UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
(Mark One)
FOR THE QUARTERLY PERIOD ENDED
OR
FOR THE TRANSITION PERIOD FROM TO .
Commission File Number:
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
(Address of principal executive offices) | (Zip code) |
(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 | Name of each exchange on which registered | ||
The |
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.
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).
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.
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
As of July 31, 2024, the registrant’s outstanding common stock consisted of
TABLE OF CONTENTS
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1 | ||
1 | ||
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) | 2 | |
Condensed Consolidated Statements of Changes in Stockholders’ Equity (Deficit) | 3 | |
4 | ||
5 | ||
Management’s Discussion and Analysis of Financial Condition and Results of Operations | 54 | |
97 | ||
97 | ||
97 | ||
97 | ||
97 | ||
Item 3. | Defaults Upon Senior Securities | None |
Item 4. | Mine Safety Disclosures | None |
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98 | ||
99 | ||
PART I — FINANCIAL INFORMATION
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
Unless otherwise required by the context, in this report, the words “EchoStar,” the “Company,” “we,” “our” and “us” refer to EchoStar Corporation and its subsidiaries, “DISH Network” refers to DISH Network Corporation, our wholly owned subsidiary, 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
Risks Related to the Integration
| ● | Although we expect that the Merger will result in synergies and other benefits, those synergies and benefits may not be realized in the amounts anticipated, or may not be realized within the expected timeframe, or at all, and risks associated with the foregoing may also result from any extended delay in the Integration. |
| ● | The market price for shares of our common stock may be affected by factors different from, or in addition to, those that historically affected the market prices of shares of DISH Network Class A Common Stock and EchoStar Class A Common Stock. |
Competition and Economic Risks
| ● | We face intense and increasing competition from providers of video, broadband and/or wireless services. Changing consumer behavior and new technologies in our Pay-TV and/or Wireless 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. |
i
| ● | Through the MNSA and the NSA, we depend on T-Mobile and AT&T to provide network services to our Wireless subscribers. Our failure to effectively manage these relationships, including without limitation, our minimum commitments, any system failure in their wireless networks, interruption in the services provided to us, and/or the termination of the MNSA or the NSA could have a material adverse effect on our business, financial condition and results of operations. |
| ● | We compete with the MNOs whose networks we rely on to provide wireless services to our customers, and they may seek to limit, reduce or terminate our network access to the extent that it becomes competitively advantageous to do so. |
| ● | If we are unable to take advantage of technological developments on a timely basis, or at all, we may experience a decline in demand for our services or face challenges in implementing or evolving our business strategy. |
Operational and Service Delivery Risks
| ● | Any deterioration in our operational performance, subscriber activations and churn rate and subscriber satisfaction could adversely affect our business, 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 have limited satellite capacity and any failures or reduced capacity, caused by, among other things, operational and environmental risks, could adversely affect our business, financial condition and results of operations. |
| ● | Extreme weather may result in risk of damage to our infrastructure and therefore our ability to provide services, and may lead to changes in federal, state and foreign government regulation, all of which could materially and adversely affect our business, results of operations and financial condition. |
| ● | 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. |
Risks Related to our Human Capital
| ● | We rely on highly skilled personnel for our business, and any inability to hire and retain key personnel or to hire qualified personnel may negatively affect our business, financial condition and results of operations. |
| ● | Our business growth and customer retention strategies rely in part on the work of technically skilled employees. |
Risks Related to our Products and Technology
| ● | Our business depends on certain intellectual property rights and on not infringing the intellectual property rights of others. |
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| ● | 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. |
| ● | If our products contain defects, we could be subject to significant costs to correct such defects and our product and network service contracts could be delayed or cancelled, which could adversely affect our revenue. |
Risks Related to Cybersecurity
| ● | We have experienced and may experience in the future consistent cyber-attacks and attempts to gain unauthorized access to our systems and any failure or inadequacy of our information technology infrastructure and communications systems or those of third parties that we use in our operations could disrupt or harm our business. |
| ● | The confidentiality, integrity, and availability of our services and products depends on the continuing operation of our information technology and other enabling systems. |
Acquisition and Capital Structure Risks
| ● | We have substantial debt outstanding and may incur additional debt and covenants in our Indentures could limit our ability to undertake certain types of activities and adversely affect our liquidity. |
| ● | We may pursue acquisitions, dispositions, capital expenditures, the development, acquisition and launch of new satellites and other strategic initiatives to complement or expand our business, which may not be successful and we may lose a portion or all of our investment in these acquisitions and transactions. |
| ● | We have made substantial investments to acquire certain wireless spectrum licenses and other related assets, and may be unable to realize a return on these assets. |
| ● | We will need additional capital, which may not be available on favorable terms, to fund current obligations, to continue investing in our business and to finance acquisitions and other strategic transactions. |
| ● | We are controlled by one principal stockholder who is our Chairman. |
Risks Related to the Regulation of Our Business
| ● | Our services depend on FCC licenses that can expire or be revoked or modified and applications for FCC licenses that may not be granted. |
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.
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Item 1. FINANCIAL STATEMENTS
ECHOSTAR CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share amounts)
(Unaudited)
As of | ||||||
June 30, | December 31, | |||||
| 2024 |
| 2023 | |||
Assets | ||||||
Current Assets: | ||||||
Cash and cash equivalents | $ | | $ | | ||
Marketable investment securities | | | ||||
Trade accounts receivable, net of allowance for credit losses of $ | | | ||||
Inventory | | | ||||
Prepaids and other assets | | | ||||
Other current assets | | | ||||
Total current assets | | | ||||
Noncurrent Assets: | ||||||
Restricted cash, cash equivalents and marketable investment securities | | | ||||
Property and equipment, net | | | ||||
Regulatory authorizations, net | | | ||||
Other investments, net | | | ||||
Operating lease assets | | | ||||
Intangible assets, net | | | ||||
Other noncurrent assets, net | | | ||||
Total noncurrent assets | | | ||||
Total assets | $ | | $ | | ||
Liabilities and Stockholders’ Equity (Deficit) | ||||||
Current Liabilities: | ||||||
Trade accounts payable | $ | | $ | | ||
Deferred revenue and other | | | ||||
Accrued programming | | | ||||
Accrued interest | | | ||||
Other accrued expenses and liabilities | | | ||||
Current portion of long-term debt and finance lease obligations (Note 9) | | | ||||
Total current liabilities | | | ||||
Long-Term Obligations, Net of Current Portion: | ||||||
Long-term debt and finance lease obligations, net of current portion (Note 9) | | | ||||
Deferred tax liabilities, net | | | ||||
Operating lease liabilities | | | ||||
Long-term deferred revenue and other long-term liabilities | | | ||||
Total long-term obligations, net of current portion | | | ||||
Total liabilities | | | ||||
Commitments and Contingencies (Note 10) | ||||||
Redeemable noncontrolling interests (Note 2) | — | | ||||
Stockholders’ Equity (Deficit): | ||||||
Class A common stock, $ | | | ||||
Class B common stock, $ | | | ||||
Additional paid-in capital | | | ||||
Accumulated other comprehensive income (loss) | ( | ( | ||||
Accumulated earnings (deficit) | | | ||||
Total EchoStar stockholders’ equity (deficit) | | | ||||
Noncontrolling interests | | | ||||
Total stockholders’ equity (deficit) | | | ||||
Total liabilities and stockholders’ equity (deficit) | $ | | $ | | ||
The accompanying notes are an integral part of these condensed consolidated financial statements.
1
ECHOSTAR CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME (LOSS)
(Dollars in thousands, except per share amounts)
(Unaudited)
For the Three Months Ended | For the Six Months Ended | |||||||||||
June 30, | June 30, | |||||||||||
| 2024 |
| 2023 |
| 2024 |
| 2023 | |||||
Revenue: | ||||||||||||
Service revenue | $ | | $ | | $ | | $ | | ||||
Equipment sales and other revenue | | | | | ||||||||
Total revenue | | | | | ||||||||
Costs and Expenses (exclusive of depreciation and amortization): | ||||||||||||
Cost of services | | | | | ||||||||
Cost of sales - equipment and other | | | | | ||||||||
Selling, general and administrative expenses | | | | | ||||||||
Depreciation and amortization | | | | | ||||||||
Impairment of long-lived assets and goodwill | — | — | — | | ||||||||
Total costs and expenses | | | | | ||||||||
Operating income (loss) | ( | | ( | | ||||||||
Other Income (Expense): | ||||||||||||
Interest income, net | | | | | ||||||||
Interest expense, net of amounts capitalized (Note 2) | ( | ( | ( | ( | ||||||||
Other, net (Note 5) | ( | | ( | ( | ||||||||
Total other income (expense) | ( | | ( | | ||||||||
Income (loss) before income taxes | ( | | ( | | ||||||||
Income tax (provision) benefit, net | | ( | | ( | ||||||||
Net income (loss) | ( | | ( | | ||||||||
Less: Net income (loss) attributable to noncontrolling interests, net of tax | ( | | ( | | ||||||||
Net income (loss) attributable to EchoStar | $ | ( | $ | | $ | ( | $ | | ||||
Weighted-average common shares outstanding - Class A and B common stock: | ||||||||||||
Basic | | | | | ||||||||
Diluted | | | | | ||||||||
Earnings per share - Class A and B common stock: | ||||||||||||
Basic net income (loss) per share attributable to EchoStar | $ | ( | $ | | $ | ( | $ | | ||||
Diluted net income (loss) per share attributable to EchoStar | $ | ( | $ | | $ | ( | $ | | ||||
Comprehensive Income (Loss): | ||||||||||||
Net income (loss) | $ | ( | $ | | $ | ( | $ | | ||||
Other comprehensive income (loss): | ||||||||||||
Foreign currency translation adjustments | ( | | ( | | ||||||||
Unrealized holding gains (losses) on available-for-sale debt securities | ( | | | | ||||||||
Recognition of previously unrealized (gains) losses on available-for-sale securities included in net income (loss) | — | | ( | | ||||||||
Deferred income tax (expense) benefit, net | ( | ( | ( | ( | ||||||||
Total other comprehensive income (loss), net of tax | ( | | ( | | ||||||||
Comprehensive income (loss) | ( | | ( | | ||||||||
Less: Comprehensive income (loss) attributable to noncontrolling interests, net of tax | ( | | ( | | ||||||||
Comprehensive income (loss) attributable to EchoStar | $ | ( | $ | | $ | ( | $ | | ||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
2
ECHOSTAR CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)
(In thousands)
(Unaudited)
Purchase of SNR Management's ownership interest in SNR HoldCo | 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, 2022 | $ | | $ | | $ | ( | $ | | $ | | $ | | $ | | |||||||
Issuance of Class A common stock | | | — | — | — | | — | ||||||||||||||
Non-cash, stock-based compensation | — | | — | — | — | | — | ||||||||||||||
Other comprehensive income (loss) | — | — | | — | | | — | ||||||||||||||
Net income (loss) attributable to noncontrolling interests | — | — | — | — | ( | ( | | ||||||||||||||
Net income (loss) attributable to EchoStar | — | — | — | | — | | — | ||||||||||||||
Balance, March 31, 2023 | $ | | $ | | $ | ( | $ | | $ | | $ | | $ | | |||||||
Issuance of Class A common stock | | | — | — | — | | — | ||||||||||||||
Non-cash, stock-based compensation | — | | — | — | — | | — | ||||||||||||||
Other comprehensive income (loss) | — | — | | — | | | — | ||||||||||||||
Net income (loss) attributable to noncontrolling interests | — | — | — | — | ( | ( | | ||||||||||||||
Net income (loss) attributable to EchoStar | — | — | — | | — | | — | ||||||||||||||
Balance, June 30, 2023 | $ | | $ | | $ | ( | $ | | $ | | $ | | $ | | |||||||
| |||||||||||||||||||||
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, 2023 | $ | | $ | | $ | ( | $ | | $ | | $ | | $ | | |||||||
Issuance of Class A common stock | — | ( | — | — | — | ( | — | ||||||||||||||
Non-cash, stock-based compensation | — | | — | — | — | | — | ||||||||||||||
Other comprehensive income (loss) | — | — | ( | — | ( | ( | — | ||||||||||||||
Purchase of SNR Management's ownership interest in SNR HoldCo | — | — | — | — | — | — | ( | ||||||||||||||
Net income (loss) attributable to noncontrolling interests | — | — | — | — | ( | ( | | ||||||||||||||
Net income (loss) attributable to EchoStar | — | — | — | ( | — | ( | — | ||||||||||||||
Balance, March 31, 2024 | $ | | $ | | $ | ( | $ | | $ | | $ | | $ | — | |||||||
Issuance of Class A common stock | — | | — | — | — | | — | ||||||||||||||
Sale of Assets to CONX, net of deferred taxes | — | | — | — | — | | — | ||||||||||||||
Non-cash, stock-based compensation | — | | — | — | — | | — | ||||||||||||||
Other comprehensive income (loss) | — | — | ( | — | ( | ( | — | ||||||||||||||
Net income (loss) attributable to noncontrolling interests | — | — | — | — | ( | ( | — | ||||||||||||||
Net income (loss) attributable to EchoStar | — | — | — | ( | — | ( | — | ||||||||||||||
Balance, June 30, 2024 | $ | | $ | | $ | ( | $ | | $ | | $ | | $ | — | |||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
3
ECHOSTAR CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
For the Six Months Ended | ||||||
June 30, | ||||||
| 2024 |
| 2023 | |||
Cash Flows From Operating Activities: | ||||||
Net income (loss) |
| $ | ( | $ | | |
Adjustments to reconcile net income (loss) to net cash flows from operating activities: | ||||||
Depreciation and amortization | | | ||||
Impairment of long-lived assets and goodwill | — | | ||||
Realized and unrealized losses (gains) on investments, impairments and other | | ( | ||||
Realized and unrealized losses (gains) on derivatives | — | | ||||
Non-cash, stock-based compensation | | | ||||
Deferred tax expense (benefit) | ( | | ||||
Changes in allowance for credit losses | | | ||||
Change in long-term deferred revenue and other long-term liabilities | | ( | ||||
Other, net | | | ||||
Changes in current assets and current liabilities, net | ( | | ||||
Net cash flows from operating activities | | | ||||
Cash Flows From Investing Activities: | ||||||
Purchases of marketable investment securities | ( | ( | ||||
Sales and maturities of marketable investment securities | | | ||||
Purchases of property and equipment | ( | ( | ||||
Refunds and other receipts of purchases of property and equipment | — | | ||||
Capitalized interest related to regulatory authorizations (Note 2) | ( | ( | ||||
Proceeds from other debt investments | — | | ||||
Purchases of regulatory authorizations, including deposits | ( | ( | ||||
Sale of assets to CONX (Note 13) | | |||||