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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, 2023.

☐ 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: 333-179121

https://cdn.kscope.io/972440e07ca80404e5a8403805978008-HUGHES-EchoStar_RGB_HR.jpg

Hughes Satellite Systems Corporation

(Exact name of registrant as specified in its charter)

Colorado

45-0897865

(State or other jurisdiction of incorporation or organization)

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

100 Inverness Terrace East,

Englewood,

Colorado

80112-5308

(Address of principal executive offices)

(Zip Code)

(303)

706-4000

Not Applicable

(Registrant’s telephone number, including area code)

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

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 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. (Check one):

Large accelerated filer

☐

Accelerated filer

☐

Emerging growth company

☐

Non-accelerated filer

☒

Smaller reporting 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 26, 2023, the registrant’s outstanding common stock consisted of 1,078 shares of common stock, $0.01 par value per share.

The Registrant meets the conditions set forth in General Instructions (H)(1)(a) and (b) of Form 10-Q and is therefore filing this Quarterly Report on Form 10-Q with the reduced disclosure format.

* The Registrant currently is not subject to the filing requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934 and is filing this Quarterly Report on Form 10-Q on a voluntary basis. The Registrant 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 as if it were subject to such filing requirements during such period.

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TABLE OF CONTENTS


Disclosure Regarding Forward Looking Statements		i

PART I - FINANCIAL IN F ORMATION

Item 1.	Financial Statements	1
	Consolidated Balance Sheets as of March 31, 2023 (unaudited) and December 31, 2022 (audited)	1
	Consolidated Statements of Operations for the three months ended March 31, 2023 and 2022 (unaudited)	3
	Consolidated Statements of Comprehensive Income (Loss) for the three months ended March 31, 2023 and 2022 (unaudited)	4
	Consolidated Statements of Changes in Shareholder’s Equity for the three months ended March 31, 2023 and 2022 (unaudited)	5
	Consolidated Statements of Cash Flows for the three months ended March 31, 2023 and 2022 (unaudited)	6
	Notes to the Consolidated Financial Statements (unaudited)	8
Item 2.	Management’s Narrative Analysis of Results of Operations	46
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	*
Item 4.	Controls and Procedures	57

PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	58
Item 1A.	Risk Factors	58
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	*
Item 3.	Defaults Upon Major Securities	*
Item 4.	Mine Safety Disclosures	58
Item 5.	Other Information	58
Item 6.	Exhibits	59
	Signatures	60

* This item has been omitted pursuant to the reduced disclosure format as set forth in General Instructions (I) (2) (a) and (c) of Form 10-K.

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DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (“Form 10-Q”) contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including but not limited to statements about our estimates, expectations, future developments, plans, objectives, strategies, financial condition, expected impact of regulatory developments and legal proceedings, opportunities in our industries and businesses and other trends and projections for the next fiscal quarter and beyond. All statements, other than statements of historical facts, may be forward-looking statements. Forward-looking statements may also be identified by words such as “anticipate,” “intend,” “plan,” “goal,” “seek,” “believe,” “estimate,” “expect,” “predict,” “project,” “continue,” “future,” “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 Form 10-Q and represent management’s current views and assumptions based on past experience and trends, current economic and industry conditions, expected future developments and other relevant factors. Forward-looking statements are not guarantees of future performance, events or results and involve potential known and unknown risks, uncertainties, including the impact of the coronavirus pandemic (COVID-19), and other factors, many of which may be beyond our control and may pose a risk to our operating and financial condition both the near- and long-term. 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:

•significant risks related to our ability to operate and control our satellites, operational and environmental risks related to our owned and leased satellites, and risks related to our satellites under construction;

•our ability and the ability of third parties with whom we engage to operate our business as a result of the COVID-19 pandemic, including regulatory and competitive considerations;

•our ability to implement and/or realize benefits of our investments and other strategic initiatives;

•legal proceedings relating to the BSS Transaction or other matters that could result in substantial costs and material adverse effects to our business;

•risks related to our foreign operations and other uncertainties associated with doing business internationally;

•risks related to our dependency upon third-party providers, including supply chain disruptions and inflation;

•risks related to cybersecurity incidents; and

•risks related to our human capital resources.

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 II, Item 1A of this Form 10-Q and in Part I, Item 1A of our most recent Annual Report on Form 10-K (“Form 10-K”) filed with the Securities and Exchange Commission (“SEC”), those discussed in Management’s Narrative Analysis of Results of Operations in Part I, Item 2 of this Form 10-Q and in Part II, Item 7 of our Form 10-K and those discussed in other documents we file with the SEC.

All cautionary statements made herein should be read as being applicable to all forward-looking statements wherever they appear. Investors should consider the risks and uncertainties described herein and should not place undue reliance on any forward-looking statements. We do not undertake, and specifically disclaim, any obligation to publicly release the results of any revisions that may be made to any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

Although we believe that the expectations reflected in any forward-looking statements are reasonable, we cannot guarantee future results, events, levels of activity, performance or achievements. We do not assume responsibility for the accuracy and completeness of any forward-looking statements. We assume no responsibility for updating forward-looking information contained or incorporated by reference herein or in any documents we file with the SEC, except as required by law.

Should one or more of the risks or uncertainties described herein or in any documents we file with the SEC occur, or should underlying assumptions prove incorrect, our actual results and plans could differ materially from those expressed in any forward-looking statements.

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PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

HUGHES SATELLITE SYSTEMS CORPORATION

CONSOLIDATED BALANCE SHEETS

(Amounts in thousands, except share and per share amounts)


	As of
	March 31, 2023		December 31, 2022
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	842,174	$	653,132
Marketable investment securities	613,012		799,769
Trade accounts receivable and contract assets, net	251,866		236,336
Other current assets, net	288,230		275,202
Total current assets	1,995,282		1,964,439
Non-current assets:
Property and equipment, net	1,342,226		1,376,004
Operating lease right-of-use assets	146,845		150,632
Goodwill	532,858		532,491
Regulatory authorizations, net	408,949		408,619
Other intangible assets, net	15,151		15,698
Other investments, net	82,971		83,523
Other non-current assets, net	281,621		285,877
Total non-current assets	2,810,621		2,852,844
Total assets	$	4,805,903	$	4,817,283

Liabilities and Shareholder's Equity
Current liabilities:
Trade accounts payable	$	83,753	$	98,229
Contract liabilities	129,292		121,739
Accrued expenses and other current liabilities	360,526		393,899
Total current liabilities	573,571		613,867
Non-current liabilities:
Long-term debt, net	1,496,981		1,496,777
Deferred tax liabilities, net	295,137		289,757
Operating lease liabilities	131,091		135,122
Other non-current liabilities	124,328		133,897
Total non-current liabilities	2,047,537		2,055,553
Total liabilities	2,621,108		2,669,420

Commitments and contingencies

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HUGHES SATELLITE SYSTEMS CORPORATION

CONSOLIDATED BALANCE SHEETS

(Amounts in thousands, except share and per share amounts)

(Unaudited)


Shareholder's equity:
Preferred stock, $0.001 par value,1,000,000 shares authorized, none issued and outstanding at both March 31, 2023 and December 31, 2022	—		—
Common stock, $0.01 par value, 1,000,000 shares authorized, 1,078 shares issued and outstanding at both March 31, 2023 and December 31, 2022	—		—
Additional paid-in capital	1,480,953		1,479,857
Accumulated other comprehensive income (loss)	(162,944)		(170,184)
Accumulated earnings (losses)	769,603		741,754
Total Hughes Satellite Systems Corporation shareholder's equity	2,087,612		2,051,427
Non-controlling interests	97,183		96,436
Total shareholder's equity	2,184,795		2,147,863
Total liabilities and shareholder's equity	$	4,805,903	$	4,817,283

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HUGHES SATELLITE SYSTEMS CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(Amounts in thousands)

(Unaudited)


	For the three months ended March 31,
	2023		2022
Revenue:
Services and other revenue	$	375,754	$	420,941
Equipment revenue	62,070		82,717
Total revenue	437,824		503,658
Costs and expenses:
Cost of sales - services and other (exclusive of depreciation and amortization)	134,039		139,354
Cost of sales - equipment (exclusive of depreciation and amortization)	51,671		69,105
Selling, general and administrative expenses	104,099		111,618
Research and development expenses	8,256		7,616
Depreciation and amortization	96,351		113,678
Impairment of long-lived assets	—		—
Total costs and expenses	394,416		441,371
Operating income (loss)	43,408		62,287
Other income (expense):
Interest income, net	17,948		2,280
Interest expense, net of amounts capitalized	(22,527)		(23,378)
Gains (losses) on investments, net	(3)		—
Equity in earnings (losses) of unconsolidated affiliates, net	(551)		(1,714)
Foreign currency transaction gains (losses), net	3,030		6,655
Other, net	29		(189)
Total other income (expense), net	(2,074)		(16,346)
Income (loss) before income taxes	41,334		45,941
Income tax benefit (provision), net	(14,706)		(15,128)
Net income (loss)	26,628		30,813
Less: Net loss (income) attributable to non-controlling interests	1,221		2,488
Net income (loss) attributable to HSSC	$	27,849	$	33,301

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HUGHES SATELLITE SYSTEMS CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Amounts in thousands)

(Unaudited)


	For the three months ended March 31,
	2023		2022
Net income (loss)	$	26,628	$	30,813
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments	9,296		46,686
Unrealized gains (losses) on available-for-sale securities	(88)		(470)

Total other comprehensive income (loss), net of tax	9,208		46,216
Comprehensive income (loss)	35,836		77,029
Less: Comprehensive loss (income) attributable to non-controlling interests	(747)		(7,068)
Comprehensive income (loss) attributable to HSSC	$	35,089	$	69,961

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HUGHES SATELLITE SYSTEMS CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDER’S EQUITY

(Amounts in thousands)

(Unaudited)


	Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss)		Accumulated Earnings (Losses)		Non-controlling Interests		Total
Balance, December 31, 2021	$	1,489,776	$	(173,381)	$	692,341	$	60,253	$	2,068,989
Stock-based compensation	779		—		—		—		779
Issuance of equity and contribution of assets pursuant to the India JV formation	(14,090)		—		—		44,393		30,303
Dividend paid to EchoStar	—		—		(100,000)		—		(100,000)
Other comprehensive income (loss)	—		36,660		—		9,556		46,216
Net income (loss)	—		—		33,301		(2,488)		30,813

Balance, March 31, 2022	$	1,476,465	$	(136,721)	$	625,642	$	111,714	$	2,077,100

Balance, December 31, 2022	$	1,479,857	$	(170,184)	$	741,754	$	96,436	$	2,147,863
Stock-based compensation	1,096		—		—		—		1,096


Other comprehensive income (loss)	—		7,240		—		1,968		9,208
Net income (loss)	—		—		27,849		(1,221)		26,628

Balance, March 31, 2023	$	1,480,953	$	(162,944)	$	769,603	$	97,183	$	2,184,795

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HUGHES SATELLITE SYSTEMS CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

(Unaudited)


	For the three months ended March 31,
	2023		2022
Cash flows from operating activities:
Net income (loss)	$	26,628	$	30,813
Adjustments to reconcile net income (loss) to cash flows provided by (used for) operating activities:
Depreciation and amortization	96,351		113,678
Losses (gains) on investments, net	3		—

Equity in losses (earnings) of unconsolidated affiliates, net	551		1,714
Foreign currency transaction losses (gains), net	(3,030)		(6,655)
Deferred tax provision (benefit), net	5,333		7,575
Stock-based compensation	1,096		779
Amortization of debt issuance costs	204		191

Other, net	835		(1,627)
Changes in assets and liabilities, net:
Trade accounts receivable and contract assets, net	(18,086)		(8,526)
Other current assets, net	(15,203)		3,181
Trade accounts payable	(13,499)		8,284
Contract liabilities	7,553		(3,142)
Accrued expenses and other current liabilities	(28,719)		(31,511)
Non-current assets and non-current liabilities, net	(11,223)		(9,570)
Net cash provided by (used for) operating activities	48,794		105,184

Cash flows from investing activities:
Purchases of marketable investment securities	(226,068)		(76,228)
Sales and maturities of marketable investment securities	420,411		485,730

Expenditures for property and equipment	(47,025)		(61,021)
Expenditures for externally marketed software	(6,962)		(5,093)

India JV formation	—		(7,892)


Net cash provided by (used for) investing activities	140,356		335,496

Cash flows from financing activities:


Payment of in-orbit incentive obligations	(1,834)		(1,444)
Payment of finance lease obligations	—		(85)
Dividend paid to EchoStar	—		(100,000)

Net cash provided by (used for) financing activities	(1,834)		(101,529)

Effect of exchange rates on cash and cash equivalents	1,669		3,490
Net increase (decrease) in cash and cash equivalents	188,985		342,641
Cash and cash equivalents, including restricted amounts, beginning of period	654,473		430,148
Cash and cash equivalents, including restricted amounts, end of period	$	843,458	$	772,789

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HUGHES SATELLITE SYSTEMS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1. ORGANIZATION AND BUSINESS ACTIVITIES

Principal Business

Hughes Satellite Systems Corporation (which, together with its subsidiaries, is referred to as “HSSC,” the “Company,” “we,” “us” and “our”) is a holding company and a subsidiary of EchoStar Corporation (“EchoStar” and “parent”). We are an industry leader in both networking technologies and services, innovating to deliver the global solutions that power a connected future for people, enterprises and things everywhere. We provide internet services to consumer customers, which include home and small to medium-sized businesses, and satellite and multi-transport technologies and managed network services to enterprise customers, telecommunications providers, aeronautical service providers and government entities, including the U.S. Department of Defense. We operate in the following two business segments:

•Hughes segment — which provides broadband satellite technologies and broadband internet products and services to consumer customers. We provide broadband network technologies, managed services, equipment, hardware, satellite services and communications solutions to government and enterprise customers. We also design, provide and install gateway and terminal equipment to customers for other satellite systems. In addition, we design, develop, construct and provide telecommunication networks comprising satellite ground segment systems and terminals to mobile system operators and our enterprise customers.

•EchoStar Satellite Services segment (“ESS segment”) — which provides satellite services on a full-time and/or occasional-use basis to U.S. government service providers, internet service providers, broadcast news organizations, content providers and private enterprise customers. We operate our ESS business using primarily the EchoStar IX satellite and the EchoStar 105/SES-11 satellite and related infrastructure. Revenue in our ESS segment depends largely on our ability to continuously make use of our available satellite capacity with existing customers and our ability to enter into commercial relationships with new customers. During the first quarter of 2023, we transitioned the EchoStar IX satellite into inclined operations to extend its usable life for our customers. With this inclined mode of operation, we are expecting to extend the life of the spacecraft into 2024.

Our operations also include various corporate functions (primarily Executive, Treasury, Strategic Development, Human Resources, Information Technology, Finance, Accounting, Real Estate and Legal) and other activities, such as costs incurred in certain satellite development programs and other business development activities, and gains or losses from certain of our investments, that have not been assigned to our business segments. These activities, costs and income, as well as eliminations of intersegment transactions, are accounted for in Corporate and Other segment in our segment reporting. We also divide our operations by primary geographic market as follows: (i) North America (the U.S. and its territories, Mexico, and Canada); (ii) South and Central America and (iii) Other (Asia, Africa, Australia, Europe, India, and the Middle East). Refer to Note 14. Segment Reporting for further detail.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

These unaudited Consolidated Financial Statements and the accompanying notes (collectively, the “Consolidated Financial Statements”) are prepared in conformity with U.S. generally accepted accounting principles (“GAAP”) and the instructions to Form 10-Q and Article 10 of Regulation S-X for interim financial information. Accordingly, they do not include all of the information and notes required for complete financial statements prepared in conformity with GAAP. In our opinion, all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation have been included. However, our results of operations for the interim periods presented are not necessarily indicative of the results that may be expected for the full year.

All amounts presented in these Consolidated Financial Statements are expressed in thousands of U.S. dollars, except share and per share amounts and unless otherwise noted.

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HUGHES SATELLITE SYSTEMS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(Unaudited)

Refer to Note 2. Summary of Significant Accounting Policies to the Consolidated Financial Statements in our Form 10-K for a summary and discussion of our significant accounting policies, except as updated below.

Use of Estimates

We are required to make certain estimates and assumptions that affect the amounts reported in these Consolidated Financial Statements. The most significant estimates and assumptions are used in determining: (i) inputs used to recognize revenue over time, including amortization periods for deferred contract acquisition costs; (ii) allowances for doubtful accounts, and estimated credit losses on investments; (iii) deferred taxes and related valuation allowances, including uncertain tax positions; (iv) loss contingencies; (v) fair value of financial instruments; (vi) fair value of assets and liabilities acquired in business combinations; and (vii) assets and goodwill impairment testing.

We base our estimates and assumptions on historical experience, observable market inputs and on various other factors that we believe to be relevant under the circumstances. Due to the inherent uncertainty involved in making estimates, actual results may differ from previously estimated amounts and such differences may be material to our financial statements. Additionally, changing economic conditions may increase the inherent uncertainty in the estimates and assumptions indicated above. We review our estimates and assumptions periodically and the effects of revisions thereto are reflected in the period they occur or prospectively if the revised estimate affects future periods.

Recently Adopted Accounting Pronouncements

Government Assistance

On January 1, 2022, we adopted ASU No. 2021-10 - Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance, which requires business entities (except for not-for-profit entities and employee benefit plans) to disclose information about certain government assistance they receive. The Topic 832 disclosure requirements include: (i) the nature of the transactions and the related accounting policy used; (ii) the line items on the balance sheet and income statement that are affected and the amounts applicable to each financial statement line item; and (iii) significant terms and conditions of the transactions. Our adoption of this ASU did not have a material impact on our Consolidated Financial Statements.

Income Taxes

On January 1, 2021, we adopted ASU No. 2019-12 - Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”). ASU 2019-12 is part of the Financial Accounting Standards Board (“FASB”) overall simplification initiative and seeks to simplify the accounting for income taxes by updating certain guidance and removing certain exceptions. Our adoption of this ASU did not have a material impact on our Consolidated Financial Statements.

Business Combinations

On January 1, 2023, we adopted Accounting Standards Update (“ASU”) No. 2021-08 - Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which provides an exception to fair value measurement for contract assets and contract liabilities related to revenue contracts acquired in a business combination. The ASU requires an entity (acquirer) to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606. At the acquisition date, an acquirer should account for the related revenue contracts in accordance with Topic 606 as if it had originated the contracts. The ASU is applied to business combinations occurring on or after the adoption date.

Recently Issued Accounting Pronouncements Not Yet Adopted

Leases - Common Control Arrangements

In March 2023, the FASB issued ASU No. 2023-01 - Leases (Topic 842): Common Control Arrangements. Among other things, this ASU requires all lessees to amortize leasehold improvements associated with common control leases over their useful life to the common control group and account for them as a transfer of assets between

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HUGHES SATELLITE SYSTEMS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(Unaudited)

entities under common control at the end of the lease. Additional disclosures are required when the useful life of leasehold improvements to the common control group exceeds the related lease term. The guidance is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted. We are evaluating the impact of adopting this new guidance and we do not expect it to have a material impact on our Consolidated Financial Statements.

Reference Rate Reform

In March 2020, the FASB issued ASU No. 2020-04 - Reference Rate Reform (Topic 848), and all subsequent amendments to the initial guidance, codified as ASC 848 (“ASC 848”). The purpose of ASC 848 is to provide optional guidance to ease the potential effects on financial reporting of the market-wide migration away from Interbank Offered Rates to alternative reference rates. ASC 848 applies only to contracts, hedging relationships, and other transactions that reference a reference rate expected to be discontinued because of reference rate reform. The guidance may be applied upon issuance of ASC 848 through December 31, 2024. We expect to utilize the optional expedients provided by the guidance for contracts amended solely to use an alternative reference rate. We have evaluated the new guidance and we are in the process of implementing this ASU, and all subsequent amendments, and do not expect them to have a material impact on our Consolidated Financial Statements.

NOTE 3. REVENUE RECOGNITION

Contract Balances

The following table presents the components of our contract balances:


	As of
	March 31, 2023		December 31, 2022
Trade accounts receivable and contract assets, net:
Sales and services	$	193,348	$	170,466
Leasing	9,397		7,935
Total trade accounts receivable	202,745		178,401
Contract assets	65,313		73,293
Allowance for doubtful accounts	(16,192)		(15,358)
Total trade accounts receivable and contract assets, net	$	251,866	$	236,336

Contract liabilities:
Current	$	129,292	$	121,739
Non-current	7,872		8,326
Total contract liabilities	$	137,164	$	130,065

The following table presents the revenue recognized in the Consolidated Statements of Operations that was previously included within contract liabilities:


	For the three months ended March 31,
	2023		2022
Revenue	$	60,963	$	88,947

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HUGHES SATELLITE SYSTEMS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(Unaudited)

Contract Acquisition Costs

The following table presents the activity in our contract acquisition costs, net:


	For the three months ended March 31,
	2023		2022
Balance at beginning of period	$	64,447	$	82,986
Additions	11,973		15,788
Amortization expense	(16,638)		(20,197)
Foreign currency translation	452		1,995
Balance at end of period	$	60,234	$	80,572

Performance Obligations

As of March 31, 2023, the remaining performance obligations for our customer contracts with original expected durations of more than one year was approximately $1.0 billion. Performance obligations expected to be satisfied within one year and greater than one year are 26.8% and 73.2%, respectively. This amount and percentages exclude agreements with consumer customers in our Hughes segment, our leasing arrangements and agreements with certain customers under which collectability of all amounts due through the term of contracts is uncertain.

Disaggregation of Revenue

Geographic Information

The following tables present our revenue from customer contracts disaggregated by primary geographic market and by segment:


	Hughes		ESS		Corporate and Other		Consolidated Total












For the three months ended March 31, 2023
North America	$	348,961	$	5,997	$	(508)	$	354,450
South and Central America	38,373		—		—		38,373
Other	43,861		—		1,140		45,001
Total revenue	$	431,195	$	5,997	$	632	$	437,824

For the three months ended March 31, 2022
North America	$	399,422	$	4,474	$	(198)	$	403,698
South and Central America	42,872		—		—		42,872
Other	51,812		—		5,276		57,088
Total revenue	$	494,106	$	4,474	$	5,078	$	503,658

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HUGHES SATELLITE SYSTEMS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(Unaudited)

Nature of Products and Services

The following tables present our revenue disaggregated by the nature of products and services and by segment:


	Hughes		ESS		Corporate and Other		Consolidated Total
For the year ended March 31, 2023
Services and other revenue:
Services	$	359,440	$	3,987	$	—	$	363,427
Lease revenue	9,685		2,010		632		12,327
Total services and other revenue	369,125		5,997		632		375,754
Equipment revenue:
Equipment	20,965		—		—		20,965
Design, development and construction services	36,904		—		—		36,904
Lease revenue	4,201		—		—		4,201
Total equipment revenue	62,070		—		—		62,070
Total revenue	$	431,195	$	5,997	$	632	$	437,824

For the year ended March 31, 2022
Services and other revenue:
Services	$	400,402	$	2,935	$	—	$	403,337
Lease revenue	10,987		1,539		5,078		17,604
Total services and other revenue	411,389		4,474		5,078		420,941
Equipment revenue:
Equipment	25,885		—		—		25,885
Design, development and construction services	55,905		—		—		55,905
Lease revenue	927		—		—		927
Total equipment revenue	82,717		—		—		82,717
Total revenue	$	494,106	$	4,474	$	5,078	$	503,658

Lease Revenue

The following table presents our lease revenue by type of lease:


	For the three months ended March 31,
	2023		2022
Sales-type lease revenue:
Revenue at lease commencement	$	3,754	$	638
Interest income	447		289
Total sales-type lease revenue	4,201		927
Operating lease revenue	12,327		17,604
Total lease revenue	$	16,528	$	18,531

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NOTE 4. MARKETABLE INVESTMENT SECURITIES

The following table presents our Marketable investment securities:


	As of
	March 31, 2023		December 31, 2022
Marketable investment securities:
Available-for-sale debt securities:
Corporate bonds	$	181,065	$	154,580
Commercial paper	429,690		643,526
Other debt securities	2,257		1,663
Total available-for-sale debt securities	613,012		799,769
Equity securities	—		—
Total marketable investment securities	$	613,012	$	799,769

Debt Securities

Available-for-Sale

The following table presents the components of our available-for-sale debt securities:


	Amortized		Unrealized				Estimated
	Cost		Gains		Losses		Fair Value
As of March 31, 2023
Corporate bonds	$	181,115	$	158	$	(208)	$	181,065
Commercial paper	429,691		—		(1)		429,690
Other debt securities	2,257		—		—		2,257
Total available-for-sale debt securities	$	613,063	$	158	$	(209)	$	613,012
As of December 31, 2022
Corporate bonds	$	154,517	$	119	$	(56)	$	154,580
Commercial paper	643,553		—		(27)		643,526
Other debt securities	1,663		—		—		1,663
Total available-for-sale debt securities	$	799,733	$	119	$	(83)	$	799,769

The following table presents the activity on our available-for-sale debt securities:


	For the three months ended March 31,
	2023		2022
Proceeds from sales	$	38,109	$	29,018

As of March 31, 2023, we have $529.8 million of available-for-sale debt securities with contractual maturities of one year or less and $83.2 million with contractual maturities greater than one year.

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Fair Value Measurements

The following table presents our marketable investment securities categorized by the fair value hierarchy, certain of which have historically experienced volatility:


	Level 1		Level 2		Total
As of March 31, 2023
Cash equivalents (including restricted)	$	280	$	737,633	$	737,913
Available-for-sale debt securities:
Corporate bonds	$	—	$	181,065	$	181,065
Commercial paper	—		429,690		429,690
Other debt securities	—		2,257		2,257
Total available-for-sale debt securities	—		613,012		613,012
Equity securities	—		—		—
Total marketable investment securities	$	—	$	613,012	$	613,012

As of December 31, 2022
Cash equivalents (including restricted)	$	496	$	548,058	$	548,554
Available-for-sale debt securities:
Corporate bonds	$	—	$	154,580	$	154,580
Commercial paper	—		643,526		643,526
Other debt securities	—		1,663		1,663
Total available-for-sale debt securities	—		799,769		799,769
Equity securities	—		—		—
Total marketable investment securities	$	—	$	799,769	$	799,769

As of March 31, 2023 and December 31, 2022, we did not have any investments that were categorized within Level 3 of the fair value hierarchy.

NOTE 5. PROPERTY AND EQUIPMENT

The following table presents the components of Property and equipment, net:


	As of
	March 31, 2023		December 31, 2022
Property and equipment, net:
Satellites, net	$	731,217	$	754,019
Other property and equipment, net	611,009		621,985
Total property and equipment, net	$	1,342,226	$	1,376,004

Satellites

As of March 31, 2023, our satellite fleet consisted of eight geosynchronous (“GEO”) satellites, five of which are owned and three of which are leased. They are all in geosynchronous orbit, approximately 22,300 miles above the equator.

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The following table presents our GEO satellite fleet as of March 31, 2023:

GEO Satellite

Segment

Launch Date

Nominal Degree Orbital Location (Longitude)

Depreciable Life (In Years)

Owned:

SPACEWAY 3 (1)

Hughes

August 2007

95 W

EchoStar XVII

Hughes

July 2012

107 W

EchoStar XIX

Hughes

December 2016

97.1 W

Al Yah 3 (2)

Hughes

January 2018

20 W

EchoStar IX (3) (4)

ESS

August 2003

121 W

Finance leases:

Eutelsat 65 West A

Hughes

March 2016

65 W

Telesat T19V

Hughes

July 2018

63 W

EchoStar 105/SES-11

ESS

October 2017

105 W

(1) Depreciable life represents the remaining useful life as of June 8, 2011, the date EchoStar completed the acquisition of Hughes Communications, Inc. (“Hughes Communications”) and its subsidiaries in 2011 (the “Hughes Acquisition”).

(2) Upon consummation of our joint venture with Al Yah Satellite Communications Company PrJSC (“Yahsat”) in Brazil in November 2019, we acquired the Brazilian Ka-band payload on this satellite. Depreciable life represents the remaining useful life as of November 2019.

(3) We own the Ka-band and Ku-band payloads on this satellite.

(4) The Company placed the satellite in an inclined-orbit in the first quarter of 2023. Inclined-orbit will extend its life to enable further revenue generating opportunities.

The following table presents the components of our satellites, net:


	Depreciable Life (In Years)	As of
		March 31, 2023		December 31, 2022
Satellites, net:
Satellites - owned	7 to 15	$	1,504,514	$	1,503,435
Satellites - acquired under finance leases	15	363,333		360,642
Total satellites		1,867,847		1,864,077
Accumulated depreciation:
Satellites - owned		(1,007,595)		(988,164)
Satellites - acquired under finance leases		(129,035)		(121,894)
Total accumulated depreciation		(1,136,630)		(1,110,058)
Total satellites, net		$	731,217	$	754,019

The following table presents the depreciation expense associated with our satellites, net:


	For the three months ended March 31,
		2023		2022
Depreciation expense:
Satellites - owned		$	18,923	$	18,915
Satellites - acquired under finance leases		6,018		5,987
Total depreciation expense		$	24,941	$	24,902

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The following table presents capitalized interest associated with our satellites and satellite-related ground infrastructure:


	For the three months ended March 31,
		2023		2022
Capitalized interest		$	2,566	$	1,963

Satellite-Related Commitments

As of March 31, 2023 and December 31, 2022 our satellite-related commitments were $135.9 million and $143.5 million, respectively. These include payments pursuant to regulatory authorizations, non-lease costs associated with our finance lease satellites, in-orbit incentives relating to certain satellites and commitments for satellite service arrangements.

In certain circumstances, the dates on which we are obligated to pay our contractual obligations could change.

Satellite Anomalies and Impairments

We are not aware of any anomalies with respect to our owned or leased satellites or payloads that have had any significant adverse effect on their remaining useful lives, the commercial operation of the satellites or payloads or our operating results or financial position as of and for the three months ended March 31, 2023.

Satellite Insurance

We generally do not carry in-orbit insurance on our satellites or payloads because we have assessed that the cost of insurance is not economical relative to the risk of failures. Therefore, we generally bear the risk of any in-orbit failures. Pursuant to the terms of our joint venture agreement with Yahsat, we are required to maintain insurance for the Al Yah 3 Brazilian payload during the commercial in-orbit service of such payload, subject to certain limitations on coverage. We have obtained certain insurance for our EchoStar XXIV satellite covering launch plus the first year of operations. We will continue to assess circumstances going forward and make insurance-related decisions on a case-by-case basis.

Fair Value of In-Orbit Incentives

As of March 31, 2023 and December 31, 2022, the fair values of our in-orbit incentive obligations approximated their carrying amounts of $48.4 million and $50.2 million, respectively.

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NOTE 6. REGULATORY AUTHORIZATIONS

The following table presents our Regulatory authorizations, net:


	Finite lived
	Cost		Accumulated Amortization		Total		Indefinite lived		Total
Balance, December 31, 2021	$	10,733	$	(1,774)	$	8,959	$	400,000	$	408,959
Amortization expense	—		(203)		(203)		—		(203)
Currency translation adjustments	818		(164)		654		—		654
Balance, March 31, 2022	$	11,551	$	(2,141)	$	9,410	$	400,000	$	409,410

Balance, December 31, 2022	$	11,331	$	(2,712)	$	8,619	$	400,000	$	408,619
Amortization expense	—		(215)		(215)		—		(215)
Currency translation adjustments	713		(168)		545		—		545
Balance, March 31, 2023	$	12,044	$	(3,095)	$	8,949	$	400,000	$	408,949

Weighted-average useful life (in years)			13

NOTE 7. OTHER INVESTMENTS

The following table presents our Other investments, net:


	As of
	March 31, 2023		December 31, 2022
Other investments, net:
Equity method investments	$	82,971	$	83,523
Total other investments, net	$	82,971	$	83,523

Equity Method Investments

Deluxe/EchoStar LLC

We own 50% of Deluxe/EchoStar LLC (“Deluxe”), a joint venture that we entered into in 2010 to build an advanced digital cinema satellite distribution network targeting delivery to digitally equipped theaters in the U.S. and Canada.

Broadband Connectivity Solutions (Restricted) Limited

We own 20% of Broadband Connectivity Solutions (Restricted) Limited (together with its subsidiaries, “BCS”), a joint venture that we entered into in 2018 to provide commercial Ka-band satellite broadband services across Africa, the Middle East and southwest Asia operating over Yahsat's Al Yah 2 and Al Yah 3 Ka-band satellites.

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Financial Information for Our Equity Method Investments

The following table presents revenue recognized:


	For the three months ended March 31,
		2023		2022
Deluxe		$	1,332	$	1,323
BCS		$	822	$	1,771

The following table presents trade accounts receivable:


	As of
	March 31, 2023		December 31, 2022
Deluxe	$	1,045	$	3,026
BCS	$	5,437	$	5,062

NOTE 8 LONG-TERM DEBT

The following table presents the carrying amount and fair values of our Long-term debt, net:


	Effective Interest Rate	As of
		March 31, 2023				December 31, 2022
		Carrying Amount		Fair Value		Carrying Amount		Fair Value
Senior Secured Notes:
5 1/4% Senior Secured Notes due 2026	5.320%	$	750,000	$	715,320	$	750,000	$	727,763
Senior Unsecured Notes:
6 5/8% Senior Unsecured Notes due 2026	6.688%	750,000		712,433		750,000		707,490
Less: Unamortized debt issuance costs		(3,019)		—		(3,223)		—
Total long-term debt, net		$	1,496,981	$	1,427,753	$	1,496,777	$	1,435,253

NOTE 9. INCOME TAXES

Our income tax provision for interim periods is determined using an estimate of our annual effective tax rate, adjusted for discrete items, if any, in the relevant period. Each quarter we update our estimate of the annual effective tax rate, and if our estimated tax rate changes, we make a cumulative adjustment.

Our interim income tax provision and our interim estimate of our annual effective tax rate are influenced by several factors, including foreign losses and capital gains and losses for which related deferred tax assets are partially offset by a valuation allowance, changes in tax laws and relative changes in unrecognized tax benefits. Additionally, our effective tax rate can be affected by the amount of pre-tax income or loss. For example, the impact of discrete items and non-deductible expenses on our effective tax rate is greater when our pre-tax income or loss is lower.

Our income tax provision was $14.7 million for the three months ended March 31, 2023 compared to our income tax provision of $15.1 million for the three months ended March 31, 2022. Our estimated effective income tax rate was 35.6% and 32.9% for the three months ended March 31, 2023 and 2022, respectively. The variations in our effective tax rate from the U.S. federal statutory rate for the three months ended March 31, 2023 were primarily due to excluded foreign losses where the Company carries a full valuation allowance and a reserve recorded for an uncertain tax benefit. The variations in our effective tax rate from the U.S. federal statutory rate for the three months ended March 31, 2022 were primarily due to excluded foreign losses where the Company carries a full valuation allowance and the impact of state and local taxes.

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NOTE 10. RELATED PARTY TRANSACTIONS - ECHOSTAR

The following is a summary of the transactions and the terms of the underlying principal agreements that have had or may have an impact on our consolidated financial condition and results of operations.

Shared Corporate Services. We and EchoStar, including EchoStar’s other subsidiaries, have agreed that we shall

each have the right, but not the obligation, to receive from the other certain shared corporate services, including among other things: treasury, tax, accounting and reporting, risk management, cybersecurity, legal, internal audit, human resources, and information technology. These shared corporate services are generally provided at cost. We and EchoStar, including EchoStar’s other subsidiaries, may each terminate a particular shared corporate service for any reason upon at least 30 days’ notice. We recorded these expenses within Operating expenses - EchoStar for shared corporate services received from EchoStar and its other subsidiaries of $3.5 million and $2.6 million for the three months ended March 31, 2023 and 2022, respectively.

Services and Other Revenue — EchoStar

The following table presents our Services and other revenue from EchoStar:


	For the three months ended March 31,
		2023		2022
Services and other revenue - EchoStar		$	1,140	$	5,277

The following table presents the corresponding related party receivables:


	As of
	March 31, 2023		December 31, 2022
Related party receivables - EchoStar - current	$	106,774	$	112,985
Related party receivables - EchoStar - non-current	54,312		55,834
Total related party receivables - EchoStar	$	161,086	$	168,819

Receivables. EchoStar and its other subsidiaries reimburse us from time to time for amounts paid by us for costs and expenses attributable to EchoStar and its other subsidiaries. We report receivables under these arrangements within Related party receivables - EchoStar - current. No repayment schedule for these receivables has been determined.

Operating Expenses — EchoStar

The following table presents our operating expenses from EchoStar:


	For the three months ended March 31,
		2023		2022
Operating expenses - EchoStar		$	20,910	$	17,530

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The following table presents the corresponding related party payables:


	As of
	March 31, 2023		December 31, 2022
Related party payables - EchoStar - current	$	216,771	$	216,504
Related party payables - EchoStar - non-current	21,270		23,423
Total related party payables - EchoStar	$	238,041	$	239,927

Payables. We reimburse EchoStar and its other subsidiaries from time to time for amounts paid by EchoStar and its other subsidiaries for costs and expenses attributable to us. We report payables under these arrangements within Related party payables - EchoStar - current. No repayment schedule for these payables has been determined.

Real Estate. We occupy certain office space in buildings owned or leased by EchoStar and its other subsidiaries and pay a portion of the taxes, insurance, utilities and maintenance of the premises in accordance with the percentage of the space we occupy.

Cash Advances. EchoStar and certain of its other subsidiaries have also provided cash advances to certain of our

foreign subsidiaries to fund certain expenditures pursuant to loan agreements that mature in 2023. Advances under these agreements bear interest at annual rates of three percent. We report amounts payable under these agreements within Related party payables - EchoStar - non-current.

BSS Transaction. Pursuant to the pre-closing restructuring contemplated by the Master Transaction Agreement (as defined below), and as part of the BSS Transaction (as defined below), we and our subsidiaries transferred certain of the BSS Business (as defined below) to BSS Corp. (as defined below), and we distributed all of the shares of BSS Corp. to EchoStar as a dividend.

Share Exchange Agreement. Prior to consummation of the Share Exchange, EchoStar was required to complete steps necessary for the transferring of certain assets and liabilities to DISH Network Corporation (“DISH”) and its subsidiaries (together with DISH, “DISH Network”). As part of these steps, subsidiaries of EchoStar that, prior to the consummation of the Share Exchange, owned EchoStar’s business of providing online video delivery and satellite video delivery for broadcasters and pay-TV operators, including satellite uplinking/downlinking, transmission services, signal processing and conditional access management, and other services and related assets and liabilities were contributed to one of our subsidiaries in consideration for additional shares of HSSC’s common stock that were then issued to a subsidiary of EchoStar.

EchoStar Mobile Limited Service Agreements. We provide services and lease equipment to support the business of EchoStar Mobile Limited, a subsidiary of EchoStar that is licensed by the EU to provide mobile satellite services and complementary ground component services covering the entire EU using S-band spectrum. Generally, the amounts EchoStar’s other subsidiaries pay for these services are based on cost plus a fixed margin. We recorded revenue in Services and other revenue of $1.1 million and $5.3 million for the three months ended March 31, 2023 and 2022, respectively, related to these services. Additionally, we have converted the receivables for certain of these services into loans, bearing an annual interest rate of 5%, that mature in 2023. We report these loans within Related party receivables - EchoStar - non-current.

Construction Management Services for EchoStar XXIV satellite. In August 2017, a subsidiary of EchoStar entered into a contract with Maxar Space, LLC (formerly Space Systems/Loral, LLC), for the design and construction of the EchoStar XXIV satellite, a new, next-generation, high throughput geostationary satellite. We provide construction management services to EchoStar’s subsidiary for the construction of the EchoStar XXIV satellite. We charged EchoStar’s subsidiary and reduced our operating expenses by the costs of such services of $0.4 million and $0.3 million for the three months ended March 31, 2023 and 2022, respectively.

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NOTE 11. RELATED PARTY TRANSACTIONS - DISH NETWORK

Overview

EchoStar and DISH have operated as separate publicly-traded companies since 2008 (the “Spin-off”). A substantial majority of the voting power of the shares of each of EchoStar and DISH is owned beneficially by Charles W. Ergen, our Chairman, and by certain entities established for the benefit of his family.

In January 2017, EchoStar and certain of its subsidiaries entered into a share exchange agreement (the “Share Exchange Agreement”) with DISH and certain of its subsidiaries pursuant to which, in February 2017, we received all of the shares of preferred tracking stock previously issued by us and one of our subsidiaries (the “Tracking Stock”), representing an 80% economic interest in the residential retail satellite broadband business of our Hughes segment, in exchange for 100% of the equity interests of certain EchoStar subsidiaries that held substantially all of our EchoStar Technologies businesses and certain other assets (collectively, the “Share Exchange”). The Tracking Stock was retired in March 2017.

In September 2019, pursuant to a master transaction agreement (the “Master Transaction Agreement”) with DISH and a wholly-owned subsidiary of DISH (“Merger Sub”), (i) we transferred certain real property and the various businesses, products, licenses, technology, revenues, billings, operating activities, assets and liabilities primarily related to the former portion of our ESS segment that managed, marketed and provided (1) broadcast satellite services primarily to Network and our former joint venture Dish Mexico, S. de R.L. de C.V. and its subsidiaries (“Dish Mexico”), and (2) telemetry, tracking and control (“TT&C”) services for satellites owned by DISH Network and a portion of our other businesses (collectively, the “BSS Business”) to one of our former subsidiaries, EchoStar BSS Corporation (“BSS Corp.”), (ii) we distributed to each holder of shares of our Class A or Class B common stock entitled to receive consideration in the transaction an amount of shares of common stock of BSS Corp., par value $0.001 per share (“BSS Common Stock”), equal to one share of BSS Common Stock for each share of our Class A or Class B common stock owned by such stockholder (the “Distribution”); and (iii) immediately after the Distribution, (1) Merger Sub merged with and into BSS Corp. (the “Merger”), such that BSS Corp. became a wholly-owned subsidiary of DISH and with DISH then owning and operating the BSS Business, and (2) each issued and outstanding share of BSS Common Stock owned by EchoStar stockholders was converted into the right to receive 0.23523769 shares of DISH Class A common stock, par value $0.001 per share (“DISH Common Stock”) ((i) - (iii) collectively, the “BSS Transaction”).

In connection with and following the Spin-off, the Share Exchange and the BSS Transaction, EchoStar, we and certain other of EchoStar’s subsidiaries and DISH Network entered into certain agreements pursuant to which we, EchoStar and certain of its other subsidiaries, on the one hand, obtain certain products, services and rights from DISH Network, on the other hand; DISH Network, on the one hand, obtains certain products, services and rights from us, EchoStar and certain of its other subsidiaries, on the other hand; and such entities indemnify each other against certain liabilities arising from their respective businesses. Generally, the amounts we and/or EchoStar and its other subsidiaries or DISH Network pay for products and services provided under the agreements are based on cost plus a fixed margin (unless noted differently below), which varies depending on the nature of the products and services provided. We and/or EchoStar and its other subsidiaries may also enter into additional agreements with DISH Network in the future.

Services and Other Revenue — DISH Network

The following table presents our Services and other revenue - DISH Network:


	For the three months ended March 31,
		2023		2022
Services and other revenue - DISH Network		$	3,378	$	4,812

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The following table presents the related trade accounts receivable:


	As of
	March 31, 2023		December 31, 2022
Trade accounts receivable - DISH Network	$	3,813	$	1,992

Satellite Capacity Leased to DISH Network. Effective January 2008, DISH Network began leasing satellite capacity from us on the EchoStar IX satellite. We terminated the provision of this satellite capacity in December 2022.

Telesat Obligation Agreement. In September 2009, we entered into an agreement with Telesat Canada to lease satellite capacity from Telesat Canada on all 32 direct broadcast satellite (“DBS”) transponders on the Nimiq 5 satellite at the 72.7 degree west longitude orbital location (the “Telesat Transponder Agreement”). In September 2009, we entered into an agreement with DISH Network, pursuant to which DISH Network leased satellite capacity from us on all 32 of the DBS transponders covered by the Telesat Transponder Agreement (the “DISH Nimiq 5 Agreement”). Under the terms of the DISH Nimiq 5 Agreement, DISH Network made certain monthly payments to us that commenced in September 2009, when the Nimiq 5 satellite was placed into service. We transferred the Telesat Transponder Agreement to DISH Network in September 2019 as part of the BSS Transaction; however, we retained certain obligations related to DISH Network’s performance under that agreement and we entered into an agreement with DISH Network whereby DISH Network compensates us for retaining such obligations.

TerreStar Agreement. In March 2012, DISH Network completed its acquisition of substantially all the assets of TerreStar Networks Inc. (“TerreStar”). Prior to DISH Network’s acquisition of substantially all the assets of TerreStar and EchoStar’s completion of the Hughes Acquisition, TerreStar and HNS entered into various agreements pursuant to which we provide, among other things, warranty, operations and maintenance and hosting services for TerreStar’s ground-based communications equipment (the “TerreStar Agreements”). In December 2017, we and DISH Network amended these agreements, effective as of January 1, 2018, to reduce certain pricing terms through December 31, 2023 and to modify certain termination provisions. DISH Network generally has the right to continue to receive warranty services from us for our products on a month-to-month basis unless terminated by DISH Network upon at least 21 days’ written notice to us. DISH Network generally has the right to continue to receive operations and maintenance services from us on a quarter-to-quarter basis unless these services are terminated by DISH Network upon at least 90 days’ written notice to us. In addition, DISH Network generally may terminate any and all services for convenience subject to providing us with prior notice and/or payment of termination charges. In March 2020, we entered into an agreement with DISH Network pursuant to which we perform certain work and provide certain credits to amounts owed to us under the TerreStar Agreements in exchange for DISH Network’s granting us rights to use certain satellite capacity under the Amended and Restated Professional Services Agreement (as defined below). As a result, we and DISH Network amended the TerreStar Agreements to suspend our provision of warranty services to DISH Network from April 2020 through December 2020. Following the expiration of this suspension, we have recommenced providing warranty services to DISH Network. In May 2022, we and DISH Network amended the agreement for the provision of hosting services to extend the term until May 2027.

Hughes Broadband Distribution Agreement. Effective October 2012, we and DISH Network entered into a distribution agreement (the “Distribution Agreement”) pursuant to which DISH Network has the right, but not the obligation, to market, sell and distribute our Gen 4 HughesNet service. DISH Network pays us a monthly per subscriber wholesale service fee for our Gen 4 HughesNet service based upon a subscriber’s service level and based upon certain volume subscription thresholds. The Distribution Agreement also provides that DISH Network has the right, but not the obligation, to purchase certain broadband equipment from us to support the sale of the Gen 4 HughesNet service. The Distribution Agreement had an initial term of five years with automatic renewal for successive one-year terms unless terminated by either party with a written notice at least 180 days’ before the expiration of the then-current term. In February 2014, we and DISH Network entered into an amendment to the Distribution Agreement which, among other things, extended the initial term of the Distribution Agreement until March 2024. Upon expiration or termination of the Distribution Agreement, we and DISH Network will continue to

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provide our Gen 4 HughesNet service to the then-current DISH Network subscribers pursuant to the terms and conditions of the Distribution Agreement.

DBSD North America Agreement. In March 2012, DISH Network completed its acquisition of all of the equity of DBSD North America, Inc. (“DBSD North America”). Prior to DISH Network’s acquisition of DBSD North America and EchoStar’s completion of the Hughes Acquisition, DBSD North America and HNS entered into various agreements pursuant to which we provide, among other things, warranty, operations and maintenance and hosting services of DBSD North America’s gateway and ground-based communications equipment. In December 2017, we and DBSD North America amended these agreements, effective as of January 1, 2018, to reduce certain pricing terms through December 31, 2023 and to modify certain termination provisions. DBSD North America has the right to continue to receive operations and maintenance services from us on a quarter-to-quarter basis, unless terminated by DBSD North America upon at least 120 days’ written notice to us. In February 2019, we further amended these agreements to provide DBSD North America with the right to continue to receive warranty services from us on a month-to-month basis until December 2023, unless terminated by DBSD North America upon at least 21 days’ written notice to us. The provision of hosting services will continue until February 2027 unless terminated by DBSD North America upon at least 180 days’ written notice to us. In addition, DBSD North America generally may terminate any and all such services for convenience, subject to providing us with prior notice and/or payment of termination charges.

Hughes Equipment and Services Agreement. In February 2019, we and DISH Network entered into an agreement pursuant to which we will sell to DISH Network our HughesNet Service and HughesNet equipment that has been modified to meet DISH Network’s internet-of-things specifications for the transfer of data to DISH Network’s network operations centers. This agreement has an initial term of five years expiring February 2024 with automatic renewal for successive one-year terms unless terminated by DISH Network with at least 180 days’ written notice to us or by us with at least 365 days’ written notice to DISH Network.

Operating Expenses — DISH Network

The following table presents our operating expenses related to DISH Network:


	For the three months ended March 31,
		2023		2022
Operating expenses - DISH Network		$	1,120	$	1,094

The following table presents the related trade accounts payable:


	As of
	March 31, 2023		December 31, 2022
Trade accounts payable - DISH Network	$	475	$	567

Amended and Restated Professional Services Agreement. In connection with the Spin-off, EchoStar entered into various agreements with DISH Network including a transition services agreement, satellite procurement agreement and services agreement, all of which expired in January 2010 and were replaced by a professional services agreement (the “Professional Services Agreement”). In January 2010, EchoStar and DISH Network agreed that EchoStar and its subsidiaries shall continue to have the right, but not the obligation, to receive the following services from DISH Network, among others, certain of which were previously provided under a transition services agreement: information technology, travel and event coordination, internal audit, legal, accounting and tax, benefits administration, program acquisition services and other support services. Additionally, EchoStar and DISH Network agreed that DISH Network would continue to have the right, but not the obligation, to engage EchoStar and its subsidiaries to manage the process of procuring new satellite capacity for DISH Network (previously provided under a satellite procurement agreement), receive logistics, procurement and quality assurance services from EchoStar and its subsidiaries (previously provided under a services agreement) and provide other support services. In connection with the consummation of the Share Exchange, EchoStar and DISH amended and restated the Professional Services Agreement (as amended to date, the “Amended and Restated Professional Services

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Agreement”) to provide that EchoStar and its subsidiaries and DISH Network shall have the right to receive additional services that either EchoStar and its subsidiaries or DISH Network may require as a result of the Share Exchange, including access to antennas owned by DISH Network for our use in performing TT&C services and maintenance and support services for our antennas (collectively, the “TT&C Antennas”). In September 2019, in connection with the BSS Transaction, EchoStar and DISH further amended the Professional Services Agreement (the “Amended and Restated Professional Services Agreement”) to provide that EchoStar and its subsidiaries and DISH Network shall have the right to receive additional services that either EchoStar and its subsidiaries or DISH Network may require as a result of the BSS Transaction and to remove our access to and the maintenance and support services for the TT&C Antennas. A portion of these costs and expenses have been allocated to us in the manner described in Note 10. Related Party Transactions - EchoStar. The term of the Amended and Restated Professional Services Agreement is through January 1, 2023 and renews automatically for successive one-year periods thereafter, unless the agreement is terminated earlier by either party upon at least 60 days’ notice. We or DISH network may generally terminate the Amended and Restated Professional Services Agreement in part with respect to any particular service it receives for any reason upon at least 30 days’ notice, unless the statement of work for particular services states otherwise. Certain services provided under the Amended and Restated Professional Services Agreement may survive the termination of the agreement.

Collocation and Antenna Space Agreements. We and DISH Network entered into an agreement pursuant to which DISH Network provided us with collocation space in El Paso, Texas. This agreement was for an initial period ending in July 2015, and provided us with renewal options for four consecutive three-year terms. We exercised our first renewal option for a period commencing in August 2015 and ending in July 2018, in April 2018 we exercised our second renewal option for a period ending in July 2021, and in May 2021 we exercised our third renewal option for a period ending in July 2024. In connection with the Share Exchange, effective March 2017, we also entered into certain agreements pursuant to which DISH Network provides collocation and antenna space to EchoStar through February 2022 at the following locations: Cheyenne, Wyoming; Gilbert, Arizona; New Braunfels, Texas; Monee, Illinois; Spokane, Washington; and Englewood, Colorado. In October 2019, we provided a termination notice for our New Braunfels, Texas agreement effective May 2020. In November 2020, we provided a termination notice for one of our Englewood, Colorado agreements effective May 2021. In November 2021, we exercised our right to renew the collocation agreements at Gilbert, Arizona, Cheyenne, Wyoming, Spokane, Washington, Englewood, Colorado and Monee, Illinois for a period ending in February 2025. In August 2017, we and DISH Network also entered into certain other agreements pursuant to which DISH Network provides additional collocation and antenna space to us in Monee, Illinois and Spokane, Washington through August 2022. In May 2022, we exercised our right to renew such other agreements at Monee, Illinois and Spokane, Washington through August 2025. Generally, we may renew our collocation and antenna space agreements for three-year periods by providing DISH Network with prior written notice no more than 120 days but no less than 90 days prior to the end of the then-current term. We may terminate certain of these agreements with 60 days’ prior written notice and certain other of these agreements with 180 days’ prior written notice. In September 2019, in connection with the BSS Transaction, we entered into an agreement pursuant to which DISH Network provided us with certain additional collocation space in Cheyenne, Wyoming for a period that ended in September 2020. The fees for the services provided under these agreements depend on the number of racks located at the location.

Also in connection with the BSS Transaction, in September 2019, we entered into an agreement pursuant to which DISH Network provides us with antenna space and power in Cheyenne, Wyoming for a period of five years commencing in August 2020, with four three-year renewal terms, with prior written notice of renewal required no more than 120 days but no less than 90 days prior to the end of the then-current term. In March 2021, we entered into additional agreements pursuant to which DISH Network provides us with antenna space and power in Cheyenne, Wyoming, and the right to use an antenna and certain space in Gilbert, Arizona. Both agreements are for a period of five years with four three-year renewal terms, with prior written notice of renewal required no more than 120 days but no less than 90 days prior to the end of the then-current term.

Hughes Broadband Master Services Agreement. In conjunction with the launch of our EchoStar XIX satellite, in March 2017, we and DISH Network entered into a master service agreement (the “Hughes Broadband MSA”) pursuant to which DISH Network, among other things: (i) has the right, but not the obligation, to market, promote and solicit orders and upgrades for our Gen 5 HughesNet service and related equipment and other telecommunication services and (ii) installs Gen 5 HughesNet service equipment with respect to activations generated by DISH Network. Under the Hughes Broadband MSA, we and DISH Network make certain payments to each other relating to sales, upgrades, purchases and installation services. The current term of the Hughes

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Broadband MSA is through March 2023 with automatic renewal for successive one-year terms. Either party has the ability to terminate the Hughes Broadband MSA, in whole or in part, for any reason upon at least 90 days’ notice to the other party. Upon expiration or termination of the Hughes Broadband MSA, we will continue to provide our Gen 5 HughesNet service to subscribers and make certain payments to DISH Network pursuant to the terms and conditions of the Hughes Broadband MSA. We incurred sales incentives and other costs under the Hughes Broadband MSA totaling $0.7 million and $1.7 million for the three months ended March 31, 2023 and 2022, respectively.

2019 TT&C Agreement. In September 2019, in connection with the BSS Transaction, we and a subsidiary of EchoStar entered into an agreement pursuant to which DISH Network provides TT&C services to us and EchoStar and its other subsidiaries for a period ending in September 2021, with the option for a subsidiary of EchoStar to renew for a one-year period upon written notice at least 90 days prior to the initial expiration (the “2019 TT&C Agreement”). In June 2021, we amended the 2019 TT&C Agreement to extend the term until September 2022 and added the option for us to renew the 2019 TT&C Agreement up to an additional three years. In September 2022, we exercised the option to renew the 2019 TT&C Agreement until September 2023. The fees for services provided under the 2019 TT&C Agreement are calculated at either: (i) a fixed fee or (ii) cost plus a fixed margin, which will vary depending on the nature of the services provided. Any party is able to terminate the 2019 TT&C Agreement for any reason upon 12 months’ notice.

Referral Marketing Agreement. In June 2021, we and DISH Network entered into an agreement pursuant to which we will pre-qualify prospects contacting Hughes call centers and transfer those prospects to DISH Network for introduction to DISH Network’s video services, for prospects that convert Hughes will receive a commission. This agreement has an indefinite term and may be terminated by either party upon 90 days’ prior written notice.

Whidbey Island 5G Network Test Bed Subcontract. In June 2022, we and DISH Wireless entered into a subcontract (“DISH Subcontract”) pursuant to which DISH will provide access and use of a DISH lab, technical support and integration and testing support for the 5G network test bed to be delivered by Hughes to its customer.

Other Receivables - DISH Network

Tax Sharing Agreement. Effective December 2007, EchoStar and DISH Network entered into a tax sharing agreement (the “Tax Sharing Agreement”) in connection with the Spin-off. This agreement governs EchoStar and DISH and their respective subsidiaries’ respective rights, responsibilities and obligations after the Spin-off with respect to taxes for the periods ending on or before the Spin-off. Generally, all pre-Spin-off taxes, including any taxes that are incurred as a result of restructuring activities undertaken to implement the Spin-off, are borne by DISH Network and DISH Network indemnifies EchoStar and its subsidiaries for such taxes. However, DISH Network is not liable for and does not indemnify EchoStar or its subsidiaries for any taxes that are incurred as a result of the Spin-off or certain related transactions failing to qualify as tax-free distributions pursuant to any provision of Section 355 or Section 361 of the Internal Revenue Code of 1986, as amended (the “Code”), because of: (i) a direct or indirect acquisition of any of EchoStar’s stock, stock options or assets; (ii) any action that EchoStar or its subsidiaries take or fail to take or (iii) any action that EchoStar or its subsidiaries take that is inconsistent with the information and representations furnished to the IRS in connection with the request for the private letter ruling, or to counsel in connection with any opinion being delivered by counsel with respect to the Spin-off or certain related transactions. In such case, EchoStar and its subsidiaries will be solely liable for, and will indemnify DISH Network for any resulting taxes, as well as any losses, claims and expenses. The Tax Sharing Agreement will terminate after the later of the full period of all applicable statutes of limitations, including extensions, or once all rights and obligations are fully effectuated or performed.

In light of the Tax Sharing Agreement, among other things, and in connection with EchoStar’s consolidated federal income tax returns for certain tax years prior to and for the year of the Spin-off, in September 2013, EchoStar and DISH Network agreed upon a supplemental allocation of the tax benefits arising from certain tax items resolved in the course of the IRS’s examination of EchoStar’s consolidated tax returns. As a result, DISH Network agreed to pay EchoStar an amount that includes the federal tax benefit DISH received as a result of our operations.

In August 2018, EchoStar and DISH Network amended the Tax Sharing Agreement and the 2013 agreements (the “Tax Sharing Amendment”). Under the Tax Sharing Amendment, DISH Network is required to compensate

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EchoStar for certain past and future excess California research and development tax credits generated by EchoStar and its subsidiaries and used by DISH Network.

Other Agreements

Master Transaction Agreement. In May 2019, EchoStar and BSS Corp. entered into the Master Transaction Agreement with DISH and Merger Sub with respect to the BSS Transaction. Pursuant to the terms of the Master Transaction Agreement, on September 10, 2019: (i) EchoStar and its subsidiaries and we and our subsidiaries transferred the BSS Business to BSS Corp.; (ii) EchoStar completed the Distribution; and (iii) immediately after the Distribution, (1) BSS Corp. became a wholly-owned subsidiary of DISH such that DISH owns and operates the BSS Business and (2) each issued and outstanding share of BSS Common Stock owned by EchoStar stockholders was converted into the right to receive 0.23523769 shares of DISH Common Stock. Following the consummation of the BSS Transaction, we no longer operate the BSS Business, which was a substantial portion of our ESS segment. The Master Transaction Agreement contained customary representations and warranties by the parties, including EchoStar’s representations relating to the assets, liabilities and financial condition of the BSS Business, and representations by DISH Network relating to its financial condition and liabilities. EchoStar and DISH Network have agreed to indemnify each other against certain losses with respect to breaches of certain representations and covenants and certain retained and assumed liabilities, respectively.

BSS Transaction Intellectual Property and Technology License Agreement. Effective September 2019, in connection with the BSS Transaction, we, EchoStar and DISH Network entered into an intellectual property and technology license agreement (the “BSS IPTLA”) pursuant to which we, EchoStar and its other subsidiaries and DISH Network license to each other certain intellectual property and technology. The BSS IPTLA will continue in perpetuity, unless mutually terminated by the parties. Pursuant to the BSS IPTLA, we, EchoStar and its other subsidiaries granted to DISH Network a license to our and their intellectual property and technology for use by DISH Network, among other things, in connection with its continued operation of the BSS Business acquired pursuant to the BSS Transaction, including a limited license to use the “ESS” and “ECHOSTAR SATELLITE SERVICES” trademarks during a transition period. EchoStar retains full ownership of the “ESS” and “ECHOSTAR SATELLITE SERVICES” trademarks. In addition, DISH Network granted a license back to us, EchoStar and its other subsidiaries, among other things, for the continued use of all intellectual property and technology that is used in our, EchoStar and its other subsidiaries’ retained businesses but the ownership of which was transferred to DISH Network pursuant to the BSS Transaction.

BSS Transaction Tax Matters Agreement. Effective September 2019, in connection with the BSS Transaction, EchoStar, BSS Corp. and DISH entered into a tax matters agreement. This agreement governs certain rights, responsibilities and obligations of EchoStar and its subsidiaries’ with respect to taxes of the BSS Business transferred pursuant to the BSS Transaction. Generally, EchoStar is responsible for all tax returns and tax liabilities for the BSS Business for periods prior to the BSS Transaction and DISH is responsible for all tax returns and tax liabilities for the BSS Business from and after the BSS Transaction.

Both EchoStar and DISH made certain tax-related representations and are subject to various tax-related covenants after the consummation of the BSS Transaction. Both EchoStar and DISH Network have agreed to indemnify each other for certain losses if there is a breach of any the tax representations or violation of any of the tax covenants in the tax matters agreement and that breach or violation results in the failure of the BSS Transaction being treated as a transaction that is tax-free for EchoStar or its stockholders for U.S. federal income tax purposes. In addition, DISH Network has agreed to indemnify EchoStar if the BSS Business is acquired, either directly or indirectly (e.g., via an acquisition of DISH Network), by one or more persons, where either it took an action, or knowingly facilitated, consented to or assisted with an action by its stockholders, that resulted in the failure of the BSS Transaction being treated as a transaction that is tax-free for EchoStar and its stockholders for U.S. federal income tax purposes. This tax matters agreement supplements the Tax Sharing Agreement outlined above and the Share Exchange Tax Matters Agreement outlined below, both of which continue in full force and effect.

BSS Transaction Employee Matters Agreement. Effective September 2019, in connection with the BSS Transaction, EchoStar and DISH Network entered into an employee matters agreement that addressed the transfer of employees from us to DISH Network, including certain benefit and compensation matters and the allocation of responsibility for employee related liabilities relating to current and past employees of the BSS Business. DISH

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Network assumed employee-related liabilities relating to the BSS Business as part of the BSS Transaction, except that EchoStar is responsible for certain pre-BSS Transaction compensation and benefits for employees who transferred to DISH Network in connection with the BSS Transaction.

Share Exchange Agreement. In February 2017 EchoStar consummated the Share Exchange, following which EchoStar and certain of its and our subsidiaries no longer operate the transferred EchoStar Technologies businesses and the Tracking Stock was retired and is no longer outstanding and all agreements, arrangements and policy statements with respect to such Tracking Stock terminated and are of no further effect. Pursuant to the Share Exchange Agreement, EchoStar and certain of its and our subsidiaries transferred certain assets, investments in joint ventures, spectrum licenses and real estate properties and DISH Network assumed certain liabilities relating to the transferred assets and businesses. The Share Exchange Agreement contained customary representations and warranties by the parties, including representations by EchoStar related to the transferred assets, assumed liabilities and the financial condition of the transferred businesses. EchoStar and DISH Network also agreed to customary indemnification provisions whereby each party indemnifies the other against certain losses with respect to breaches of representations, warranties or covenants and certain liabilities and if certain actions undertaken by EchoStar or DISH causes the transaction to be taxable to the other party after closing.

Share Exchange Intellectual Property and Technology License Agreement. Effective March 2017, in connection with the Share Exchange, EchoStar and one of its other subsidiaries and DISH Network entered into an intellectual property and technology license agreement (“IPTLA”) pursuant to which we, EchoStar and its other subsidiaries and DISH Network license to each other certain intellectual property and technology. The IPTLA will continue in perpetuity, unless mutually terminated by the parties. Pursuant to the IPTLA, we, EchoStar and its other subsidiaries granted to DISH Network a license to our and their intellectual property and technology for use by DISH Network, among other things, in connection with its continued operation of the businesses acquired pursuant to the Share Exchange, including a limited license to use the “ECHOSTAR” trademark during a transition period. EchoStar retains full ownership of the “ECHOSTAR” trademark. In addition, DISH Network granted a license back to us, EchoStar and its other subsidiaries, among other things, for the continued use of all intellectual property and technology that is used in our, EchoStar and its other subsidiaries’ retained businesses but the ownership of which was transferred to DISH Network pursuant to the Share Exchange.

Share Exchange Tax Matters Agreement. Effective March 2017, in connection with the Share Exchange, EchoStar and DISH entered into a tax matters agreement. This agreement governs certain rights, responsibilities and obligations of EchoStar and its subsidiaries with respect to taxes of the transferred businesses pursuant to the Share Exchange. Generally, EchoStar is responsible for all tax returns and tax liabilities for the transferred businesses and assets for periods prior to the Share Exchange and DISH Network is responsible for all tax returns and tax liabilities for the transferred businesses and assets from and after the Share Exchange. Both EchoStar and DISH Network made certain tax-related representations and are subject to various tax-related covenants after the consummation of the Share Exchange. Both EchoStar and DISH Network have agreed to indemnify each other if there is a breach of any such tax representation or violation of any such tax covenant and that breach or violation results in the Share Exchange not qualifying for tax free treatment for the other party. In addition, DISH Network has agreed to indemnify EchoStar if the transferred businesses are acquired, either directly or indirectly (e.g., via an acquisition of DISH Network), by one or more persons and such acquisition results in the Share Exchange not qualifying for tax free treatment. The tax matters agreement supplements the Tax Sharing Agreement outlined above which continues in full force and effect.

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NOTE 12. RELATED PARTY TRANSACTIONS - OTHER

Hughes Systique Corporation

We contract with Hughes Systique Corporation (“Hughes Systique”) for software development services. In addition to our approximately 42% ownership in Hughes Systique, Mr. Pradman Kaul, the former President of our subsidiary Hughes Communications and Vice-Chair of our board of directors (effective January 1, 2023), and his brother, who is the Chief Executive Officer and President of Hughes Systique, own in the aggregate approximately 25%, on an undiluted basis, of Hughes Systique’s outstanding shares as of March 31, 2023. Furthermore, Mr. Pradman Kaul serves on the board of directors of Hughes Systique. Hughes Systique is a variable interest entity and we are considered the primary beneficiary of Hughes Systique due to, among other factors, our ability to direct the activities that most significantly impact the economic performance of Hughes Systique. As a result, we consolidate Hughes Systique’s financial statements in these Consolidated Financial Statements.

TerreStar Solutions

DISH Network owns more than 15% of TerreStar Solutions, Inc. (“TSI”). In May 2018, we and TSI entered into an equipment and services agreement pursuant to which we design, manufacture and install upgraded ground communications network equipment for TSI’s network and provide, among other things, warranty and support services. We recognized revenue of $0.5 million and $0.5 million for the three months ended March 31, 2023 and 2022, respectively. As of March 31, 2023 we had $0.5 million of trade accounts receivable from TSI.

NOTE 13. CONTINGENCIES

Patents and Intellectual Property

Many entities, including some of our competitors, have, or may have in the future, patents and other intellectual property rights that cover or affect products or services directly or indirectly related to those that we offer. We may not be aware of all patents and other intellectual property rights that our products and services may potentially infringe. Damages in patent infringement cases can be substantial, and in certain circumstances can be tripled. Further, we cannot estimate the extent to which we may be required in the future to obtain licenses with respect to intellectual property rights held by others and the availability and cost of any such licenses. Various parties have asserted patent and other intellectual property rights with respect to our products and services. We cannot be certain that these parties do not own the rights they claim, that these rights are not valid or that our products and services do not infringe on these rights. Further, we cannot be certain that we would be able to obtain licenses from these parties on commercially reasonable terms or, if we were unable to obtain such licenses, that we would be able to redesign our products and services to avoid infringement.

Certain Arrangements with DISH Network

In connection with EchoStar’s spin-off from DISH in 2008, EchoStar entered into a separation agreement with DISH Network that provides, among other things, for the division of certain liabilities, including liabilities resulting from litigation. Under the terms of the separation agreement, EchoStar assumed certain liabilities that relate to its and our business, including certain designated liabilities for acts or omissions that occurred prior to the Spin-off. Certain specific provisions govern intellectual property related claims under which EchoStar will generally only be liable for its and its subsidiaries’ acts or omissions following the Spin-off and DISH Network will indemnify EchoStar for any liabilities or damages resulting from intellectual property claims relating to the period prior to the Spin-off as well as DISH Network’s acts or omissions following the Spin-off. In connection with the Share Exchange and BSS Transaction, EchoStar and certain of its and our subsidiaries entered into the Share Exchange Agreement and the Master Transaction Agreement, respectively, and other agreements which provide, among other things, for the division of certain liabilities, including liabilities relating to taxes, intellectual property and employees and liabilities resulting from litigation and the assumption of certain liabilities that relate to the transferred businesses and assets. These agreements also contain additional indemnification provisions between EchoStar and us and DISH Network for, in the case of the Share Exchange, certain pre-existing liabilities and legal proceedings and, in the case of the BSS Transaction, certain losses with respect to breaches of certain representations and covenants and certain liabilities.

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Litigation

We are involved in a number of legal proceedings concerning matters arising in connection with the conduct of our business activities. Many of these proceedings are at preliminary stages and/or seek an indeterminate amount of damages. We regularly evaluate the status of the legal proceedings in which we are involved to assess whether a loss is probable and to determine if accruals are appropriate. We record an accrual for litigation and other loss contingencies when we determine that a loss is probable, and the amount of the loss can be reasonably estimated. If accruals are not appropriate, we further evaluate each legal proceeding to assess whether an estimate of possible loss or range of loss can be made. There can be no assurance that legal proceedings against us will be resolved in amounts that will not differ from the amounts of our recorded accruals. Legal fees and other costs of defending legal proceedings are charged to expense as incurred.

For certain proceedings, management is unable to predict with any degree of certainty the outcome or provide a meaningful estimate of the possible loss or range of possible loss because, among other reasons: (i) the proceedings are in various stages; (ii) damages have not been sought or specified; (iii) damages are unsupported, indeterminate and/or exaggerated in management’s opinion; (iv) there is uncertainty as to the outcome of pending trials, appeals, motions or other proceedings; (v) there are significant factual issues to be resolved; and/or (vi) there are novel legal issues or unsettled legal theories to be presented or a large number of parties are involved (as with many patent-related cases). Except as described below, however, management does not believe, based on currently available information, that the outcomes of these proceedings will have a material effect on our financial condition, operating results or cash flows, though there is no assurance that the resolution and outcomes of these proceedings, individually or in the aggregate, will not be material to our financial condition, operating results or cash flows for any particular period, depending, in part, upon the operating results for such period.

We intend to vigorously defend the proceedings against us. In the event that a court, tribunal, other body or jury ultimately rules against us, we may be subject to adverse consequences, including, without limitation, substantial damages, which may include treble damages, fines, penalties, compensatory damages and/or other equitable or injunctive relief that could require us to materially modify our business operations or certain products or services that we offer to our consumers.

Shareholder Litigation

On July 2, 2019, the City of Hallandale Beach Police Officers’ and Firefighters’ Personnel Retirement Trust, purporting to sue on behalf of a class of EchoStar Corporation’s stockholders, filed a complaint in the District Court of Clark County, Nevada against EchoStar’s directors, Charles W. Ergen, R. Stanton Dodge, Anthony M. Federico, Pradman P. Kaul, C. Michael Schroeder, Jeffrey R. Tarr, William D. Wade, and Michael T. Dugan; our chief financial officer, David J. Rayner; EchoStar; HSSC; our former subsidiary BSS Corp.; and DISH and its subsidiary Merger Sub. On September 5, 2019, the defendants filed motions to dismiss. On October 11, 2019, the plaintiffs filed an amended complaint removing Messrs. Dodge, Federico, Kaul, Schroeder, Tarr and Wade as defendants. The amended complaint alleges that Mr. Ergen, as our controlling stockholder, breached fiduciary duties to EchoStar’s minority stockholders by structuring the BSS Transaction with inadequate consideration and improperly influencing our and EchoStar’s boards of directors to approve the BSS Transaction. The amended complaint also alleges that the other defendants aided and abetted such alleged breaches. The plaintiffs seek equitable and monetary relief, including the issuance of additional DISH Common Stock, and other costs and disbursements, including attorneys’ fees on behalf of the purported class. On November 11, 2019, we and the other defendants filed separate motions to dismiss plaintiff’s amended complaint and during a hearing on January 13, 2020 the court denied these motions. On February 10, 2020, we and the other defendants filed answers to the amended complaint. The Court certified plaintiff’s class on January 11, 2021. On June 18, 2021, the parties executed a settlement agreement to resolve all claims in this case. On the same day, the parties filed a joint motion for preliminary approval of the settlement agreement. The motion was granted by an order dated July 30, 2021. On December 9, 2021, the Court held a final settlement hearing. On December 10, 2021, the Court issued an Order granting final approval of the settlement agreement. In an order dated October 24, 2022, the Court granted plaintiff’s unopposed motion to approve the class distribution plan.

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License Fee Dispute with Government of India, Department of Telecommunications

In 1994, the Government of India promulgated a “National Telecommunications Policy” under which the government liberalized the telecommunications sector and required telecommunications service providers to pay fixed license fees. Pursuant to this policy, our subsidiary HCIPL, formerly known as Hughes Escorts Communications Limited, obtained a license to operate a data network over satellite using VSAT systems. In 2002, HCIPL’s license was amended pursuant to a new government policy that was first established in 1999. The new policy eliminated the fixed license fees and instead required each telecommunications service provider to pay license fees based on its adjusted gross revenue (“AGR”). In March 2005, the Indian Department of Telecommunications (“DOT”) notified HCIPL that, based on its review of HCIPL’s audited accounts and AGR statements, HCIPL must pay additional license fees and penalties and interest on such fees and penalties. HCIPL responded that the DOT had improperly calculated its AGR by including revenue from licensed and unlicensed activities. The DOT rejected this explanation and in 2006, HCIPL filed a petition with an administrative tribunal (the “Tribunal”), challenging the DOT’s calculation of its AGR. The DOT also issued license fee assessments to other telecommunications service providers and a number of similar petitions were filed by several other such providers with the Tribunal. These petitions were amended, consolidated, remanded and re-appealed several times. On April 23, 2015, the Tribunal issued a judgment affirming the DOT’s calculation of AGR for the telecommunications service providers but reversing the DOT’s imposition of interest, penalties and interest on such penalties as excessive. Over subsequent years, the DOT and HCIPL and other telecommunications service providers, respectively, filed several appeals of the Tribunal’s ruling. On October 24, 2019, the Supreme Court of India (“Supreme Court”) issued an order (the “October 2019 Order”) affirming the license fee assessments imposed by the DOT, including its imposition of interest, penalties and interest on the penalties, but without indicating the amount HCIPL is required to pay the DOT, and ordering payment by January 23, 2020. On November 23, 2019, HCIPL and other telecommunication service providers filed a petition asking the Supreme Court to reconsider the October 2019 Order. The petition was denied on January 20, 2020. On January 22, 2020, HCIPL and other telecommunication service providers filed an application requesting that the Supreme Court modify the October 2019 Order to permit the DOT to calculate the final amount due and extend HCIPL’s and the other telecommunication service providers’ payment deadline. On February 14, 2020, the Supreme Court directed HCIPL and the other telecommunication service providers to explain why the Supreme Court should not initiate contempt proceedings for failure to pay the amounts due. During a hearing on March 18, 2020, the Supreme Court ordered that all amounts that were due before the October 2019 Order must be paid, including interest, penalties and interest on the penalties. The Supreme Court also ordered that the parties appear for a further hearing addressing, potentially among other things, a proposal by the DOT to allow for extended or deferred payments of amounts due. On June 11, 2020, the Supreme Court ordered HCIPL and the other telecommunication service providers to submit affidavits addressing the proposal made by the DOT to extend the time frame for payment of the amounts owed and for HCIPL and the other telecommunication providers to provide security for such payments. On September 1, 2020, the Supreme Court issued a judgment permitting a10-year payment schedule. Under this payment schedule, HCIPL is required to make an annual payment every March 31, through 2031. Following the Supreme Court of India’s October 2019 judgment, HCIPL made payments during the first quarter of 2020, and additional payments on each March 31 thereafter.

The following table presents the components of the accrual:


	As of
	March 31, 2023		December 31, 2022
Additional license fees	$	3,453	$	3,425
Penalties	3,544		3,516
Interest and interest on penalties	80,236		78,327
Less: Payments	(28,200)		(17,785)
Total accrual	59,033		67,483
Less: Current portion	10,273		10,191
Total long-term accrual	$	48,760	$	57,292

Any eventual payments made with respect to the ultimate outcome of this matter may be different from our accrual and such differences could be significant.

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Other

In addition to the above actions, we are subject to various other legal proceedings and claims, which arise in the ordinary course of business. As part of our ongoing operations, we are subject to various inspections, audits, inquiries, investigations and similar actions by third parties, as well as by governmental/regulatory authorities responsible for enforcing the laws and regulations to which we may be subject. Further, under the federal False Claims Act, private parties have the right to bring qui tam, or “whistleblower,” suits against companies that submit false claims for payments to, or improperly retain overpayments from, the federal government. Some states have adopted similar state whistleblower and false claims provisions. In addition, we from time to time receive inquiries from federal, state and foreign agencies regarding compliance with various laws and regulations.

In our opinion, the amount of ultimate liability with respect to any of these other actions is unlikely to materially affect our financial position, results of operations or cash flows, though the resolutions and outcomes, individually or in the aggregate, could be material to our financial position, operating results or cash flows for any particular period, depending, in part, upon the operating results for such period.

We also indemnify our directors, officers and employees for certain liabilities that might arise from the performance of their responsibilities for us. Additionally, in the normal course of its business, we enter into contracts pursuant to which we may make a variety of representations and warranties and indemnify the counterparty for certain losses. Our possible exposure under these arrangements cannot be reasonably estimated as this involves the resolution of claims made, or future claims that may be made, against us or our officers, directors or employees, the outcomes of which are unknown and not currently predictable or estimable.

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NOTE 14. SEGMENT REPORTING

Business segments are components of an enterprise for which separate financial information is available and regularly evaluated by our chief operating decision maker (“CODM”), who is our Chief Executive Officer. We operate in two business segments, Hughes segment and ESS segment.

The primary measure of segment profitability that is reported regularly to our CODM is earnings before interest, taxes, depreciation and amortization, and net income (loss) attributable to non-controlling interests (“EBITDA”).

Total assets by segment have not been reported herein because the information is not provided to our CODM on a regular basis.

The following table presents total revenue, capital expenditures and EBITDA for each of our business segments:


	Hughes		ESS		Corporate and Other		Consolidated Total
For the three months ended March 31, 2023
External revenue	$	431,195	$	5,489	$	1,140	$	437,824
Intersegment revenue	—		508		(508)		—
Total revenue	$	431,195	$	5,997	$	632	$	437,824

Capital expenditures	$	47,025	$	—	$	—	$	47,025
EBITDA	$	157,234	$	4,655	$	(18,404)	$	143,485

For the three months ended March 31, 2022
External revenue	$	494,106	$	4,276	$	5,276	$	503,658
Intersegment revenue	—		198		(198)		—
Total revenue	$	494,106	$	4,474	$	5,078	$	503,658

Capital expenditures	$	61,021	$	—	$	—	$	61,021
EBITDA	$	191,170	$	2,691	$	(10,656)	$	183,205

The following table reconciles Income (loss) before income taxes in the Consolidated Statements of Operations to EBITDA:


	For the three months ended March 31,
		2023		2022
Income (loss) before income taxes		$	41,334	$	45,941
Interest income, net		(17,948)		(2,280)
Interest expense, net of amounts capitalized		22,527		23,378
Depreciation and amortization		96,351		113,678
Net loss (income) attributable to non-controlling interests		1,221		2,488
EBITDA		$	143,485	$	183,205

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NOTE 15. SUPPLEMENTAL FINANCIAL INFORMATION

Other Current Assets, Net and Other Non-current Assets, Net

The following table presents the components of Other current assets, net and Other non-current assets, net:


	As of
	March 31, 2023		December 31, 2022
Other current assets, net:
Related party receivables - EchoStar	$	106,774	$	112,985
Inventory	136,443		123,006
Prepaids and deposits	25,698		23,948
Trade accounts receivable - DISH Network	3,813		1,992
Other, net	15,502		13,271
Total other current assets	$	288,230	$	275,202

Other non-current assets, net:
Capitalized software, net	$	116,545	$	116,844
Contract acquisition costs, net	60,234		64,447
Related party receivables - EchoStar	54,312		55,834
Deferred tax assets, net	8,082		7,822
Restricted cash	1,284		1,341
Contract fulfillment costs, net	1,957		1,931
Other, net	39,207		37,658
Total other non-current assets, net	$	281,621	$	285,877

Inventory

The following table presents the components of inventory:


	As of
	March 31, 2023		December 31, 2022
Raw materials	$	35,932	$	32,920
Work-in-process	19,557		16,408
Finished goods	80,954		73,678
Total inventory	$	136,443	$	123,006

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Accrued Expenses and Other Current Liabilities and Other Non-Current Liabilities

The following table presents the components of Accrued expenses and other current liabilities and Other non-current liabilities:


	As of
	March 31, 2023		December 31, 2022
Accrued expenses and other current liabilities:
Related party payables - EchoStar	$	216,771	$	216,504
Accrued compensation	35,424		40,684
Operating lease obligation	17,668		17,766
Accrued interest	15,596		39,194
Accrued taxes	10,953		10,631
Accrual for license fee dispute	10,273		10,191
In-orbit incentive obligations	4,331		5,369
Trade accounts payable - DISH Network	475		567
Other	49,035		52,993
Total accrued expenses and other current liabilities	$	360,526	$	393,899

Other non-current liabilities:
Accrual for license fee dispute	$	48,760	$	57,292
In-orbit incentive obligations	44,041		44,836
Related party payables - EchoStar	21,270		23,423
Contract liabilities	7,872		8,326
Other	2,385		20
Total other non-current liabilities	$	124,328	$	133,897

Supplemental and Non-cash Investing and Financing Activities

The following table presents the supplemental and non-cash investing and financing activities:


	For the three months ended March 31,
	2023		2022
Supplemental disclosure of cash flow information:
Cash paid for interest, net of amounts capitalized	$	49,616	$	43,226
Cash paid for income taxes	$	—	$	661

Non-cash investing and financing activities:
Increase (decrease) in capital expenditures included in accounts payable, net	$	(1,086)	$	(5,255)
Non-cash net assets received as part of the India JV formation	$	—	$	36,701

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NOTE 16. SUPPLEMENTAL GUARANTOR AND NON-GUARANTOR FINANCIAL INFORMATION

Certain of our wholly-owned subsidiaries (together, the “Guarantor Subsidiaries”) have fully and unconditionally guaranteed, on a joint and several basis, the obligations of our Notes. See Note 8. Long-term Debt for further information on our Notes.

In lieu of separate financial statements of the Guarantor Subsidiaries, accompanying consolidating financial information prepared in accordance with Rule 3-10(f) of Regulation S-X is presented below, including the accompanying balance sheet information, the accompanying statement of operations and comprehensive income (loss) information and the accompanying statement of cash flows information of HSSC, the Guarantor Subsidiaries on a combined basis and the non-guarantor subsidiaries of HSSC on a combined basis and the eliminations necessary to arrive at the corresponding information of HSSC on a consolidated basis.

The indentures governing our Notes contain restrictive covenants that, among other things, impose limitations on our ability and the ability of certain of our subsidiaries to pay dividends or make distributions, incur additional debt, make certain investments, create liens or enter into sale and leaseback transactions, merge or consolidate with another company, transfer and sell assets, enter into transactions with affiliates or allow to exist certain restrictions on the ability to pay dividends, make distributions, make other payments, or transfer assets.

The accompanying consolidating financial information (amounts in thousands) presented below should be read in conjunction with our Consolidated Financial Statements and notes thereto included herein.

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Consolidating Balance Sheet as of March 31, 2023


	Hughes Satellite Systems Corporation		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations		Total
Assets
Current assets:
Cash and cash equivalents	$	737,159	$	18,446	$	86,569	$	—	$	842,174
Marketable investment securities	613,012		—		—		—		613,012
Trade accounts receivable and contract assets, net	—		180,575		71,291		—		251,866
Other current assets, net	32		1,367,965		291,762		(1,371,529)		288,230
Total current assets	1,350,203		1,566,986		449,622		(1,371,529)		1,995,282
Non-current assets:
Property and equipment, net	—		1,116,319		225,907		—		1,342,226
Operating lease right-of-use assets	—		118,325		28,520		—		146,845
Goodwill	—		504,173		28,685		—		532,858
Regulatory authorizations, net	—		400,000		8,949		—		408,949
Other intangible assets, net	—		12,128		3,023		—		15,151
Other investments, net	9,392		—		73,579		—		82,971
Investment in subsidiaries	3,353,739		358,410		—		(3,712,149)		—
Other non-current assets, net	1,096		255,274		157,239		(131,988)		281,621
Total non-current assets	3,364,227		2,764,629		525,902		(3,844,137)		2,810,621
Total assets	$	4,714,430	$	4,331,615	$	975,524	$	(5,215,666)	$	4,805,903
Liabilities and Shareholder's Equity
Current liabilities:
Trade accounts payable	$	—	$	73,100	$	10,653	$	—	$	83,753
Contract liabilities	—		124,395		4,897		—		129,292
Accrued expenses and other current liabilities	1,129,837		273,508		328,710		(1,371,529)		360,526
Total current liabilities	1,129,837		471,003		344,260		(1,371,529)		573,571
Non-current liabilities:
Long-term debt, net	1,496,981		—		—		—		1,496,981
Deferred tax liabilities, net	—		294,082		1,451		(396)		295,137
Operating lease liabilities	—		107,561		23,530		—		131,091
Other non-current liabilities	—		105,791		150,129		(131,592)		124,328
Total non-current liabilities	1,496,981		507,434		175,110		(131,988)		2,047,537
Total liabilities	2,626,818		978,437		519,370		(1,503,517)		2,621,108
Shareholder's equity:
Total Hughes Satellite Systems Corporation shareholder's equity	2,087,612		3,353,178		358,971		(3,712,149)		2,087,612
Non-controlling interests	—		—		97,183		—		97,183
Total shareholder's equity	2,087,612		3,353,178		456,154		(3,712,149)		2,184,795
Total liabilities and shareholder's equity	$	4,714,430	$	4,331,615	$	975,524	$	(5,215,666)	$	4,805,903

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(Unaudited)

Consolidating Balance Sheet as of December 31, 2022


	Hughes Satellite Systems Corporation		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations		Total
Assets
Current assets:
Cash and cash equivalents	$	547,605	$	25,318	$	80,209	$	—	$	653,132
Marketable investment securities	799,769		—		—		—		799,769
Trade accounts receivable and contract assets, net	—		168,484		67,852		—		236,336
Other current assets, net	71		1,330,813		284,621		(1,340,303)		275,202
Total current assets	1,347,445		1,524,615		432,682		(1,340,303)		1,964,439
Non-current assets:
Property and equipment, net	—		1,140,294		235,710		—		1,376,004
Operating lease right-of-use assets	—		121,609		29,023		—		150,632
Goodwill	—		504,173		28,318		—		532,491
Regulatory authorizations, net	—		400,000		8,619		—		408,619
Other intangible assets, net	—		12,499		3,199		—		15,698
Other investments, net	8,920		—		74,603		—		83,523
Investment in subsidiaries	3,312,961		358,141		—		(3,671,102)		—
Other non-current assets, net	1,095		261,906		163,165		(140,289)		285,877
Total non-current assets	3,322,976		2,798,622		542,637		(3,811,391)		2,852,844
Total assets	$	4,670,421	$	4,323,237	$	975,319	$	(5,151,694)	$	4,817,283
Liabilities and Shareholder's Equity
Current liabilities:
Trade accounts payable	$	477	$	85,327	$	12,425	$	—	$	98,229
Contract liabilities	—		115,893		5,846		—		121,739
Accrued expenses and other current liabilities	1,121,740		296,666		315,796		(1,340,303)		393,899
Total current liabilities	1,122,217		497,886		334,067		(1,340,303)		613,867
Non-current liabilities:
Long-term debt, net	1,496,777		—		—		—		1,496,777
Deferred tax liabilities, net	—		288,716		1,451		(410)		289,757
Operating lease liabilities	—		111,052		24,070		—		135,122
Other non-current liabilities	—		113,183		160,593		(139,879)		133,897
Total non-current liabilities	1,496,777		512,951		186,114		(140,289)		2,055,553
Total liabilities	2,618,994		1,010,837		520,181		(1,480,592)		2,669,420
Shareholder's equity:
Total Hughes Satellite Systems Corporation shareholder's equity	2,051,427		3,312,400		358,702		(3,671,102)		2,051,427
Non-controlling interests	—		—		96,436		—		96,436
Total shareholder's equity	2,051,427		3,312,400		455,138		(3,671,102)		2,147,863
Total liabilities and shareholder's equity	$	4,670,421	$	4,323,237	$	975,319	$	(5,151,694)	$	4,817,283

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(Unaudited)

Consolidating Statement of Operations and Comprehensive Income (Loss)

For the Three Months Ended March 31, 2023


	Hughes Satellite Systems Corporation		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations		Total
Revenue:
Services and other revenue	$	—	$	306,897	$	76,042	$	(7,185)	$	375,754
Equipment revenue	—		57,983		7,968		(3,881)		62,070
Total revenue	—		364,880		84,010		(11,066)		437,824
Costs and expenses:
Cost of sales - services and other (exclusive of depreciation and amortization)	—		99,575		41,629		(7,165)		134,039
Cost of sales - equipment (exclusive of depreciation and amortization)	—		49,374		5,618		(3,321)		51,671
Selling, general and administrative expenses	270		85,069		19,340		(580)		104,099
Research and development expenses	—		8,186		70		—		8,256
Depreciation and amortization	—		69,725		26,626		—		96,351
Total costs and expenses	270		311,929		93,283		(11,066)		394,416
Operating income (loss)	(270)		52,951		(9,273)		—		43,408
Other income (expense):
Interest income	16,426		1,055		1,349		(882)		17,948
Interest expense, net of amounts capitalized	(22,469)		1,514		(2,454)		882		(22,527)
Gains (losses) on investments, net	(3)		—		—		—		(3)
Equity in earnings (losses) of unconsolidated affiliates, net	473		—		(1,024)		—		(551)
Equity in earnings (losses) of subsidiaries, net	32,354		(7,143)		—		(25,211)		—
Foreign currency transaction gains (losses), net	—		(547)		3,577		—		3,030
Other, net	—		—		29		—		29
Total other income (expense), net	26,781		(5,121)		1,477		(25,211)		(2,074)
Income (loss) before income taxes	26,511		47,830		(7,796)		(25,211)		41,334
Income tax benefit (provision), net	1,338		(15,476)		(568)		—		(14,706)
Net income (loss)	27,849		32,354		(8,364)		(25,211)		26,628
Less: Net loss (income) attributable to non-controlling interests	—		—		1,221		—		1,221
Net income (loss) attributable to HSSC	$	27,849	$	32,354	$	(7,143)	$	(25,211)	$	27,849
Comprehensive income (loss):
Net income (loss)	$	27,849	$	32,354	$	(8,364)	$	(25,211)	$	26,628
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments	—		—		9,296		—		9,296
Unrealized gains (losses) on available-for-sale securities	(88)		—		—		—		(88)
Amounts reclassified to net income (loss):

Equity in other comprehensive income (loss) of subsidiaries, net	7,328		7,328		—		(14,656)		—
Total other comprehensive income (loss), net of tax	7,240		7,328		9,296		(14,656)		9,208
Comprehensive income (loss)	35,089		39,682		932		(39,867)		35,836
Less: Comprehensive loss (income) attributable to non-controlling interests	—		—		(747)		—		(747)
Comprehensive income (loss) attributable to HSSC	$	35,089	$	39,682	$	185	$	(39,867)	$	35,089

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(Unaudited)

Consolidating Statement of Operations and Comprehensive Income (Loss)

For the Three Months Ended March 31, 2022


	Hughes Satellite Systems Corporation		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations		Total
Revenue:
Services and other revenue	$	—	$	344,278	$	82,683	$	(6,020)	$	420,941
Equipment revenue	—		82,985		6,033		(6,301)		82,717
Total revenue	—		427,263		88,716		(12,321)		503,658
Costs and expenses:
Cost of sales - services and other (exclusive of depreciation and amortization)	—		105,621		41,857		(8,124)		139,354
Cost of sales - equipment (exclusive of depreciation and amortization)	—		69,418		3,433		(3,746)		69,105
Selling, general and administrative expenses	—		90,634		21,435		(451)		111,618
Research and development expenses	—		7,536		80		—		7,616
Depreciation and amortization	—		78,306		35,372		—		113,678
Impairment of long-lived assets	—		—		—		—		—
Total costs and expenses	—		351,515		102,177		(12,321)		441,371
Operating income (loss)	—		75,748		(13,461)		—		62,287
Other income (expense):
Interest income, net	1,126		1,345		1,073		(1,264)		2,280
Interest expense, net of amounts capitalized	(22,457)		824		(3,009)		1,264		(23,378)
Gains (losses) on investments, net	—		—		—		—		—
Equity in earnings (losses) of unconsolidated affiliates, net	—		102		(1,816)		—		(1,714)
Equity in earnings (losses) of subsidiaries, net	49,756		(9,842)		—		(39,914)		—
Foreign currency transaction gains (losses), net	—		897		5,758		—		6,655
Other, net	—		(55)		(134)		—		(189)
Total other income (expense), net	28,425		(6,729)		1,872		(39,914)		(16,346)
Income (loss) before income taxes	28,425		69,019		(11,589)		(39,914)		45,941
Income tax benefit (provision), net	4,876		(19,263)		(741)		—		(15,128)
Net income (loss)	33,301		49,756		(12,330)		(39,914)		30,813
Less: Net loss (income) attributable to non-controlling interests	—		—		2,488		—		2,488
Net income (loss) attributable to HSSC	$	33,301	$	49,756	$	(9,842)	$	(39,914)	$	33,301
Comprehensive income (loss):
Net income (loss)	$	33,301	$	49,756	$	(12,330)	$	(39,914)	$	30,813
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments	—		—		46,686		—		46,686
Unrealized gains (losses) on available-for-sale securities	(470)		—		—		—		(470)

Amounts reclassified to net income (loss):

Equity in other comprehensive income (loss) of subsidiaries, net	37,130		37,130		—		(74,260)		—
Total other comprehensive income (loss), net of tax	36,660		37,130		46,686		(74,260)		46,216
Comprehensive income (loss)	69,961		86,886		34,356		(114,174)		77,029
Less: Comprehensive loss (income) attributable to non-controlling interests	—		—		(7,068)		—		(7,068)
Comprehensive income (loss) attributable to HSSC	$	69,961	$	86,886	$	27,288	$	(114,174)	$	69,961

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(Unaudited)

Consolidating Statement of Cash Flows

For the Three months ended March 31, 2023


	Hughes Satellite Systems Corporation		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations		Total
Cash flows from operating activities:
Net income (loss)	$	27,849	$	32,354	$	(8,364)	$	(25,211)	$	26,628
Adjustments to reconcile net income (loss) to cash flows provided by (used for) operating activities:	(62,296)		37,279		21,972		25,211		22,166
Net cash provided by (used for) operating activities	(34,447)		69,633		13,608		—		48,794

Cash flows from investing activities:
Purchases of marketable investment securities	(226,068)		—		—		—		(226,068)
Sales and maturities of marketable investment securities	420,411		—		—		—		420,411

Expenditures for property and equipment	—		(38,051)		(8,974)		—		(47,025)

Expenditures for externally marketed software	—		(6,962)		—		—		(6,962)


Distributions (contributions) and advances from (to) subsidiaries, net	29,659		—		—		(29,659)		—



Net cash provided by (used for) investing activities	224,002		(45,013)		(8,974)		(29,659)		140,356

Cash flows from financing activities:


Payment of in-orbit incentive obligations	—		(1,834)		—		—		(1,834)



Contribution (distributions) and advances (to) from parent, net	—		(29,659)		—		29,659		—
Net cash provided by (used for) financing activities	—		(31,493)		—		29,659		(1,834)

Effect of exchange rates on cash and cash equivalents	—		—		1,669		—		1,669
Net increase (decrease) in cash and cash equivalents	189,555		(6,873)		6,303		—		188,985
Cash and cash equivalents, including restricted amounts, beginning of period	547,605		25,318		81,550		—		654,473
Cash and cash equivalents, including restricted amounts, end of period	$	737,160	$	18,445	$	87,853	$	—	$	843,458

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(Unaudited)

Consolidating Statement of Cash Flows

For the Three months ended March 31, 2022


	Hughes Satellite Systems Corporation		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations		Total
Cash flows from operating activities:
Net income (loss)	$	33,301	$	49,756	$	(12,330)	$	(39,914)	$	30,813
Adjustments to reconcile net income (loss) to cash flows provided by (used for) operating activities:	(179,357)		172,734		41,080		39,914		74,371
Net cash provided by (used for) operating activities	(146,056)		222,490		28,750		—		105,184

Cash flows from investing activities:
Purchases of marketable investment securities	(76,228)		—		—		—		(76,228)
Sales and maturities of marketable investment securities	485,730		—		—		—		485,730
Expenditures for property and equipment	—		(46,491)		(14,530)		—		(61,021)
Expenditures for externally marketed software	—		(5,093)		—		—		(5,093)
Distributions (contributions) and advances from (to) subsidiaries, net	182,738		—		—		(182,738)		—
India JV formation	—		(7,892)		—		—		(7,892)
Net cash provided by (used for) investing activities	592,240		(59,476)		(14,530)		(182,738)		335,496

Cash flows from financing activities:
Payment of finance lease obligations	—		—		(85)		—		(85)
Payment of in-orbit incentive obligations	—		(1,444)		—		—		(1,444)
Dividend paid to EchoStar	(100,000)		—		—		—		(100,000)
Contribution (distributions) and advances (to) from parent, net	—		(182,738)		—		182,738		—
Net cash provided by (used for) financing activities	(100,000)		(184,182)		(85)		182,738		(101,529)

Effect of exchange rates on cash and cash equivalents	—		—		3,490		—		3,490
Net increase (decrease) in cash and cash equivalents	346,184		(21,168)		17,625		—		342,641
Cash and cash equivalents, including restricted amounts, beginning of period	324,764		42,550		62,834		—		430,148
Cash and cash equivalents, including restricted amounts, end of period	$	670,948	$	21,382	$	80,459	$	—	$	772,789

Table of Contents

ITEM 2. MANAGEMENT’S NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS

Unless the context indicates otherwise, the terms “we,” “us,” “HSSC,” the “Company” and “our” refer to Hughes Satellite Systems Corporation and its subsidiaries. The following Management’s Narrative Analysis of Results of Operations (“Management’s Narrative Analysis”) should be read in conjunction with our accompanying Consolidated Financial Statements and notes thereto (“Consolidated Financial Statements”) in Item 1 of this Quarterly Report on Form 10-Q (“Form 10-Q”). This Management’s Narrative Analysis is intended to help provide an understanding of our financial condition, changes in our financial condition and our results of operations. Many of the statements in this Management’s Narrative Analysis are forward-looking statements that involve assumptions and are subject to risks and uncertainties that are often difficult to predict and beyond our control. Actual results could differ materially from those expressed or implied by such forward-looking statements. Refer to the Disclosure Regarding Forward-Looking Statements in this Form 10-Q for further discussion. For a discussion of additional risks, uncertainties and other factors that could impact our results of operations or financial condition, refer to the Risk Factors in Part II, Item 1A of this Form 10-Q and in Part I, Item 1A of our most recent Annual Report on Form 10-K (“Form 10-K”) filed with the Securities and Exchange Commission (“SEC”). Further, such forward-looking statements speak only as of the date of this Form 10-Q and we undertake no obligation to update them.

EXECUTIVE SUMMARY

Overview

We currently operate in two business segments: our Hughes segment and our EchoStar Satellite Services segment (“ESS segment”). Our operations include various corporate functions that have not been assigned to our business segments. These activities, costs and income, as well as eliminations of intersegment transactions, are accounted for in our Corporate and Other segment in our segment reporting.

All amounts presented in this Management’s Narrative Analysis are expressed in thousands of U.S. dollars, except share and per share amounts and unless otherwise noted.

Hughes Segment

Our Hughes segment is an industry leader in both networking technologies and services, innovating to deliver the global solutions that power a connected future for people, enterprises and things everywhere. We offer broadband satellite technologies and broadband internet products and services to consumer customers. We offer broadband network technologies, managed services, equipment, hardware, satellite services and communications solutions to government and enterprise customers.

Our Hughes segment continues to focus its efforts on optimizing financial returns of our existing satellites while planning for new satellite capacity to be launched, leased or acquired. Our consumer revenue growth depends on our success in adding new and retaining existing subscribers, as well as increasing our Average Revenue Per User/subscriber (“ARPU”). Service and acquisition costs related to ongoing support for our direct and indirect customers and partners are typically impacted most significantly by our growth. The growth of our enterprise and consumer businesses relies heavily on global economic conditions and the competitive landscape for pricing relative to competitors and alternative technologies. In most areas of the U.S. we are nearing or have reached capacity, which has resulted in our consumer subscriber base becoming increasingly limited. Our Latin America consumer subscriber base in certain areas has also become capacity constrained. These constraints are expected to be addressed by the launch of the EchoStar XXIV satellite.

To date, we have not experienced a material adverse impact from the Russia-Ukraine conflict and the associated sanctions.

On January 4, 2022, our India JV was formed, which allows us to offer flexible and scalable enterprise networking solutions using satellite connectivity for primary transport, back-up and hybrid implementation in India.

The EchoStar XXIV satellite is currently expected to be shipped to the launch site in June and subsequently launched at the first window that Space Exploration Technologies Corp. (“SpaceX”) can allocate to it, which is subject to preemption by certain higher-priority government launches. The EchoStar XXIV satellite is primarily intended to provide additional capacity for our HughesNet service in North, Central and South America as well as

enterprise broadband services. Following delays of over two years, in November 2022 we negotiated an amendment to our contract with the manufacturer to provide for additional compensation for past delays and a realignment of remedies. Delay in the availability of the EchoStar XXIV satellite could have a material adverse impact on our business operations, future revenues, financial position and prospects, and our planned expansion of satellite broadband services throughout North, South and Central America. Capital expenditures associated with the construction and launch of the EchoStar XXIV satellite are included in our Corporate and Other segment in our segment reporting.

Our broadband subscribers include customers that subscribe to our HughesNet services in the U.S. and Latin America through retail, wholesale and small/medium enterprise service channels.

The following table presents our approximate number of broadband subscribers:


	As of
	2023	2022
United States	890,000	931,000
Latin America	287,000	297,000
Total broadband subscribers	1,177,000	1,228,000

The following table presents the approximate number of net subscriber additions:


	For the three months ended
	March 31, 2023	December 31, 2022
United States	(41,000)	(43,000)
Latin America	(10,000)	(14,000)
Total net subscriber additions	(51,000)	(57,000)

Our ability to gain new customers and retain existing customers in the U.S. is being impacted by our capacity limitations, competitive pressure from satellite-based competitors and other technologies, and increased bandwidth usage on average by our existing customers. For the three months ended March 31, 2023, these factors resulted in lower total subscribers as compared to the three months ended December 31, 2022.

Our ability to gain new customers and retain existing customers in Latin America were tempered by our focus on more profitable consumer segments and our allocation of capacity to enterprise opportunities. In addition, capacity constraints in certain areas limit our ability to add new subscribers. For the three months ended March 31, 2023, the decline in net subscribers was primarily due to more selective customer screening as compared to the three months ended December 31, 2022.

We continued to execute our strategy of maximizing financial returns by utilizing capacity for higher economic value enterprise and government applications in Latin America. Continued success of this strategy will further reduce the available capacity for consumer subscribers.

As of March 31, 2023, our Hughes segment had $1.6 billion of contracted revenue backlog, an increase of 6.7%, as compared to December 31, 2022, primarily due to increases in contracts from our domestic customers. We define Hughes segment contracted revenue backlog as our expected future revenue under enterprise customer contracts that are non-cancelable, including lease revenue.

ESS Segment

Our ESS segment provides satellite services on a full-time and/or occasional-use basis to U.S. government service providers, internet service providers, broadcast news organizations, content providers and private enterprise customers. We operate our ESS business using primarily the EchoStar IX satellite and the EchoStar 105/SES-11 satellite and related infrastructure. Revenue in our ESS segment depends largely on our ability to continuously make use of our available satellite capacity with existing customers and our ability to enter into commercial relationships with new customers. During the first quarter of 2023, we transitioned the EchoStar IX satellite into inclined operations to extend its usable life for our customers. With this inclined mode of operation, we are expecting to extend the life of the spacecraft into 2024.

As of March 31, 2023, our ESS segment had $18.2 million of contracted revenue backlog, a decrease of 18.4%, as compared to December 31, 2022, primarily due to the recognition of revenue of existing contracts. We define contracted revenue backlog for our ESS segment as contracted future satellite lease revenue.

Corporate and Other Segment

Satellite Anomalies and Impairments

Our satellites may experience anomalies from time to time, some of which may have a significant adverse effect on their remaining useful lives, the commercial operation of the satellites or our operating results or financial position. We are not aware of any anomalies with respect to our owned or leased satellites that have had any such significant adverse effect during the year ended March 31, 2023. There can be no assurance, however, that anomalies will not have a significant adverse effect in the future. In addition, there can be no assurance that we can recover critical transmission capacity in the event one or more of our satellites were to fail.

Cybersecurity

We are not aware of any cyber-incidents with respect to our owned or leased satellites or other networks, equipment or systems that have had a material adverse effect on our business, costs, operations, prospects, results of operation or financial position during the three months ended March 31, 2023 and through May 8, 2023. There can be no assurance, however, that any such incident can be detected or thwarted or will not have such a material adverse effect in the future.

EXPLANATION OF KEY METRICS AND OTHER ITEMS

Services and other revenue. Services and other revenue primarily includes the sales of consumer and enterprise broadband services, maintenance and other contracted services, revenue associated with satellite and transponder leases and services, satellite uplinking/downlinking, subscriber wholesale service fees for the HughesNet service, professional services and facilities rental revenue.

Equipment revenue. Equipment revenue primarily includes broadband equipment and networks sold to customers in our consumer and enterprise markets.

Cost of sales - services and other. Cost of sales - services and other primarily includes the cost of broadband services provided to our consumer and enterprise customers, maintenance and other contracted services, costs associated with satellite and transponder leases and services, professional services and facilities rental.

Cost of sales - equipment. Cost of sales - equipment consists primarily of the cost of broadband equipment and networks provided to customers in our consumer and enterprise markets. It also includes certain other costs associated with the deployment of equipment to our customers.

Selling, general and administrative expenses. Selling, general and administrative expenses primarily include selling and marketing costs and employee-related costs associated with administrative services (e.g., information systems, human resources and other services), including bad debt expense and stock-based compensation

expense. It also includes professional fees (e.g. legal, information systems and accounting services) and other expenses associated with facilities and administrative services.

Research and development expenses. Research and development expenses primarily include costs associated with the design and development of products to support future growth and provide new technology and innovation to our customers.

Impairment of long-lived assets. Impairment of long-lived assets includes our impairment losses related to our property and equipment, goodwill, regulatory authorizations and other intangible assets.

Interest income, net. Interest income, net primarily includes interest earned on our cash, cash equivalents and marketable investment securities, and other investments including premium amortization, discount accretion on debt securities and changes in allowance for estimated credit losses on investments.

Interest expense, net of amounts capitalized. Interest expense, net of amounts capitalized primarily includes interest expense associated with our debt and finance lease obligations (net of capitalized interest), amortization of debt issuance costs and interest expense related to certain legal proceedings.

Gains (losses) on investments, net. Gains (losses) on investments, net primarily includes changes in fair value of our marketable equity securities and other investments for which we have elected the fair value option. It may also include realized gains and losses on the sale or exchange of our available-for-sale debt securities, other-than-temporary impairment losses on our available-for-sale securities, realized gains and losses on the sale or exchange of equity securities and debt securities without readily determinable fair value and adjustments to the carrying amount of investments in unconsolidated affiliates and marketable equity securities resulting from impairments and observable price changes.

Equity in earnings (losses) of unconsolidated affiliates, net. Equity in earnings (losses) of unconsolidated affiliates, net includes earnings or losses from our investments accounted for using the equity method.

Foreign currency transaction gains (losses), net. Foreign currency transaction gains (losses), net include gains and losses resulting from the re-measurement of transactions denominated in foreign currencies.

Other, net. Other, net primarily includes dividends received from our marketable investment securities and other non-operating income and expense items that are not appropriately classified elsewhere in the Consolidated Statements of Operations in our Consolidated Financial Statements.

Earnings before interest, taxes, depreciation and amortization (“EBITDA”). EBITDA is defined as Net income (loss) excluding Interest income and expense, net, Income tax benefit (provision), net, Depreciation and amortization, and Net income (loss) attributable to non-controlling interests. EBITDA is not a measure determined in accordance with U.S. generally accepted accounting principles (“GAAP”). This non-GAAP measure is reconciled to Net income (loss) in our discussion of Results of Operations section below. EBITDA should not be considered in isolation or as a substitute for operating income, net income or any other measure determined in accordance with GAAP. EBITDA is used by our management as a measure of operating efficiency and overall financial performance for benchmarking against our peers and competitors. Management believes EBITDA 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.

Subscribers. Subscribers include customers that subscribe to our HughesNet service, through retail, wholesale and small/medium enterprise service channels.

RESULTS OF OPERATIONS

Three Months Ended March 31, 2023 Compared to the Three Months Ended March 31, 2022

The following table presents our consolidated results of operations for the three months ended March 31, 2023 compared to the three months ended March 31, 2022:


	For the three months ended March 31,						Variance
Statements of Operations Data (1)	2023			2022			Amount		%
Revenue:
Services and other revenue	$	375,754		$	420,941		$	(45,187)	(10.7)
Equipment revenue	62,070			82,717			(20,647)		(25.0)
Total revenue	437,824			503,658			(65,834)		(13.1)
Costs and expenses:
Cost of sales - services and other	134,039			139,354			(5,315)		(3.8)
% of total services and other revenue	35.7		%	33.1		%
Cost of sales - equipment	51,671			69,105			(17,434)		(25.2)
% of total equipment revenue	83.2		%	83.5		%
Selling, general and administrative expenses	104,099			111,618			(7,519)		(6.7)
% of total revenue	23.8		%	22.2		%
Research and development expenses	8,256			7,616			640		8.4
% of total revenue	1.9		%	1.5		%
Depreciation and amortization	96,351			113,678			(17,327)		(15.2)

Total costs and expenses	394,416			441,371			(46,955)		(10.6)
Operating income (loss)	43,408			62,287			(18,879)		(30.3)
Other income (expense):
Interest income, net	17,948			2,280			15,668		*
Interest expense, net of amounts capitalized	(22,527)			(23,378)			851		(3.6)
Gains (losses) on investments, net	(3)			—			(3)		*
Equity in earnings (losses) of unconsolidated affiliates, net	(551)			(1,714)			1,163		(67.9)
Foreign currency transaction gains (losses), net	3,030			6,655			(3,625)		(54.5)
Other, net	29			(189)			218		(115.3)
Total other income (expense), net	(2,074)			(16,346)			14,272		(87.3)
Income (loss) before income taxes	41,334			45,941			(4,607)		(10.0)
Income tax benefit (provision), net	(14,706)			(15,128)			422		(2.8)
Net income (loss)	26,628			30,813			(4,185)		(13.6)
Less: Net loss (income) attributable to non-controlling interests	1,221			2,488			(1,267)		(50.9)
Net income (loss) attributable to HSSC	$	27,849		$	33,301		$	(5,452)	(16.4)

Other data:
EBITDA (2)	$	143,485		$	183,205		$	(39,720)	(21.7)
Subscribers, end of period	1,177,000			1,406,000			(229,000)		(16.3)

* Percentage is not meaningful.

(1) An explanation of our key metrics is included in Explanation of Key Metrics and Other Items.

(2) A reconciliation of EBITDA to Net income (loss), the most directly comparable GAAP measure in our Consolidated Financial Statements, is included in Results of Operations. For further information on our use of EBITDA, see Explanation of Key Metrics and Other Items.

The following discussion relates to our results of operations for the three months ended March 31, 2023 compared to the three months ended March 31, 2022:

Services and other revenue. Services and other revenue totaled $375.8 million for the three months ended March 31, 2023, a decrease of $45.2 million, or 10.7%, as compared to 2022. The decrease was primarily attributable to our Hughes segment related to lower sales of broadband services to our consumer customers of $41.0 million, and lower sales of broadband services to our enterprise customers of $2.2 million, partially offset by increased sales of broadband services to our mobile satellite system and other customers of $1.0 million. Our ESS segment increased by $1.5 million. These variances reflect an estimated negative impact of exchange rate fluctuations of $1.7 million, primarily attributable to our enterprise customers.

Equipment revenue. Equipment revenue totaled $62.1 million for the three months ended March 31, 2023, a decrease of $20.6 million, or 25.0%, as compared to 2022. The decrease was primarily attributable to: i) decreases in hardware sales to our enterprise customers of $19.1 million mainly associated with a certain customer in North America and to international customers, and ii) decreases in hardware sales of $2.2 million to our consumer customers. These decreases were partially offset by increases on our hardware sales to our mobile satellite system customers of $0.6 million.

Cost of sales - services and other. Cost of sales - services and other totaled $134.0 million for the three months ended March 31, 2023, a decrease of $5.3 million, or 3.8%, as compared to 2022. The increase was primarily attributable to lower sales of broadband services and corresponding decreases in cost of services provided to our consumer and enterprise customers of $4.8 million, mainly related to service delivery expenses, such as field services and customer care.

Cost of sales - equipment. Cost of sales - equipment totaled $51.7 million for the three months ended March 31, 2023, a decrease of $17.4 million, or 25.2%, as compared to 2022. The increase was primarily attributable to the corresponding decrease in equipment revenue.

Selling, general and administrative expenses. Selling, general and administrative expenses totaled $104.1 million for the three months ended March 31, 2023, a decrease of $7.5 million, or 6.7%, as compared to 2022. The decrease was primarily attributable to decreases in sales and marketing expenses of $9.8 million offset by increases in bad debt expense of $1.1 million.

Depreciation and amortization. Depreciation and amortization expenses totaled $96.4 million for the three months ended March 31, 2023, a decrease of $17.3 million, or 15.2%, as compared to 2022. The decrease was primarily attributable to: i) decreases in other property and equipment depreciation expense of $14.6 million, ii) decreases in amortization of our capitalized software of $1.6 million, and iii) decreases in our satellite depreciation of $1.0 million.

Interest income, net. Interest income, net totaled $17.9 million for the three months ended March 31, 2023, an increase of $15.7 million, as compared to 2022, primarily attributable to increases in the yield on our marketable investment securities.

Interest expense, net of amounts capitalized. Interest expense, net of amounts capitalized, totaled $22.5 million for the three months ended March 31, 2023, a decrease of $0.9 million, or 3.6%, as compared to 2022. The decrease was primarily attributable to an increase of $0.6 million in capitalized interest relating to the construction of our satellite-related ground infrastructure.

Foreign currency transaction gains (losses), net. Foreign currency transaction gains (losses), net totaled $3.0 million in gains for the three months ended March 31, 2023, as compared to $6.7 million in losses for the three months ended March 31, 2022, a positive change of $3.6 million. The change was due to the net impact of foreign exchange rate fluctuations of certain foreign currencies during the period, primarily related to the Mexican, Chilean and Colombian Pesos.

Income tax benefit (provision), net. Income tax benefit (provision), net was $(14.7) million for the three months ended March 31, 2023, as compared to $(15.1) million for the three months ended March 31, 2022. Our effective income tax rate was 35.6% and 32.9% for the three months ended March 31, 2023 and 2022, respectively. The variations in our effective tax rate from the U.S. federal statutory rate for the three months ended March 31, 2023 were primarily due to excluded foreign losses where the Company carries a full valuation allowance and a reserve recorded for an uncertain tax benefit. The variations in our effective tax rate from the U.S. federal statutory rate for the three months ended March 31, 2022 were primarily due to excluded foreign losses where the Company carries a full valuation allowance and the impact of state and local taxes.

Net income (loss) attributable to HSSC. The following table reconciles the change in Net income (loss) attributable to HSSC:


	Amounts
Net income (loss) attributable to HSSC for the three months ended March 31, 2022	$	33,301
Increase (decrease) in interest income, net	15,668
Decrease (increase) in equity in earnings (losses) of unconsolidated affiliates, net	1,163
Decrease (increase) in interest expense, net of amounts capitalized	851
Decrease (increase) in income tax benefit (provision), net	422
Increase (decrease) in other, net	218
Increase (decrease) in gains (losses) on investments, net	(3)
Decrease (increase) in net income (loss) attributable to non-controlling interests	(1,267)
Increase (decrease) in foreign currency transaction gains (losses), net	(3,625)
Increase (decrease) in operating income (loss), including depreciation and amortization	(18,879)
Net income (loss) attributable to HSSC for the three months ended March 31, 2023	$	27,849

EBITDA. EBITDA is a non-GAAP financial measure and is described under Explanation of Key Metrics and Other Items section. The following table reconciles EBITDA to Net income (loss), the most directly comparable GAAP measure in our Consolidated Financial Statements:


	For the three months ended March 31,				Variance
	2023		2022		Amount		%
Net income (loss)	$	26,628	$	30,813	$	(4,185)	(13.6)
Interest income, net	(17,948)		(2,280)		(15,668)		*
Interest expense, net of amounts capitalized	22,527		23,378		(851)		(3.6)
Income tax provision (benefit), net	14,706		15,128		(422)		(2.8)
Depreciation and amortization	96,351		113,678		(17,327)		(15.2)
Net loss (income) attributable to non-controlling interests	1,221		2,488		(1,267)		(50.9)
EBITDA	$	143,485	$	183,205	$	(39,720)	(21.7)

* Percentage is not meaningful.

The following table reconciles the change in EBITDA:


	Amounts
EBITDA for the three months ended March 31, 2022	$	183,205
Decrease (increase) in equity in earnings (losses) of unconsolidated affiliates, net	1,163
Increase (decrease) in other, net	218
Increase (decrease) in gains (losses) on investments, net	(3)
Decrease (increase) in net loss (income) attributable to non-controlling interests	(1,267)
Increase (decrease) in foreign currency transaction gains (losses), net	(3,625)
Increase (decrease) in operating income (loss), excluding depreciation and amortization	(36,206)
EBITDA for the three months ended March 31, 2023	$	143,485

Segment Operating Results and Capital Expenditures

The following tables present our total revenue, capital expenditures and EBITDA by segment for the three months ended March 31, 2023, as compared to the three months ended March 31, 2022:


	Hughes		ESS		Corporate and Other		Consolidated Total
For the year ended March 31, 2023
Total revenue	$	431,195	$	5,997	$	632	$	437,824
Capital expenditures	47,025		—		—		47,025
EBITDA	157,234		4,655		(18,404)		143,485

For the year ended March 31, 2022
Total revenue	$	494,106	$	4,474	$	5,078	$	503,658
Capital expenditures	61,021		—		—		61,021
EBITDA	191,170		2,691		(10,656)		183,205

Hughes Segment


	For the three months ended March 31,				Variance
	2023		2022		Amount		%
Total revenue	$	431,195	$	494,106	$	(62,911)	(12.7)
Capital expenditures	47,025		61,021		(13,996)		(22.9)
EBITDA	157,234		191,170		(33,936)		(17.8)

Total revenue was $431.2 million for the three months ended March 31, 2023, a decrease of $62.9 million, or 12.7%, as compared to 2022. Services and other revenue decreased primarily due to lower sales of broadband services to our consumer customers of $41.0 million, and lower sales of broadband services to our enterprise customers of $2.2 million, partially offset by increased sales of broadband services to our mobile satellite system and other customers of $1.0 million. Equipment revenue decreased primarily due to: i) decreases in hardware sales to our enterprise customers of $19.1 million mainly associated with a certain customer in North America and to international customers, and ii) decreases in hardware sales of $2.2 million to our consumer customers. These decreases were partially offset by increases on our hardware sales to our mobile satellite system customers of $0.6 million. These variances reflect an estimated negative impact of exchange rate fluctuations of $2.2 million, primarily attributable to our enterprise customers.

Capital expenditures were $47.0 million for the three months ended March 31, 2023, a decrease of $14.0 million, or 22.9%, as compared to 2022, primarily due to decreases in expenditures associated with our consumer business, and decreases in expenditures related to the construction of our satellite-related ground infrastructure.

The following table reconciles the change in the Hughes Segment EBITDA:


	Amounts
EBITDA for the three months ended March 31, 2022	$	191,170
Decrease (increase) in equity in earnings (losses) of unconsolidated affiliates, net	792
Increase (decrease) in other, net	217
Decrease (increase) in net loss (income) attributable to non-controlling interests	(1,267)
Increase (decrease) in foreign currency transaction gains (losses), net	(3,581)
Increase (decrease) in operating income (loss), excluding depreciation and amortization	(30,097)

EBITDA for the three months ended March 31, 2023	$	157,234

ESS Segment


	For the three months ended March 31,				Variance
	2023		2022		Amount		%
Total revenue	$	5,997	$	4,474	$	1,523	34.0
EBITDA	4,655		2,691		1,964		73.0

Total revenue was $6.0 million for the three months ended March 31, 2023, an increase of $1.5 million, or 34.0%, compared to 2022, primarily due to an increase in transponder services provided to third parties.

EBITDA was $4.7 million for the three months ended March 31, 2023, an increase of $2.0 million, or 73.0%, as compared to 2022, primarily due to the increase in overall ESS segment revenue and lower expenses.

Corporate and Other Segment


	For the three months ended March 31,				Variance
	2023		2022		Amount		%
Total revenue	$	632	$	5,078	$	(4,446)	(87.6)

EBITDA	(18,404)		(10,656)		(7,748)		72.7

The following table reconciles the change in the Corporate and Other Segment EBITDA:


	Amounts
EBITDA for the three months ended March 31, 2022	$	(10,656)
Increase (decrease) in operating income (loss), excluding depreciation and amortization	(8,071)
Increase (decrease) in foreign currency transaction gains (losses), net	(45)
Increase (decrease) in gains (losses) on investments, net	(3)
Increase (decrease) in other, net	(1)
Decrease (increase) in equity in earnings (losses) of unconsolidated affiliates, net	371
EBITDA for the three months ended March 31, 2023	$	(18,405)

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this Form 10-Q. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this Form 10-Q such that the information required to be disclosed in our Securities and Exchange Commission reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms, and is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

There has been no change in our internal control over financial reporting (as defined in Rule 15d-15(f) under the Securities Exchange Act of 1934, as amended) that occurred during the three months ended March 31, 2023 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. We continue to review our internal control over financial reporting and may from time to time make changes aimed at enhancing its effectiveness and to ensure that our systems evolve with our business.

Table of Contents

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

For a discussion of legal proceedings, refer to Part I, Item 1. Financial Statements - Note 13. Contingencies - Litigation in this Form 10-Q.

ITEM 1A. RISK FACTORS

Item 1A, Risk Factors, of our Form 10-K for the year ended December 31, 2022 includes a detailed discussion of our risk factors.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

Financial Results

On May 8, 2023, EchoStar issued a press release (the “Press Release”) announcing its financial results for the quarter ended March 31, 2023. A copy of the Press Release is furnished herewith as Exhibit 99.1. The foregoing information, including the exhibit related thereto, is furnished in response to Item 2.02 of Form 8-K and shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise, and shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933, as amended, or into any filing or other document pursuant to the Securities Exchange Act of 1934, as amended, except as otherwise expressly stated in any such filing.

Table of Contents

ITEM 6. EXHIBITS


Exhibit No.						Description
31.1 (H)						Section 302 Certification of Chief Executive Officer and Principal Financial Officer
32.1 (I)						Section 906 Certification of Chief Executive Officer and Principal Financial Officer
99.1 (I)						Press release dated May 3, 2023 issued by EchoStar Corporation regarding financial results for the period ended March 31, 2023.
101.INS						XBRL Instance Document. The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH						XBRL Taxonomy Extension Schema.
101.CAL						XBRL Taxonomy Extension Calculation Linkbase.
101.DEF						XBRL Taxonomy Extension Definition Linkbase.
101.LAB						XBRL Taxonomy Extension Label Linkbase.
101.PRE						XBRL Taxonomy Extension Presentation Linkbase.

(H) Filed herewith.

(I) Furnished herewith.

* Incorporated by reference.

** Constitutes a management contract or compensatory plan or arrangement.

Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Form 10-Q to be signed on its behalf by the undersigned thereunto duly authorized.


		HUGHES SATELLITE SYSTEMS CORPORATION


Date: May 8, 2023	By:	/s/ Hamid Akhavan
		Hamid Akhavan
		Chief Executive Officer and President
		(Principal Executive Officer and Principal Financial Officer)


Date: May 8, 2023	By:	/s/ Veronika Takacs
		Veronika Takacs
		Vice President, Chief Accounting Officer and Controller
		(Principal Accounting Officer)

Document

EXHIBIT 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER

Section 302 Certification

I, Hamid Akhavan, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Hughes Satellite Systems Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Date: May 8, 2023

By:			/s/ Hamid Akhavan
Name:			Hamid Akhavan
Title:			Chief Executive Officer and President
			(Principal Executive Officer and Principal Financial Officer)

Document

EXHIBIT 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER

Section 906 Certifications

In connection with the quarterly report for the quarter ended March 31, 2023 on Form 10-Q (the “Report”), of Hughes Satellite Systems Corporation (the “Company”) as filed with the Securities and Exchange Commission on the date hereof, I, Hamid Akhavan, Chief Executive Officer and Principal Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that to the best of our knowledge:

(i) the Report fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934; and

(ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


Date: May 8, 2023


By:			/s/ Hamid Akhavan
Name:			Hamid Akhavan
Title:			Chief Executive Officer and President
			(Principal Executive Officer and Principal Financial Officer)

The foregoing certification is being furnished solely pursuant to 18 U.S.C. Section 1350 and is not being filed as part of the Report or as a separate disclosure document.

A SIGNED ORIGINAL OF THIS WRITTEN STATEMENT REQUIRED BY SECTION 906 HAS BEEN PROVIDED TO THE COMPANY AND WILL BE RETAINED BY THE COMPANY AND FURNISHED TO THE SECURITIES AND EXCHANGE COMMISSION OR ITS STAFF UPON REQUEST.

Document

Exhibit 99.1

EchoStar Announces Financial Results for the Three Months Ended March 31, 2023

Englewood, CO, May 8, 2023—EchoStar Corporation (Nasdaq: SATS) announced its financial results for the three months ended March 31, 2023.

Three Months Ended March 31, 2023 Financial Highlights:

•Consolidated revenue of $439.6 million.

•Net income of $27.8 million, consolidated net income attributable to EchoStar common stock of $29.0 million, and basic and diluted earnings per share of common stock of $0.35.

•Consolidated Adjusted EBITDA of $135.0 million (see discussion and the reconciliation of GAAP to this non-GAAP measure below).

“In the first quarter of 2023, the EchoStar team performed as planned, with a focus on optimizing our existing assets and market opportunities efficiently,” said Hamid Akhavan, CEO and President of EchoStar. “The business continues to pursue new avenues of growth, laying the operational foundation to drive increased revenues once our upcoming EchoStar XXIV/JUPITER 3 satellite enters into service and taking tangible steps toward fulfilling our vision of a global 5G network in the S-band.”

Three Months Ended March 31, 2023 - Additional Information:

•Consolidated revenue decreased 12.3% or $61.9 million year over year. The decrease was driven by lower service revenues of $41.3 million partially due to fewer broadband customers. Equipment sales decreased $20.7 million, primarily due to lower sales to both domestic and international enterprise customers.

•Net income decreased $61.1 million year over year. The decrease was due to lower operating income of $16.8 million and an unfavorable change in investments of $87.8 million due to $80.7 million of gains that occurred in 2022. These items were partially offset by a favorable change in interest income of $22.2 million and lower net income tax expense of $21.3 million.

•Adjusted EBITDA decreased 18.6% or $30.9 million year over year.

◦Hughes segment Adjusted EBITDA decreased $30.1 million year over year. The decrease was driven primarily by lower service and equipment revenue, partially offset by lower sales and marketing expense for our broadband consumer business.

◦ESS segment Adjusted EBITDA increased $2.0 million year over year primarily due to higher revenue.

◦Corporate and Other segment Adjusted EBITDA decreased $2.7 million year over year. The decrease was primarily due to higher corporate expenses, partially offset by higher earnings of unconsolidated affiliates, net, of $0.4 million.

•Hughes broadband subscribers totaled approximately 1,177,000, declining 51,000 from December 31, 2022. Our current capacity limitations, increasing bandwidth usage by approximately 15% year on year on average by our existing U.S subscribers, and competitive pressures are impacting our consumer subscriber levels. In Latin America, subscriber levels were tempered by our focus on more profitable consumer segments and by our allocation of capacity to enterprise opportunities.

•For the three months ended March 31, 2023, approximately 37% of Hughes segment revenue was attributable to our enterprise customers, increasing from 36% in the same period last year.

•Cash, cash equivalents and current marketable investment securities were $1.7 billion as of March 31, 2023.

•The JUPITER 3/EchoStar XXIV satellite is currently expected to be shipped to the launch site in June and subsequently launched at the first window that SpaceX can allocate to it, which is subject to preemption by certain higher-priority government launches.

Set forth below is a table highlighting certain of EchoStar’s segment results for the three months ended March 31, 2023 and 2022 (amounts in thousands) (all US GAAP amounts reference results from operations):


	For the three months ended March 31,
	2023		2022

Revenue
Hughes	$	431,195	$	494,106
EchoStar Satellite Services	5,997		$	4,474
Corporate and Other	2,405		$	2,954
Total revenue	$	439,597	$	501,534

Net income (loss)	$	27,820	$	88,945

Adjusted EBITDA
Hughes	$	154,164	$	184,287
EchoStar Satellite Services	4,655		$	2,691
Corporate & Other	(23,832)		$	(21,089)
Total Adjusted EBITDA	$	134,987	$	165,889

Expenditures for property and equipment, net of refunds and other receipts	$	44,071	$	112,138

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


	For the three months ended March 31,
	2023		2022

Net income (loss)	$	27,820	$	88,945
Interest income, net	(28,596)		(6,422)
Interest expense, net of amounts capitalized	13,286		14,973
Income tax provision (benefit), net	11,460		32,782
Depreciation and amortization	102,858		120,436
Net loss (income) attributable to non-controlling interests	1,221		2,488
EBITDA	128,049		253,202
(Gains) losses on investments, net	7,109		(80,686)
Impairment of long-lived assets	3,142		—
License fee dispute - India, net of non-controlling interests	—		(233)
Foreign currency transaction (gains) losses, net	(3,313)		(6,394)
Adjusted EBITDA	134,987		165,889

Note on Use of Non-GAAP Financial Measures

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

Adjusted EBITDA is defined as EBITDA excluding Gains and losses on investments, net, Foreign currency transaction gains (losses), net, and other non-recurring or non-operational items.

EBITDA and Adjusted EBITDA are not measures determined in accordance with US GAAP. EBITDA and Adjusted EBITDA are reconciled to Net income (loss) in the table above and should not be considered in isolation or as a substitute for operating income, net income or any other measure determined in accordance with US GAAP. Our management uses EBITDA and Adjusted EBITDA as measures of our operating efficiency and overall financial performance for benchmarking against our peers and competitors.

Management believes that these non-GAAP measures provide meaningful supplemental information regarding the underlying operating performance of our business and are appropriate to enhance an overall understanding of our financial performance. Management also believes that EBITDA and Adjusted EBITDA are useful to investors because they are frequently used by securities analysts, investors, and other interested parties to evaluate the performance of companies in our industry.

The consolidated financial statements of EchoStar for the periods ended March 31, 2023 and 2022 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, 2023 filed today with the Securities and Exchange Commission.

EchoStar will host a conference call to discuss its earnings on Tuesday, May 9, 2023 at 8:30 a.m. Eastern Time. The conference call will be broadcast live in listen-only mode on EchoStar’s investor relations website at ir.echostar.com. To participate via telephone and ask a question, participants must register using an online form found at: https://register.vevent.com/register/BI60954a97734841e7aa2eaffe6e4ad436.

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,” “goal,” “seek,” “estimate,” “expect,” “intend,” “project,” “continue,” “future,” “will,” “would,” “can,” “may,” “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, 2022 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
Samantha Whirley Phone: +1 301-601-6451 Email: ir@echostar.com			Sharyn Nerenberg Phone: +1 301-428-7124 Email: sharyn.nerenberg@echostar.com

ECHOSTAR CORPORATION

Consolidated Balance Sheets

(Amounts in thousands, except share and per share amounts)


	As of
	March 31, 2023		December 31, 2022
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	920,105	$	704,541
Marketable investment securities	755,169		973,915
Trade accounts receivable and contract assets, net	251,871		236,479
Other current assets, net	252,596		210,446
Total current assets	2,179,741		2,125,381
Non-current assets:
Property and equipment, net	2,175,861		2,237,617
Operating lease right-of-use assets	147,707		151,518
Goodwill	532,858		532,491
Regulatory authorizations, net	461,556		462,531
Other intangible assets, net	15,151		15,698
Other investments, net	364,954		356,705
Other non-current assets, net	315,960		317,062
Total non-current assets	4,014,047		4,073,622
Total assets	$	6,193,788	$	6,199,003

Liabilities and Stockholders' Equity
Current liabilities:
Trade accounts payable	$	85,772	$	101,239
Contract liabilities	129,292		121,739
Accrued expenses and other current liabilities	163,109		199,853
Total current liabilities	378,173		422,831
Non-current liabilities:
Long-term debt, net	1,496,981		1,496,777
Deferred tax liabilities, net	430,957		424,621
Operating lease liabilities	131,881		135,932
Other non-current liabilities	112,534		119,787
Total non-current liabilities	2,172,353		2,177,117
Total liabilities	2,550,526		2,599,948

Commitments and contingencies

ECHOSTAR CORPORATION

Consolidated Balance Sheets

(Amounts in thousands, except share and per share amounts)


Stockholders' equity:
Preferred stock, $0.001 par value, 20,000,000 shares authorized, none issued and outstanding at both March 31, 2023 and December 31, 2022	—		—
Common stock, $0.001 par value, 4,000,000,000 shares authorized:
Class A common stock, $0.001 par value, 1,600,000,000 shares authorized, 59,303,237 shares issued and 35,989,926 shares outstanding at March 31, 2023 and 58,604,927 shares issued and 35,291,616 shares outstanding at December 31, 2022	59		59
Class B convertible common stock, $0.001 par value, 800,000,000 shares authorized, 47,687,039 shares issued and outstanding at both March 31, 2023 and December 31, 2022	48		48
Class C convertible common stock, $0.001 par value, 800,000,000 shares authorized, none issued and outstanding at both March 31, 2023 and December 31, 2022	—		—
Class D common stock, $0.001 par value, 800,000,000 shares authorized, none issued and outstanding at both March 31, 2023 and December 31, 2022	—		—
Additional paid-in capital	3,376,169		3,367,058
Accumulated other comprehensive income (loss)	(166,931)		(172,239)
Accumulated earnings (losses)	862,558		833,517
Treasury shares, at cost, 23,313,311 at both March 31, 2023 and December 31, 2022	(525,824)		(525,824)
Total EchoStar Corporation stockholders' equity	3,546,079		3,502,619
Non-controlling interests	97,183		96,436
Total stockholders' equity	3,643,262		3,599,055
Total liabilities and stockholders' equity	$	6,193,788	$	6,199,003

ECHOSTAR CORPORATION

Consolidated Statements of Operations

(Amounts in thousands, except per share amounts)

(unaudited)


	For the three months ended March 31,
	2023		2022

Revenue:
Services and other revenue	$	377,527	$	418,811
Equipment revenue	62,070		82,723
Total revenue	439,597		501,534
Costs and expenses:
Cost of sales - services and other (exclusive of depreciation and amortization)	135,372		141,129
Cost of sales - equipment (exclusive of depreciation and amortization)	51,662		69,114
Selling, general and administrative expenses	110,061		118,170
Research and development expenses	8,255		7,617
Depreciation and amortization	102,858		120,436
Impairment of long-lived assets	3,142		—
Total costs and expenses	411,350		456,466
Operating income (loss)	28,247		45,068
Other income (expense):
Interest income, net	28,596		6,422
Interest expense, net of amounts capitalized	(13,286)		(14,973)
Gains (losses) on investments, net	(7,109)		80,686
Equity in earnings (losses) of unconsolidated affiliates, net	(551)		(1,714)
Foreign currency transaction gains (losses), net	3,313		6,394

Other, net	70		(156)
Total other income (expense), net	11,033		76,659
Income (loss) before income taxes	39,280		121,727
Income tax benefit (provision), net	(11,460)		(32,782)
Net income (loss)	27,820		88,945
Less: Net loss (income) attributable to non-controlling interests	1,221		2,488
Net income (loss) attributable to EchoStar Corporation common stock	$	29,041	$	91,433

Earnings (losses) per share:
Basic	$	0.35	$	1.07
Diluted	$	0.35	$	1.06

ECHOSTAR CORPORATION

Consolidated Statements of Cash Flows

(Amounts in thousands)

(unaudited)


	For the three months ended March 31,
	2023		2022

Cash flows from operating activities:
Net income (loss)	$	27,820	$	88,945
Adjustments to reconcile net income (loss) to cash flows provided by (used for) operating activities:
Depreciation and amortization	102,858		120,436
Impairment of long-lived assets	3,142		—
Losses (gains) on investments, net	7,109		(80,686)
Equity in losses (earnings) of unconsolidated affiliates, net	551		1,714
Foreign currency transaction losses (gains), net	(3,313)		(6,394)
Deferred tax provision (benefit), net	6,521		25,538
Stock-based compensation	2,592		1,860
Amortization of debt issuance costs	204		191

Other, net	(24,078)		(2,528)
Changes in assets and liabilities, net:
Trade accounts receivable and contract assets, net	(14,041)		(8,480)
Other current assets, net	(27,153)		(3,340)
Trade accounts payable	(13,797)		7,046
Contract liabilities	7,553		(3,142)
Accrued expenses and other current liabilities	(28,257)		(27,033)
Non-current assets and non-current liabilities, net	(1,286)		(9,774)
Net cash provided by (used for) operating activities	46,425		104,353

Cash flows from investing activities:
Purchases of marketable investment securities	(238,585)		(88,578)
Sales and maturities of marketable investment securities	457,776		492,812
Expenditures for property and equipment	(59,071)		(112,138)
Refunds and other receipts related to capital expenditures	15,000		—
Expenditures for externally marketed software	(6,962)		(5,093)
India JV formation	—		(7,892)




Net cash provided by (used for) investing activities	168,158		279,111


Cash flows from financing activities:

Payment of finance lease obligations	—		(85)
Payment of in-orbit incentive obligations	(1,834)		(1,444)

Proceeds from Class A common stock issued under the Employee Stock Purchase Plan	1,098		2,367
Treasury share repurchase	—		(33,307)


Net cash provided by (used for) financing activities	(736)		(32,469)

Effect of exchange rates on cash and cash equivalents	1,659		3,480
Net increase (decrease) in cash and cash equivalents	215,506		354,475
Cash and cash equivalents, including restricted amounts, beginning of period	705,883		536,874
Cash and cash equivalents, including restricted amounts, end of period	$	921,389	$	891,349