases of senior notes

(1,175)

(205,354)

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

4,616

6,389

Other, net

4,428

(11,341)

Net cash flows from financing activities

2,051

(229,455)

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

(4,935,231)

1,080,625

Cash, cash equivalents, restricted cash and cash equivalents, beginning of period (Note 5)

7,734,260

3,453,994

Cash, cash equivalents, restricted cash and cash equivalents, end of period (Note 5)

$

2,799,029

$

4,534,619

The accompanying notes are an integral part of these condensed consolidated financial statements.

4

Table of Contents

DISH NETWORK CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1.Organization and Business Activities

Principal Business

DISH Network Corporation is a holding company. Its subsidiaries (which together with DISH Network Corporation are referred to as “DISH Network,” the “Company,” “we,” “us” and/or “our,” unless otherwise required by the context) operate two primary business segments, Pay-TV and Wireless. Our Wireless business segment operates in two business units, Retail Wireless and 5G Network Deployment.

Pay-TV

We offer pay-TV services under the DISH® brand and the SLING® brand (collectively “Pay-TV” services). The DISH branded pay-TV service consists of, among other things, Federal Communications Commission (“FCC”) licenses authorizing us to use direct broadcast satellite (“DBS”) and Fixed Satellite Service (“FSS”) spectrum, our owned and leased satellites, receiver systems, broadcast operations, a leased fiber optic network, in-home service and call center operations, and certain other assets utilized in our operations (“DISH TV”). We also design, develop and distribute receiver systems and provide digital broadcast operations, including satellite uplinking/downlinking, transmission and other services to third-party pay-TV providers. The SLING branded pay-TV services consist of, among other things, multichannel, live-linear and on demand streaming over-the-top (“OTT”) Internet-based domestic, international and Latino video programming services (“SLING TV”). As of March 31, 2022, we had 10.245 million Pay-TV subscribers in the United States, including 7.993 million DISH TV subscribers and 2.252 million SLING TV subscribers.

Wireless – Retail Wireless

We offer nationwide prepaid and postpaid retail wireless services to subscribers under our Boost Mobile, Ting Mobile, Republic Wireless and Gen Mobile brands, as well as a competitive portfolio of wireless devices. Prepaid wireless subscribers generally pay in advance for monthly access to wireless talk, text, and data services. Postpaid wireless subscribers are qualified to pay after receiving wireless talk, text, and data services. We are currently operating our Retail Wireless business unit as a mobile virtual network operator (“MVNO”) until we complete our 5G Network Deployment. On July 14, 2021, we entered into a ten-year Network Services Agreement (the “NSA”) with AT&T to provide us with network services. Under the NSA, we expect AT&T will become our primary network services provider.  As an MVNO, today we primarily depend on T-Mobile as well as AT&T to provide us with network services under the master network services agreement (“MNSA”) and NSA, respectively. As of March 31, 2022, we had 8.203 million retail Wireless subscribers.

Wireless – 5G Network Deployment

We have directly invested approximately $20 billion to acquire certain wireless spectrum licenses and made over $10 billion in non-controlling investments in certain entities, for a total of approximately $30 billion. The $30 billion of investments related to wireless spectrum licenses does not include $7 billion of capitalized interest related to the carrying value of such licenses.  See Note 2 and Note 10 for further information.

5

Table of Contents

DISH NETWORK CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Unaudited)

DISH Network Spectrum

We have directly invested approximately $20 billion to acquire certain wireless spectrum licenses. These wireless spectrum licenses are subject to certain interim and final build-out requirements, as well as certain renewal requirements. We plan to commercialize our wireless spectrum licenses through the completion of the nation’s first cloud-native, Open Radio Access Network (“O-RAN”) based 5G network (our “5G Network Deployment”). We have committed to deploy a facilities-based 5G broadband network capable of serving increasingly larger portions of the U.S. population at different deadlines, including 20% of the U.S. population by June 2022 and 70% by June 2023.  We currently have over 60 market areas, representing approximately 260 cities with populations of at least 50,000, under construction.  The volume of construction activities is beginning to shift from markets we intend to light up before June 14, 2022 (in conjunction with the 20% population coverage requirement) to market areas we intend to light up before June 14, 2023 (in conjunction with the 70% population coverage requirement).

We will need to make significant additional investments or partner with others to, among other things, complete our 5G Network Deployment and further commercialize, build-out and integrate these licenses and related assets and any additional acquired licenses and related assets, as well as to comply with regulations applicable to such licenses. Depending on the nature and scope of such activities, any such investments or partnerships could vary significantly. In addition, as we complete our 5G Network Deployment we have and will continue to incur significant additional expenses related to, among other things, research and development, wireless testing and ongoing upgrades to the wireless network infrastructure. As a result of these investments, among other factors, we plan to raise additional capital, depending on market conditions, which may not be available on favorable terms. We may also determine that additional wireless spectrum licenses may be required to complete our 5G Network Deployment and to compete with other wireless service providers. See Note 9 and Note 10 for further information

DISH Network Non-Controlling Investments in the Northstar Entities and the SNR Entities Related to AWS-3 Wireless Spectrum Licenses

During 2015, through our wholly-owned subsidiaries American AWS-3 Wireless II L.L.C. (“American II”) and American AWS-3 Wireless III L.L.C. (“American III”), we initially made over $10 billion in certain non-controlling investments in Northstar Spectrum, LLC (“Northstar Spectrum”), the parent company of Northstar Wireless, L.L.C. (“Northstar Wireless,” and collectively with Northstar Spectrum, the “Northstar Entities”), and in SNR Wireless HoldCo, LLC (“SNR HoldCo”), the parent company of SNR Wireless LicenseCo, LLC (“SNR Wireless,” and collectively with SNR HoldCo, the “SNR Entities”), respectively. On October 27, 2015, the FCC granted certain AWS-3 wireless spectrum licenses (the “AWS-3 Licenses”) to Northstar Wireless and to SNR Wireless, respectively, which are recorded in “FCC authorizations” on our Condensed Consolidated Balance Sheets.

Under the applicable accounting guidance in Accounting Standards Codification 810, Consolidation (“ASC 810”), Northstar Spectrum and SNR HoldCo are considered variable interest entities and, based on the characteristics of the structure of these entities and in accordance with the applicable accounting guidance, we consolidate these entities into our financial statements. See Note 2 for further information.

The AWS-3 Licenses are subject to certain interim and final build-out requirements, as well as certain renewal requirements. The Northstar Entities and/or the SNR Entities may need to raise significant additional capital in the future, which may be obtained from third party sources or from us, so that the Northstar Entities and the SNR Entities may commercialize, build-out and integrate these AWS-3 Licenses, comply with regulations applicable to such AWS-3 Licenses, and make any potential Northstar Re-Auction Payment and SNR Re-Auction Payment for the AWS-3 licenses retained by the FCC. Depending upon the nature and scope of such commercialization, build-out and integration efforts, regulatory compliance, and potential Northstar Re-Auction Payment and SNR Re-Auction Payment, any loans, equity contributions or partnerships could vary significantly. There can be no assurance that we will be able to obtain a profitable return on our non-controlling investments in the Northstar Entities and the SNR Entities. See Note 10 for further information.

6

Table of Contents

DISH NETWORK CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Unaudited)

2.Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and with the instructions to Form 10-Q and Article 10 of Regulation S-X for interim financial information. Accordingly, these statements do not include all of the information and notes required for complete financial statements prepared under GAAP. In our opinion, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Our results of operations for the interim periods presented are not necessarily indicative of the results that may be expected for the full year. For further information, refer to the Consolidated Financial Statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2021. Certain prior period amounts have been reclassified to conform to the current period presentation.

Principles of Consolidation

We consolidate all majority owned subsidiaries, investments in entities in which we have controlling influence and variable interest entities where we have been determined to be the primary beneficiary. Minority interests are recorded as noncontrolling interests or redeemable noncontrolling interests. See below for further information. Non-consolidated investments are accounted for using the equity method when we have the ability to significantly influence the operating decisions of the investee. When we do not have the ability to significantly influence the operating decisions of an investee, these equity securities are classified as either marketable investment securities or other investments and recorded at fair value with changes recognized in “Other, net” within “Other Income (Expense)” on our Condensed Consolidated Statements of Operations and Comprehensive Income (Loss). All significant intercompany accounts and transactions have been eliminated in consolidation.

Redeemable Noncontrolling Interests

Northstar Wireless. Northstar Wireless is a wholly-owned subsidiary of Northstar Spectrum, which is an entity owned by Northstar Manager, LLC (“Northstar Manager”) and us. Under the applicable accounting guidance in ASC 810, Northstar Spectrum is considered a variable interest entity and, based on the characteristics of the structure of this entity and in accordance with the applicable accounting guidance, we consolidate Northstar Spectrum into our financial statements. The Northstar Operative Agreements, as amended, provide for, among other things, that Northstar Manager has the ability, but not the obligation, to require Northstar Spectrum to purchase Northstar Manager’s ownership interests in Northstar Spectrum (the “Northstar Put Right”) for a purchase price that equals its equity contribution to Northstar Spectrum plus a fixed annual rate of return. The First Northstar Put Window closed in the first quarter of 2021. The Second Northstar Put Window is currently open and expires on July 24, 2022. The value of the Northstar Put Right has accrued to approximately $88 million as of March 31, 2022.

Northstar Purchase Agreement. On December 30, 2020, through our wholly owned subsidiary American II, we entered into a Purchase Agreement (the “Northstar Purchase Agreement”) with Northstar Manager and Northstar Spectrum, pursuant to which American II purchased 80% of Northstar Manager’s Class B Common Interests in Northstar Spectrum (the “Northstar Transaction”) for a purchase price of approximately $312 million.  As a result of the Northstar Transaction, through American II, we hold 97% of the Class B Common Interests in Northstar Spectrum and Northstar Manager holds 3% of the Class B Common Interests in Northstar Spectrum.  Other than the change in ownership percentage of Northstar Spectrum, the Northstar Transaction did not modify or amend in any way the existing arrangements between or among the Northstar parties.  In the Northstar Purchase Agreement, Northstar Manager waived its right to exercise the Northstar Put Right under the First Northstar Put Window. Northstar Manager retains its right to exercise the Northstar Put Right during the Second Northstar Put Window.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Unaudited)

In the event that the Northstar Put Right is exercised by Northstar Manager, the consummation of the sale will be subject to FCC approval. Northstar Spectrum does not have a call right with respect to Northstar Manager’s ownership interests in Northstar Spectrum. Although Northstar Manager is the sole manager of Northstar Spectrum, Northstar Manager’s ownership interest is considered temporary equity under the applicable accounting guidance and is thus recorded as part of “Redeemable noncontrolling interests” in the mezzanine section of our Condensed Consolidated Balance Sheets. Northstar Manager’s ownership interest in Northstar Spectrum was initially accounted for at fair value. Subsequently, Northstar Manager’s ownership interest in Northstar Spectrum is increased by the fixed annual rate of return through “Redeemable noncontrolling interests” on our Condensed Consolidated Balance Sheets, with the offset recorded in “Net income (loss) attributable to noncontrolling interests, net of tax” on our Condensed Consolidated Statements of Operations and Comprehensive Income (Loss). The operating results of Northstar Spectrum attributable to Northstar Manager are recorded as “Redeemable noncontrolling interests” on our Condensed Consolidated Balance Sheets, with the offset recorded in “Net income (loss) attributable to noncontrolling interests, net of tax” on our Condensed Consolidated Statements of Operations and Comprehensive Income (Loss). See Note 10 for further information.

SNR Wireless. SNR Wireless is a wholly-owned subsidiary of SNR HoldCo, which is an entity owned by SNR Wireless Management, LLC (“SNR Management”) and us. Under the applicable accounting guidance in ASC 810, SNR HoldCo is considered a variable interest entity and, based on the characteristics of the structure of this entity and in accordance with the applicable accounting guidance, we consolidate SNR HoldCo into our financial statements. The SNR Operative Agreements, as amended, provide for, among other things, that SNR Management has the ability, but not the obligation, to require SNR HoldCo to purchase SNR Management’s ownership interests in SNR HoldCo (the “SNR Put Right”) for a purchase price that equals its equity contribution to SNR HoldCo plus a fixed annual rate of return.

The First SNR Put Window closed in the first quarter of 2021. On November 15, 2021, we, through our wholly-owned subsidiary American III received notice that SNR Management exercised the SNR Put Right effective as of November 15, 2021. The consummation of the sale is subject to approval by the FCC. The value of the SNR Put Right has accrued to approximately $323 million as of March 31, 2022. If approved by the FCC, the sale will result in the elimination of all of our non-controlling interest as it related to SNR Wireless.

SNR HoldCo does not have a call right with respect to SNR Management’s ownership interests in SNR HoldCo. Although SNR Management is the sole manager of SNR HoldCo, SNR Management’s ownership interest is considered temporary equity under the applicable accounting guidance and is thus recorded as part of “Redeemable noncontrolling interests” in the mezzanine section of our Condensed Consolidated Balance Sheets. SNR Management’s ownership interest in SNR HoldCo was initially accounted for at fair value. Subsequently, SNR Management’s ownership interest in SNR HoldCo is increased by the fixed annual rate of return through “Redeemable noncontrolling interests” on our Condensed Consolidated Balance Sheets, with the offset recorded in “Net income (loss) attributable to noncontrolling interests, net of tax” on our Condensed Consolidated Statements of Operations and Comprehensive Income (Loss). The operating results of SNR HoldCo attributable to SNR Management are recorded as “Redeemable noncontrolling interests” on our Condensed Consolidated Balance Sheets, with the offset recorded in “Net income (loss) attributable to noncontrolling interests, net of tax” on our Condensed Consolidated Statements of Operations and Comprehensive Income (Loss). See Note 10 for further information.

As of March 31, 2022 and December 31, 2021, the aggregate value of Northstar Manager’s ownership interest in Northstar Spectrum and SNR Management’s ownership interest in SNR HoldCo was $411 million and $395 million, respectively, recorded as “Redeemable noncontrolling interests” on our Condensed Consolidated Balance Sheets.

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DISH NETWORK CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Unaudited)

Use of Estimates

The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expense for each reporting period. Estimates are used in accounting for, among other things, allowances for credit losses (including those related to our installment billing programs), self-insurance obligations, deferred taxes and related valuation allowances, uncertain tax positions, loss contingencies, fair value of financial instruments, fair value of options granted under our stock-based compensation plans, fair value of assets and liabilities acquired in business combinations, the fair value of our option to purchase T-Mobile’s 800 MHz spectrum, relative standalone selling prices of performance obligations, finance leases, asset impairments, estimates of future cash flows used to evaluate and recognize impairments, useful lives of property, equipment and intangible assets, incremental borrowing rate (“IBR”) on lease right of use assets, nonrefundable upfront fees, independent third-party retailer incentives, programming expenses and subscriber lives. Economic conditions may increase the inherent uncertainty in the estimates and assumptions indicated above. Actual results may differ from previously estimated amounts, and such differences may be material to our condensed consolidated financial statements. Estimates and assumptions are reviewed periodically, and the effects of revisions are reflected prospectively in the period they occur.

Capitalized Interest

We capitalize interest associated with the acquisition or construction of certain assets, including, among other things, our wireless spectrum licenses, build-out costs associated with our 5G Network Deployment and satellites. Capitalization of interest begins when, among other things, steps are taken to prepare the asset for its intended use and ceases when the asset is ready for its intended use or when these activities are substantially suspended.

We are currently preparing for the commercialization of our 5G Network Deployment. As a result, the interest expense related to the carrying amount of the 5G Network Deployment qualifying assets is being capitalized. The qualifying assets exceed the carrying value of our long-term debt and finance lease obligations, therefore materially all of our interest expense is being capitalized. However, as the qualifying assets are placed into service, we will cease to capitalize interest on those assets.

Fair Value Measurements

We determine fair value based on the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants. Market or observable inputs are the preferred source of values, followed by unobservable inputs or assumptions based on hypothetical transactions in the absence of market inputs. We apply the following hierarchy in determining fair value:

Level 1, defined as observable inputs being quoted prices in active markets for identical assets;
Level 2, defined as observable inputs other than quoted prices included in Level 1, including quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar instruments in markets that are not active; and derivative financial instruments indexed to marketable investment securities; and
Level 3, defined as unobservable inputs for which little or no market data exists, consistent with reasonably available assumptions made by other participants therefore requiring assumptions based on the best information available.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Unaudited)

As of March 31, 2022 and December 31, 2021, the carrying amount for cash and cash equivalents, trade accounts receivable (net of allowance for credit losses) and current liabilities (excluding the “Current portion of long-term debt and finance lease obligations”) was equal to or approximated fair value due to their short-term nature or proximity to current market rates. See Note 5 for the fair value of our marketable investment securities and derivative instruments.

Fair values for our publicly traded debt securities are based on quoted market prices, when available. The fair values of private debt are based on, among other things, available trade information, and/or an analysis in which we evaluate market conditions, related securities, various public and private offerings, and other publicly available information. In performing this analysis, we make various assumptions regarding, among other things, credit spreads, and the impact of these factors on the value of the debt securities. See Note 9 for the fair value of our long-term debt.

Assets Recognized Related to the Costs to Obtain a Contract with a Subscriber

We recognize an asset for the incremental costs of obtaining a contract with a subscriber if we expect the benefit of those costs to be longer than one year.  We have determined that certain sales incentive programs in both our Pay-TV and Wireless segments, including those with our independent third-party retailers, meet the requirements to be capitalized, and payments made under these programs are capitalized and amortized to expense over the estimated subscriber life exceeding one year.  During the three months ended March 31, 2022 and 2021, we capitalized $88 million and $103 million, respectively, under these programs.  The amortization expense related to these programs was $112 million and $75 million for the three months ended March 31, 2022 and 2021, respectively. As of March 31, 2022 and December 31, 2021, we had a total of $434 million and $458 million, respectively, capitalized on our Condensed Consolidated Balance Sheets.  These amounts are capitalized in “Other current assets” and “Other noncurrent assets, net” on our Condensed Consolidated Balance Sheets, and then amortized in “Selling, general and administrative expenses” on our Condensed Consolidated Statements of Operations and Comprehensive Income (Loss).

Advertising Costs

We recognize advertising expense when incurred as a component of “Selling, general and administrative expenses” on our Condensed Consolidated Statements of Operations and Comprehensive Income (Loss). Advertising expenses totaled $150 million and $110 million for the three months ended March 31, 2022 and 2021, respectively.

Research and Development

Research and development costs are expensed as incurred and are included as a component of “Selling, general and administrative expenses” on our Condensed Consolidated Statements of Operations and Comprehensive Income (Loss). Research and development costs totaled $10 million and $7 million for the three months ended March 31, 2022 and 2021, respectively.

New Accounting Pronouncements

We do not expect that any recently issued accounting pronouncements will have a material effect on our condensed consolidated financial statements.

3.Basic and Diluted Net Income (Loss) Per Share

We present both basic earnings per share (“EPS”) and diluted EPS. Basic EPS excludes potential dilution and is computed by dividing “Net income (loss) attributable to DISH Network” by the weighted-average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if stock awards were exercised and if our Convertible Notes were converted.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - Continued

(Unaudited)

The potential dilution from stock awards is accounted for using the treasury stock method based on the average market value of our Class A common stock. The potential dilution from conversion of the Convertible Notes is accounted for using the if-converted method, which requires that all of the shares of our Class A common stock issuable upon conversion of the Convertible Notes will be included in the calculation of diluted EPS assuming conversion of the Convertible Notes at the beginning of the reporting period (or at time of issuance, if later).

The following table presents EPS amounts for all periods and the basic and diluted weighted-average shares outstanding used in the calculation.

For the Three Months Ended 

March 31,

    

2022

    

2021

    

(In thousands, except per share amounts)

Net income (loss)

 

$

448,846

 

$

641,563

 

Less: Net income (loss) attributable to noncontrolling interests, net of tax

 

16,195

 

11,339

Net income (loss) attributable to DISH Network - Basic

 

432,651

 

630,224

 

Interest on dilutive Convertible Notes, net of tax (1)

Net income (loss) attributable to DISH Network - Diluted

$

432,651

$

630,224

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

Basic

 

529,067

 

526,570

Dilutive impact of Convertible Notes

107,016

107,016

Dilutive impact of stock awards outstanding

 

387

 

174

Diluted

 

636,470

 

633,760

Earnings per share - Class A and B common stock:

Basic net income (loss) per share attributable to DISH Network

 

$

0.82

 

$

1.20

 

Diluted net income (loss) per share attributable to DISH Network

 

$

0.68

 

$

0.99

 

(1)For both the three months ended March 31, 2022 and 2021, materially all of our interest expense was capitalized. See Note 2 for further information.

Certain stock awards to acquire our Class A common stock are not included in the weighted-average common shares outstanding above, as their effect is anti-dilutive. In addition, vesting of performance/market based options and rights to acquire shares of our Class A common stock granted pursuant to our performance-based stock incentive plans (“Restricted Performance Units”) are both contingent upon meeting certain goals, some of which are not yet probable of being achieved. Furthermore, the warrants that we issued to certain option counterparties in connection with the Convertible Notes due 2026 are only exercisable at their expiration if the market price per share of our Class A common stock is greater than the strike price of the warrants, which is approximately $