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hssc-20230630

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 June 30, 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/9578cd1da4f43da6a2d96d04d81c2f87-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 August 2, 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.

HUGHES SATELLITE SYSTEMS CORPORATION

TABLE OF CONTENTS


	Disclosure Regarding Forward Looking Statements	i

Part I - Financial Information

Item 1.	Financial Statements (unaudited)	1
	Consolidated Balance Sheets as of June 3 0 , 2023 (unaudited) and December 31, 2022 (audited)	1
	Consolidated Statements of Operations for the t h r e e and six months ended June 3 0 , 2023 and 2022 (unaudited)	3
	Consolidated Statements of Comprehensive Income (Loss) for the three and six months ended June 3 0 , 2023 and 2022 (unaudited)	4
	Consolidated Statements of Changes in Stockholder’s Equity for the three months ended June 30, 2023 and 2022 (unaudited)	5
	Consolidated Statements of Changes in Shareholder’s Equity for the six months ended June 30, 2023 and 2022 (unaudited)	6
	Consolidated Statements of Cash Flows for the six months ended June 3 0 , 2023 and 2022 (unaudited)	7
	Notes to the Consolidated Financial Statements (unaudited)	8
Item 2.	Management’s Narrative Analysis of Results of Operations	48
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	*
Item 4.	Controls and Procedures	59

Part II - Other Information

Item 1.	Legal Proceedings	60
Item 1A.	Risk Factors	60
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	*
Item 3.	Defaults Upon Major Securities	*
Item 4.	Mine Safety Disclosures	60
Item 5.	Other Information	60
Item 6.	Exhibits	61
	Signatures	62

* 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.

Table of Contents

ITEM 1: FINANCIAL INFORMATION

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, 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:

•risks relating to EchoStar’s ability to complete and realize the expected benefits of the pending merger with DISH Network Corporation;

•significant risks related to our ability to launch, 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 changes in the global business environment, including regulatory and competitive considerations;

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

•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.

Table of Contents

ITEM 1. FINANCIAL STATEMENTS

HUGHES SATELLITE SYSTEMS CORPORATION

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share amounts)


	As of
	June 30, 2023		December 31, 2022
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	498,549	$	653,132
Marketable investment securities	1,062,962		799,769
Trade accounts receivable and contract assets, net	238,960		236,336
Other current assets, net	291,495		275,202
Total current assets	2,091,966		1,964,439
Non-current assets:
Property and equipment, net	1,313,132		1,376,004
Operating lease right-of-use assets	143,216		150,632
Goodwill	533,295		532,491
Regulatory authorizations, net	408,887		408,619
Other intangible assets, net	14,582		15,698
Other investments, net	47,025		83,523
Other non-current assets, net	291,275		285,877
Total non-current assets	2,751,412		2,852,844
Total assets	$	4,843,378	$	4,817,283

Liabilities and Shareholder's Equity
Current liabilities:
Trade accounts payable	$	86,656	$	98,229
Contract liabilities	107,977		121,739
Accrued expenses and other current liabilities	395,356		393,899
Total current liabilities	589,989		613,867
Non-current liabilities:
Long-term debt, net	1,497,187		1,496,777
Deferred tax liabilities, net	298,918		289,757
Operating lease liabilities	127,607		135,122
Other non-current liabilities	127,229		133,897
Total non-current liabilities	2,050,941		2,055,553
Total liabilities	2,640,930		2,669,420

Commitments and contingencies (Note 13)

The accompanying notes are an integral part of these Consolidated Financial Statements.

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HUGHES SATELLITE SYSTEMS CORPORATION

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share amounts)


Shareholder's equity:
Preferred stock, $0.001 par value,1,000,000 shares authorized, none issued and outstanding at both June 30, 2023 and December 31, 2022	—		—
Common stock, $0.01 par value, 1,000,000 shares authorized, 1,078 shares issued and outstanding at both June 30, 2023 and December 31, 2022	—		—
Additional paid-in capital	1,481,996		1,479,857
Accumulated other comprehensive income (loss)	(151,488)		(170,184)
Accumulated earnings (losses)	774,935		741,754
Total Hughes Satellite Systems Corporation shareholder's equity	2,105,443		2,051,427
Non-controlling interests	97,005		96,436
Total shareholder's equity	2,202,448		2,147,863
Total liabilities and shareholder's equity	$	4,843,378	$	4,817,283

The accompanying notes are an integral part of these Consolidated Financial Statements.

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HUGHES SATELLITE SYSTEMS CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited, in thousands)


	For the three months ended June 30,				For the six months ended June 30,
	2023		2022		2023		2022
Revenue:
Services and other revenue	$	369,434	$	416,463	$	745,188	$	837,404
Equipment revenue	81,604		84,620		143,674		167,337
Total revenue	451,038		501,083		888,862		1,004,741
Costs and expenses:
Cost of sales - services and other (exclusive of depreciation and amortization)	130,856		142,616		264,895		281,970
Cost of sales - equipment (exclusive of depreciation and amortization)	56,165		70,048		107,836		139,153
Selling, general and administrative expenses	102,453		106,825		206,552		218,443
Research and development expenses	6,840		8,765		15,096		16,381
Depreciation and amortization	99,223		109,864		195,574		223,542

Total costs and expenses	395,537		438,118		789,953		879,489
Operating income (loss)	55,501		62,965		98,909		125,252
Other income (expense):
Interest income, net	20,156		4,279		38,104		6,559
Interest expense, net of amounts capitalized	(22,206)		(23,096)		(44,733)		(46,474)
Gains (losses) on investments, net	233		214		230		214
Equity in earnings (losses) of unconsolidated affiliates, net	(546)		(1,301)		(1,097)		(3,015)
Other-than-temporary impairment losses on equity method investments	(33,400)		—		(33,400)		—
Foreign currency transaction gains (losses), net	3,283		(2,878)		6,313		3,777
Other, net	(1,248)		(239)		(1,219)		(428)
Total other income (expense), net	(33,728)		(23,021)		(35,802)		(39,367)
Income (loss) before income taxes	21,773		39,944		63,107		85,885
Income tax benefit (provision), net	(18,513)		(14,844)		(33,219)		(29,972)
Net income (loss)	3,260		25,100		29,888		55,913
Less: Net loss (income) attributable to non-controlling interests	2,072		3,394		3,293		5,882
Net income (loss) attributable to HSSC	$	5,332	$	28,494	$	33,181	$	61,795

The accompanying notes are an integral part of these Consolidated Financial Statements.

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HUGHES SATELLITE SYSTEMS CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited, in thousands)


	For the three months ended June 30,				For the six months ended June 30,
	2023		2022		2023		2022
Net income (loss)	$	3,260	$	25,100	$	29,888	$	55,913
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments	13,254		(39,143)		22,550		7,543
Unrealized gains (losses) on available-for-sale securities	(133)		(46)		(221)		(516)
Amounts reclassified to net income (loss):
Realized losses (gains) on available-for-sale debt securities	229		3		229		3
Total other comprehensive income (loss), net of tax	13,350		(39,186)		22,558		7,030
Comprehensive income (loss)	16,610		(14,086)		52,446		62,943
Less: Comprehensive loss (income) attributable to non-controlling interests	178		10,387		(569)		3,319
Comprehensive income (loss) attributable to HSSC	$	16,788	$	(3,699)	$	51,877	$	66,262

The accompanying notes are an integral part of these Consolidated Financial Statements.

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HUGHES SATELLITE SYSTEMS CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDER’S EQUITY

FOR THE THREE MONTHS ENDED JUNE 30, 2023 AND 2022

(Unaudited, in thousands)


	Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss)		Accumulated Earnings (Losses)		Non-controlling Interests		Total
Balance, March 31, 2022	$	1,476,465	$	(136,721)	$	625,642	$	111,714	$	2,077,100
Stock-based compensation	1,139		—		—		—		1,139


Other comprehensive income (loss)	—		(32,193)		—		(6,993)		(39,186)
Net income (loss)	—		—		28,494		(3,394)		25,100

Balance, June 30, 2022	$	1,477,604	$	(168,914)	$	654,136	$	101,327	$	2,064,153

Balance, March 31, 2023	$	1,480,953	$	(162,944)	$	769,603	$	97,183	$	2,184,795
Stock-based compensation	1,043		—		—		—		1,043


Other comprehensive income (loss)	—		11,456		—		1,894		13,350
Net income (loss)	—		—		5,332		(2,072)		3,260

Balance, June 30, 2023	$	1,481,996	$	(151,488)	$	774,935	$	97,005	$	2,202,448

The accompanying notes are an integral part of these Consolidated Financial Statements.

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HUGHES SATELLITE SYSTEMS CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDER’S EQUITY

FOR THE SIX MONTHS ENDED JUNE 30, 2023 AND 2022

(Unaudited, in thousands)


	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	1,918		—		—		—		1,918
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)	—		4,467		—		2,563		7,030
Net income (loss)	—		—		61,795		(5,882)		55,913

Balance, June 30, 2022	$	1,477,604	$	(168,914)	$	654,136	$	101,327	$	2,064,153

Balance, December 31, 2022	$	1,479,857	$	(170,184)	$	741,754	$	96,436	$	2,147,863
Stock-based compensation	2,139		—		—		—		2,139


Other comprehensive income (loss)	—		18,696		—		3,862		22,558
Net income (loss)	—		—		33,181		(3,293)		29,888

Balance, June 30, 2023	$	1,481,996	$	(151,488)	$	774,935	$	97,005	$	2,202,448

The accompanying notes are an integral part of these Consolidated Financial Statements.

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HUGHES SATELLITE SYSTEMS CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, in thousands)


	For the six months ended June 30,
	2023		2022
Cash flows from operating activities:
Net income (loss)	$	29,888	$	55,913
Adjustments to reconcile net income (loss) to cash flows provided by (used for) operating activities:
Depreciation and amortization	195,574		223,542
Losses (gains) on investments, net	(230)		(214)

Equity in losses (earnings) of unconsolidated affiliates, net	1,097		3,015
Foreign currency transaction losses (gains), net	(6,313)		(3,777)
Deferred tax provision (benefit), net	9,069		14,214
Stock-based compensation	2,139		1,918

Amortization of debt issuance costs	410		385
Other-than-temporary impairment losses on equity method investments	33,400		—
Other, net	(12,359)		20,172
Changes in assets and liabilities, net:
Trade accounts receivable and contract assets, net	830		(39,178)
Other current assets, net	(15,506)		7,858
Trade accounts payable	(18,235)		4,146
Contract liabilities	(13,762)		(6,487)
Accrued expenses and other current liabilities	2,022		(12,752)
Non-current assets and non-current liabilities, net	(9,816)		(16,845)
Net cash provided by (used for) operating activities	198,208		251,910

Cash flows from investing activities:
Purchases of marketable investment securities	(859,190)		(171,005)
Sales and maturities of marketable investment securities	611,643		662,347

Expenditures for property and equipment	(90,975)		(125,882)
Expenditures for externally marketed software	(15,253)		(11,967)

India JV formation	—		(7,892)
Dividend received from unconsolidated affiliate	—		2,000

Net cash provided by (used for) investing activities	(353,775)		347,601

Cash flows from financing activities:


Payment of in-orbit incentive obligations	(2,460)		(1,908)
Payment of finance lease obligations	—		(114)
Dividend paid to EchoStar	—		(100,000)

Net cash provided by (used for) financing activities	(2,460)		(102,022)

Effect of exchange rates on cash and cash equivalents	3,476		(672)
Net increase (decrease) in cash and cash equivalents	(154,551)		496,817
Cash and cash equivalents, including restricted amounts, beginning of period	654,473		430,148
Cash and cash equivalents, including restricted amounts, end of period	$	499,922	$	926,965

The accompanying notes are an integral part of these Consolidated Financial Statements.

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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 make continuous use of our available satellite capacity on behalf of 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 without diminishing its capacity.

Our operations include various corporate functions (primarily Executive, Treasury, Strategic Development, Human Resources, Information Technology, Finance, Accounting, Real Estate and Legal) and other activities. Operating expenses include costs incurred in certain satellite development programs and other business development activities, and other income or expenses includes 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. 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.

On August 8, 2023, EchoStar entered into an Agreement and Plan of Merger (“the Merger Agreement”) with DISH Network Corporation, a Nevada corporation (“DISH”), and Eagle Sub Corp, a Nevada corporation and a wholly owned subsidiary of DISH (“Merger Sub”). The Merger Agreement provides, among other things, that subject to the satisfaction or waiver of the conditions set forth in the agreement, Merger Sub will merge with and into EchoStar, with EchoStar surviving the Merger as a wholly owned subsidiary of DISH. Refer to Note 17. Subsequent Events for further details.

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

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HUGHES SATELLITE SYSTEMS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(Unaudited)

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.

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.

Principles of Consolidation

We consolidate all entities in which we have a controlling financial interest. We are deemed to have a controlling financial interest in variable interest entities in which we are the primary beneficiary and in other entities in which we own more than 50% of the outstanding voting shares and other shareholders do not have substantive rights to participate in management. For entities we control but do not wholly own, we record a non-controlling interest within shareholder’s equity for the portion of the entity’s equity attributed to the non-controlling ownership interests. All significant intercompany balances and transactions have been eliminated in consolidation.

Recently Adopted Accounting Pronouncements

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.

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 Company is currently participating in three government programs: New York-Connect America Fund, New York Broadband, and Affordable Connectivity Plan. The purpose of these programs is to provide internet and connectivity services to

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HUGHES SATELLITE SYSTEMS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(Unaudited)

qualifying households in the United States. The Company is entitled to reimbursement from the government for services provided. We record gross monies received from government entities in Services and other revenue, and associated expenses such as salaries and supplies are recorded in Cost of sales - services and other, Research and development or Selling, general and administrative expenses, depending on the nature of expenditure. We accrue for reimbursement requests submitted to government entities in Trade accounts receivable and contract assets, net. During the three and six months ended June 30, 2023, the Company recognized $4.4 million and $8.1 million in Service and other revenue, respectively. As of June 30, 2023, we have trade accounts receivable of $2.8 million related to our government programs.

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.

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 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 plan to adopt this new guidance prospectively to all new leasehold improvements recognized on or after January 1, 2024 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.

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NOTE 3. REVENUE RECOGNITION

Contract Balances

The following table presents the components of our contract balances:


	As of
	June 30, 2023		December 31, 2022
Trade accounts receivable and contract assets, net:
Sales and services	$	178,050	$	170,466
Leasing and other	10,224		7,935
Total trade accounts receivable	188,274		178,401
Contract assets	66,909		73,293
Allowance for doubtful accounts	(16,223)		(15,358)
Total trade accounts receivable and contract assets, net	$	238,960	$	236,336

Contract liabilities:
Current	$	107,977	$	121,739
Non-current	6,738		8,326
Total contract liabilities	$	114,715	$	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 June 30,				For the six months ended June 30,
	2023		2022		2023		2022
Revenue	$	11,586	$	20,852	$	72,549	$	109,799

Contract Acquisition Costs

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


	For the six months ended June 30,
	2023		2022
Balance at beginning of period	$	64,447	$	82,986
Additions	23,601		30,645
Amortization expense	(32,135)		(39,653)
Foreign currency translation	1,006		724
Balance at end of period	$	56,919	$	74,702

We recognized amortization expenses related to contract acquisition costs of $15.5 million and $19.5 million for the three months ended June 30, 2023 and 2022, respectively.

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Performance Obligations

As of June 30, 2023, the remaining performance obligations for our customer contracts was approximately $1.0 billion. Performance obligations expected to be satisfied within one year and greater than one year are 35% and 65%, 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 June 30, 2023
North America	$	364,551	$	6,120	$	(542)	$	370,129
South and Central America	41,312		—		—		41,312
Other	38,472		—		1,125		39,597
Total revenue	$	444,335	$	6,120	$	583	$	451,038

For the three months ended June 30, 2022
North America	$	398,698	$	4,850	$	(348)	$	403,200
South and Central America	42,094		—		—		42,094
Other	51,049		—		4,740		55,789
Total revenue	$	491,841	$	4,850	$	4,392	$	501,083

For the six months ended June 30, 2023
North America	$	713,512	$	12,117	$	(1,050)	$	724,579
South and Central America	79,685		—		—		79,685
Other	82,333		—		2,265		84,598
Total revenue	$	875,530	$	12,117	$	1,215	$	888,862

For the six months ended June 30, 2022
North America	$	798,120	$	9,324	$	(546)	$	806,898
South and Central America	84,966		—		—		84,966
Other	102,861		—		10,016		112,877
Total revenue	$	985,947	$	9,324	$	9,470	$	1,004,741

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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 three months ended June 30, 2023
Services and other revenue:
Services	$	353,333	$	3,910	$	—	$	357,243
Lease revenue	9,403		2,210		578		12,191
Total services and other revenue	362,736		6,120		578		369,434
Equipment revenue:
Equipment	26,682		—		5		26,687
Design, development and construction services	51,476		—		—		51,476
Lease revenue	3,441		—		—		3,441
Total equipment revenue	81,599		—		5		81,604
Total revenue	$	444,335	$	6,120	$	583	$	451,038

For the three months ended June 30, 2022
Services and other revenue:
Services	$	397,320	$	3,161	$	—	$	400,481
Lease revenue	9,902		1,689		4,391		15,982
Total services and other revenue	407,222		4,850		4,391		416,463
Equipment revenue:
Equipment	27,408		—		1		27,409
Design, development and construction services	56,311		—		—		56,311
Lease revenue	900		—		—		900
Total equipment revenue	84,619		—		1		84,620
Total revenue	$	491,841	$	4,850	$	4,392	$	501,083

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	Hughes		ESS		Corporate and Other		Consolidated Total
For the six months ended June 30, 2023
Services and other revenue:
Services	$	712,773	$	7,897	$	—	$	720,670
Lease revenue	19,088		4,220		1,210		24,518
Total services and other revenue	731,861		12,117		1,210		745,188
Equipment revenue:
Equipment	47,647		—		5		47,652
Design, development and construction services	88,380		—		—		88,380
Lease revenue	7,642		—		—		7,642
Total equipment revenue	143,669		—		5		143,674
Total revenue	$	875,530	$	12,117	$	1,215	$	888,862

For the six months ended June 30, 2022
Services and other revenue:
Services	$	797,722	$	6,096	$	—	$	803,818
Lease revenue	20,889		3,228		9,469		33,586
Total services and other revenue	818,611		9,324		9,469		837,404
Equipment revenue:
Equipment	53,293		—		1		53,294
Design, development and construction services	112,216		—		—		112,216
Lease revenue	1,827		—		—		1,827
Total equipment revenue	167,336		—		1		167,337
Total revenue	$	985,947	$	9,324	$	9,470	$	1,004,741

Lease Revenue

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


	For the three months ended June 30,				For the six months ended June 30,
	2023		2022		2023		2022
Sales-type lease revenue:
Revenue at lease commencement	$	2,887	$	583	$	6,641	$	1,221
Interest income	554		317		1,001		606
Total sales-type lease revenue	3,441		900		7,642		1,827
Operating lease revenue	12,191		15,982		24,518		33,586
Total lease revenue	$	15,632	$	16,882	$	32,160	$	35,413

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NOTE 4. MARKETABLE INVESTMENT SECURITIES

The following table presents our Marketable investment securities:


	As of
	June 30, 2023		December 31, 2022
Marketable investment securities:
Available-for-sale debt securities:
Corporate bonds	$	241,648	$	154,580
Commercial paper	817,096		643,526
Other debt securities	4,218		1,663
Total available-for-sale debt securities	1,062,962		799,769
Equity securities	—		—
Total marketable investment securities	$	1,062,962	$	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 June 30, 2023
Corporate bonds	$	241,598	$	162	$	(112)	$	241,648
Commercial paper	817,099		—		(3)		817,096
Other debt securities	4,218		—		—		4,218
Total available-for-sale debt securities	$	1,062,915	$	162	$	(115)	$	1,062,962
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 June 30,				For the six months ended June 30,
	2023		2022		2023		2022
Proceeds from sales	$	93,612	$	8,886	$	131,721	$	37,904

As of June 30, 2023, we have $1,029.8 million of available-for-sale debt securities with contractual maturities of one year or less and $33.2 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 June 30, 2023
Cash equivalents (including restricted)	$	153	$	401,302	$	401,455
Available-for-sale debt securities:
Corporate bonds	$	—	$	241,648	$	241,648
Commercial paper	—		817,096		817,096
Other debt securities	—		4,218		4,218
Total available-for-sale debt securities	—		1,062,962		1,062,962
Equity securities	—		—		—
Total marketable investment securities	$	—	$	1,062,962	$	1,062,962

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 June 30, 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
	June 30, 2023		December 31, 2022
Property and equipment, net:
Satellites, net	$	708,562	$	754,019
Other property and equipment, net	604,570		621,985
Total property and equipment, net	$	1,313,132	$	1,376,004

Satellites

As of June 30, 2023, our satellite fleet consisted of eight satellites, five of which are owned and three of which are leased. They are all in geosynchronous (“GEO”) orbit, approximately 22,300 miles above the equator.

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The following table presents our GEO satellite fleet as of June 30, 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 (“AY3”) (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 with a remaining useful life of 7 years as of that time. In the second quarter of 2023 we reduced the estimated useful life of the satellite as a result of certain technical anomalies. In order to safeguard the future operability of the satellite, the Company has, in conjunction with recommendations from the satellite manufacturers, implemented immediate and long-term remedial actions. A revised estimate of the satellite’s remaining lifetime has been calculated using operational data of two previous quarters. The Company has updated the remaining useful life of AY3 and related ground assets prospectively from April 1, 2023 to reflect the change in estimate. This has increased the depreciation expense for the current six month period by $3.7 million. The increase is expected to be $11.1 million for the full year 2023 and $12.8 million for the year 2024, respectively. Although the anomalies are expected to shorten the remaining useful life of the satellite, they have not affected its current operation.

(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
		June 30, 2023		December 31, 2022
Satellites, net:
Satellites - owned	5 to 15	$	1,506,739	$	1,503,435
Satellites - acquired under finance leases	15	368,876		360,642
Total satellites		1,875,615		1,864,077
Accumulated depreciation:
Satellites - owned		(1,029,544)		(988,164)
Satellites - acquired under finance leases		(137,509)		(121,894)
Total accumulated depreciation		(1,167,053)		(1,110,058)
Total satellites, net		$	708,562	$	754,019

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


	For the three months ended June 30,				For the six months ended June 30,
	2023		2022		2023		2022
Depreciation expense:
Satellites - owned	$	20,803	$	19,005	$	39,726	$	37,920
Satellites - acquired under finance leases	6,101		6,137		12,119		12,124
Total depreciation expense	$	26,904	$	25,142	$	51,845	$	50,044

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


	For the three months ended June 30,				For the six months ended June 30,
	2023		2022		2023		2022
Capitalized interest	$	2,698	$	2,095	$	5,264	$	4,058

Satellite-Related Commitments

As of June 30, 2023 and December 31, 2022 our satellite-related commitments were $131.0 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

Except as described above, 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 June 30, 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. The insurance policies were procured by Yahsat, in which the Company and Yahsat are the beneficiaries of any claims in proportion to their shareholdings. An insurance claim was submitted in the second quarter of 2023 for compensation with respect to the reduction in estimated useful life of the Al Yah 3 satellite.

Fair Value of In-Orbit Incentives

As of June 30, 2023 and December 31, 2022, the fair values of our in-orbit incentive obligations approximated their carrying amounts of $47.7 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	—		(413)		(413)		—		(413)
Currency translation adjustments	335		(57)		278		—		278
Balance, June 30, 2022	$	11,068	$	(2,244)	$	8,824	$	400,000	$	408,824

Balance, December 31, 2022	$	11,331	$	(2,712)	$	8,619	$	400,000	$	408,619
Amortization expense	—		(754)		(754)		—		(754)
Currency translation adjustments	1,375		(353)		1,022		—		1,022
Balance, June 30, 2023	$	12,706	$	(3,819)	$	8,887	$	400,000	$	408,887

Weighted-average useful life (in years)			11

NOTE 7. OTHER INVESTMENTS

The following table presents our Other investments, net:


	As of
	June 30, 2023		December 31, 2022
Other investments, net:
Equity method investments	$	47,025	$	83,523
Total other investments, net	$	47,025	$	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. During the three months ended June 30, 2023, we recorded an impairment charge of $33.4 million related to our investment as a result of increased competition and the economic environment for this business. We estimated the fair value of our investment by using the combination of the discounted cash flow model and market value approach.

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Financial Information for Our Equity Method Investments

The following table presents revenue recognized:


	For the three months ended June 30,				For the six months ended June 30,
	2023		2022		2023		2022
Deluxe	$	1,456	$	1,335	$	2,788	$	2,658
BCS	$	827	$	1,950	$	1,649	$	3,721

The following table presents trade accounts receivable:


	As of
	June 30, 2023		December 31, 2022
Deluxe	$	1,052	$	3,026
BCS	$	3,392	$	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
		June 30, 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	$	701,850	$	750,000	$	727,763
Senior Unsecured Notes:
6 5/8% Senior Unsecured Notes due 2026	6.688%	750,000		705,833		750,000		707,490
Less: Unamortized debt issuance costs		(2,813)		—		(3,223)		—
Total long-term debt, net		$	1,497,187	$	1,407,683	$	1,496,777	$	1,435,253

The estimated fair value of our publicly traded debt was primarily based on Level 1 inputs that use quoted market value for the debt.

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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 $18.5 million for the three months ended June 30, 2023 compared to our income tax provision of $14.8 million for the three months ended June 30, 2022. Our effective income tax rate was 85.0% and 37.2% for the three months ended June 30, 2023 and 2022, respectively. The variations in our effective tax rate from the U.S. federal statutory rate for the three months ended June 30, 2023 were primarily due to excluded investment impairment losses and excluded foreign losses where the Company carries a full valuation allowance. The variations in our effective tax rate from the U.S. federal statutory rate for the three months ended June 30, 2022 were primarily due to excluded foreign losses where the Company carries a full valuation allowance and the impact of state and local taxes.

Our income tax provision was $33.2 million for the six months ended June 30, 2023 compared to our income tax provision of $30.0 million for the six months ended June 30, 2022. Our effective income tax rate was 52.6% for the six months ended June 30, 2023, compared to 34.9% for the same period in 2022. The variations in our effective tax rate from the U.S. federal statutory rate for the six months ended June 30, 2023 were primarily due to excluded investment impairment losses and excluded foreign losses where the Company carries a full valuation allowance. For the six months ended June 30, 2022, the variations in our effective tax rate from the U.S. federal statutory rate were primarily due to excluded foreign losses where the Company carries a full valuation allowance and the impact of state and local taxes.

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.

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. We recorded these expenses within Operating expenses - EchoStar.

Operating Expenses — EchoStar

The following table presents our operating expenses from EchoStar:


	For the three months ended June 30,				For the six months ended June 30,
	2023		2022		2023		2022
Operating expenses - EchoStar	$	20,237	$	17,829	$	41,147	$	35,359

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

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within Related party receivables - EchoStar - current. No repayment schedule for these receivables has been determined.

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 $1.2 million and $4.7 million for the three months ended June 30, 2023, and 2022, respectively, and $2.3 million and $10.0 million for the six months ended June 30, 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%. We report these loans within Related party receivables - EchoStar - non-current.

The following table presents the corresponding related party receivables:


	As of
	June 30, 2023		December 31, 2022
Related party receivables - EchoStar - current	$	105,068	$	112,985
Related party receivables - EchoStar - non-current	56,726		55,834
Total related party receivables - EchoStar	$	161,794	$	168,819

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.

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 based on the one-year Secured Overnight Financing Rate plus 65 basis points. We report amounts payable under these agreements within Related party payables - EchoStar - non-current.

The following table presents the corresponding related party payables:


	As of
	June 30, 2023		December 31, 2022
Related party payables - EchoStar - current	$	216,464	$	216,504
Related party payables - EchoStar - non-current	23,624		23,423
Total related party payables - EchoStar	$	240,088	$	239,927

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 $0.6 million and $0.4 million for the three months ended June 30, 2023 and 2022 respectively, and $1.0 million and $0.7 million for the six months ended June 30, 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 DISH 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 0.235 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.

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Services and Other Revenue — DISH Network

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


	For the three months ended June 30,				For the six months ended June 30,
	2023		2022		2023		2022
Services and other revenue - DISH Network	$	3,227	$	4,519	$	6,605	$	9,331

The following table presents the related trade accounts receivable:


	As of
	June 30, 2023		December 31, 2022
Trade accounts receivable - DISH Network	$	3,733	$	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.

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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 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 June 30,				For the six months ended June 30,
	2023		2022		2023		2022
Operating expenses - DISH Network	$	1,134	$	1,110	$	2,254	$	2,204

The following table presents the related trade accounts payable:


	As of
	June 30, 2023		December 31, 2022
Trade accounts payable - DISH Network	$	637	$	567

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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 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 (“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, 2024 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.

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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 Broadband MSA is through March 2024 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. In July 2023, the parties agreed to amend the Hughes Broadband MSA, and a relevant Statements of Work thereunder, to remove DISH Network’s fulfillment and installation obligations as a HughesNet sales agent. No money will be exchanged under the Amendment. The parties also have agreed to enter into a buy-back agreement to address the return of, and payment for, equipment valued at up to $2.2 million previously purchased by DISH Network related to its fulfillment and installation obligations. 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 $0.2 million and $1.9 million for the three months ended June 30, 2023 and 2022, respectively, and $0.9 million and $3.6 million for the six months ended June 30, 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”). 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. We have exercised our option to renew the 2019 TT&C Agreement on several occasions, and its current term expires in September 2024.

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 Network 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

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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 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 0.235 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.

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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 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.

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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 June 30, 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 from TSI of $0.4 million and $0.5 million for the three months ended June 30, 2023 and 2022, respectively, and $0.9 million and $1.0 million for the six months ended June 30, 2023 and 2022, respectively. As of June 30, 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

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BSS Transaction, certain losses with respect to breaches of certain representations and covenants and certain liabilities.

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 selling, general and administrative 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.

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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 Hughes Communications India Private Limited (“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 a 10-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.

Pursuant to the Contribution and Membership Interest Purchase Agreement (the “Purchase Agreement”) dated December 3, 2004 between The DirecTV Group, Inc. ("DirecTV") and certain other entities relating to the spinoff by DirecTV of certain of its subsidiaries, including HCIPL, DirecTV undertook indemnification obligations to HCIPL, and HCIPL has pursued indemnification claims against DirecTV under the Purchase Agreement in connection with the license fees assessed in this proceeding.

On June 22, 2023, the United States Court of Appeals for the Second Circuit ruled that, under the Purchase Agreement, HCIPL, is entitled to indemnification from DirecTV, with the amount of indemnification to be determined in further proceedings before the district court in New York.

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The following table presents the components of the accrual:


	As of
	June 30, 2023		December 31, 2022
Additional license fees	$	3,457	$	3,425
Penalties	3,548		3,516
Interest and interest on penalties	81,510		78,327
Less: Payments	(28,234)		(17,785)
Total accrual	60,281		67,483
Less: Current portion	10,285		10,191
Total long-term accrual	$	49,996	$	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.

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 June 30, 2023
External revenue	$	444,335	$	5,578	$	1,125	$	451,038
Intersegment revenue	—		542		(542)		—
Total revenue	$	444,335	$	6,120	$	583	$	451,038

Capital expenditures	$	43,950	$	—	$	—	$	43,950
EBITDA	$	140,997	$	4,562	$	(20,441)	$	125,118

For the three months ended June 30, 2022
External revenue	$	491,841	$	4,502	$	4,740	$	501,083
Intersegment revenue	—		348		(348)		—
Total revenue	$	491,841	$	4,850	$	4,392	$	501,083

Capital expenditures	$	64,861	$	—	$	—	$	64,861
EBITDA	$	179,928	$	3,521	$	(11,430)	$	172,019


	Hughes		ESS		Corporate and Other		Consolidated Total
For the six months ended June 30, 2023
External revenue	$	875,530	$	11,067	$	2,265	$	888,862
Intersegment revenue	—		1,050		(1,050)		—
Total revenue	$	875,530	$	12,117	$	1,215	$	888,862

Capital expenditures	$	90,975	$	—	$	—	$	90,975
EBITDA	$	298,231	$	9,217	$	(38,845)	$	268,603

For the six months ended June 30, 2022
External revenue	$	985,947	$	8,778	$	10,016	$	1,004,741
Intersegment revenue	—		546		(546)		—
Total revenue	$	985,947	$	9,324	$	9,470	$	1,004,741

Capital expenditures	$	125,882	$	—	$	—	$	125,882
EBITDA	$	371,098	$	6,212	$	(22,086)	$	355,224

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


	For the three months ended June 30,				For the six months ended June 30,
	2023		2022		2023		2022
Income (loss) before income taxes	21,773		$	39,944	63,107		85,885
Interest income, net	(20,156)		(4,279)		(38,104)		(6,559)
Interest expense, net of amounts capitalized	22,206		23,096		44,733		46,474
Depreciation and amortization	99,223		109,864		195,574		223,542
Net loss (income) attributable to non-controlling interests	2,072		3,394		3,293		5,882
EBITDA	$	125,118	$	172,019	$	268,603	$	355,224

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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
	June 30, 2023		December 31, 2022
Other current assets, net:
Related party receivables - EchoStar	$	105,068	$	112,985
Inventory	150,871		123,006
Prepaids and deposits	16,240		23,948
Trade accounts receivable - DISH Network	3,733		1,992
Other, net	15,583		13,271
Total other current assets	$	291,495	$	275,202

Other non-current assets, net:
Capitalized software, net	$	117,645	$	116,844
Contract acquisition costs, net	56,919		64,447
Related party receivables - EchoStar	56,726		55,834
Deferred tax assets, net	8,579		7,822
Restricted cash	1,373		1,341
Contract fulfillment costs, net	1,858		1,931
Other receivables, net	25,031		15,249
Other, net	23,144		22,409
Total other non-current assets, net	$	291,275	$	285,877

Inventory

The following table presents the components of inventory:


	As of
	June 30, 2023		December 31, 2022
Raw materials	$	39,905	$	32,920
Work-in-process	18,026		16,408
Finished goods	92,940		73,678
Total inventory	$	150,871	$	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
	June 30, 2023		December 31, 2022
Accrued expenses and other current liabilities:
Related party payables - EchoStar	$	216,464	$	216,504
Accrued compensation	34,213		40,684
Operating lease obligation	17,628		17,766
Accrued interest	38,259		39,194
Accrued taxes	12,794		10,631
Accrual for license fee dispute	10,285		10,191
In-orbit incentive obligations	4,536		5,369
Trade accounts payable - DISH Network	637		567
Accrued expenses	40,524		35,909
Other	20,016		17,084
Total accrued expenses and other current liabilities	$	395,356	$	393,899

Other non-current liabilities:
Accrual for license fee dispute	$	49,996	$	57,292
In-orbit incentive obligations	43,209		44,836
Related party payables - EchoStar	23,624		23,423
Contract liabilities	6,738		8,326
Other	3,662		20
Total other non-current liabilities	$	127,229	$	133,897

Supplemental and Non-cash Investing and Financing Activities

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


	For the six months ended June 30,
	2023		2022
Supplemental disclosure of cash flow information:
Cash paid for interest, net of amounts capitalized	$	45,740	$	49,845
Cash paid for income taxes, net of refunds	$	3,339	$	6,173

Non-cash investing and financing activities:
Increase (decrease) in capital expenditures included in accounts payable, net	$	(5,980)	$	(8,563)
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 June 30, 2023


	Hughes Satellite Systems Corporation		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations		Total
Assets
Current assets:
Cash and cash equivalents	$	400,874	$	15,943	$	81,732	$	—	$	498,549
Marketable investment securities	1,062,962		—		—		—		1,062,962
Trade accounts receivable and contract assets, net	—		160,315		78,645		—		238,960
Other current assets, net	2,666		1,455,512		292,570		(1,459,253)		291,495
Total current assets	1,466,502		1,631,770		452,947		(1,459,253)		2,091,966
Non-current assets:
Property and equipment, net	—		1,101,029		212,103		—		1,313,132
Operating lease right-of-use assets	—		114,988		28,228		—		143,216
Goodwill	—		504,173		29,122		—		533,295
Regulatory authorizations, net	—		400,000		8,887		—		408,887
Other intangible assets, net	—		11,756		2,826		—		14,582
Other investments, net	7,979		—		39,046		—		47,025
Investment in subsidiaries	3,374,478		323,362		—		(3,697,840)		—
Other non-current assets, net	1,093		256,995		162,155		(128,968)		291,275
Total non-current assets	3,383,550		2,712,303		482,367		(3,826,808)		2,751,412
Total assets	$	4,850,052	$	4,344,073	$	935,314	$	(5,286,061)	$	4,843,378
Liabilities and Shareholder's Equity
Current liabilities:
Trade accounts payable	$	272	$	74,772	$	11,612	$	—	$	86,656
Contract liabilities	—		103,750		4,227		—		107,977
Accrued expenses and other current liabilities	1,247,150		282,735		324,724		(1,459,253)		395,356
Total current liabilities	1,247,422		461,257		340,563		(1,459,253)		589,989
Non-current liabilities:
Long-term debt, net	1,497,187		—		—		—		1,497,187
Deferred tax liabilities, net	—		298,039		1,451		(572)		298,918
Operating lease liabilities	—		104,517		23,090		—		127,607
Other non-current liabilities	—		106,343		149,282		(128,396)		127,229
Total non-current liabilities	1,497,187		508,899		173,823		(128,968)		2,050,941
Total liabilities	2,744,609		970,156		514,386		(1,588,221)		2,640,930
Shareholder's equity:
Total Hughes Satellite Systems Corporation shareholder's equity	2,105,443		3,373,917		323,923		(3,697,840)		2,105,443
Non-controlling interests	—		—		97,005		—		97,005
Total shareholder's equity	2,105,443		3,373,917		420,928		(3,697,840)		2,202,448
Total liabilities and shareholder's equity	$	4,850,052	$	4,344,073	$	935,314	$	(5,286,061)	$	4,843,378

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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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Consolidating Statement of Operations and Comprehensive Income (Loss)

For the Three Months Ended June 30, 2023


	Hughes Satellite Systems Corporation		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations		Total
Revenue:
Services and other revenue	$	—	$	300,095	$	75,415	$	(6,076)	$	369,434
Equipment revenue	—		79,569		7,232		(5,197)		81,604
Total revenue	—		379,664		82,647		(11,273)		451,038
Costs and expenses:
Cost of sales - services and other (exclusive of depreciation and amortization)	—		97,291		41,418		(7,853)		130,856
Cost of sales - equipment (exclusive of depreciation and amortization)	—		55,710		4,276		(3,821)		56,165
Selling, general and administrative expenses	—		84,303		17,749		401		102,453
Research and development expenses	—		6,767		73		—		6,840
Depreciation and amortization	—		68,925		30,298		—		99,223
Total costs and expenses	—		312,996		93,814		(11,273)		395,537
Operating income (loss)	—		66,668		(11,167)		—		55,501
Other income (expense):
Interest income, net	18,495		1,704		841		(884)		20,156
Interest expense, net of amounts capitalized	(22,472)		1,652		(2,270)		884		(22,206)
Gains (losses) on investments, net	233		—		—		—		233
Equity in earnings (losses) of unconsolidated affiliates, net	586		—		(1,132)		—		(546)
Other-than-temporary impairment losses on equity method investments	—		—		(33,400)		—		(33,400)
Equity in earnings (losses) of subsidiaries, net	8,336		(44,473)		—		36,137		—
Foreign currency transaction gains (losses), net	—		(23)		3,306		—		3,283
Other, net	—		—		(1,248)		—		(1,248)
Total other income (expense), net	5,178		(41,140)		(33,903)		36,137		(33,728)
Income (loss) before income taxes	5,178		25,528		(45,070)		36,137		21,773
Income tax benefit (provision), net	154		(17,192)		(1,475)		—		(18,513)
Net income (loss)	5,332		8,336		(46,545)		36,137		3,260
Less: Net loss (income) attributable to non-controlling interests	—		—		2,072		—		2,072
Net income (loss) attributable to HSSC	$	5,332	$	8,336	$	(44,473)	$	36,137	$	5,332

Net income (loss)	$	5,332	$	8,336	$	(46,545)	$	36,137	$	3,260
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments	—		—		13,254		—		13,254
Unrealized gains (losses) on available-for-sale securities	(133)		—		—		—		(133)
Amounts reclassified to net income (loss):
Realized losses (gains) on available-for-sale securities	229		—		—		—		229
Equity in other comprehensive income (loss) of subsidiaries, net	11,360		11,360		—		(22,720)		—
Total other comprehensive income (loss), net of tax	11,456		11,360		13,254		(22,720)		13,350
Comprehensive income (loss)	16,788		19,696		(33,291)		13,417		16,610
Less: Comprehensive loss (income) attributable to non-controlling interests	—		—		178		—		178
Comprehensive income (loss) attributable to HSSC	$	16,788	$	19,696	$	(33,113)	$	13,417	$	16,788

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HUGHES SATELLITE SYSTEMS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(Unaudited)

Consolidating Statement of Operations and Comprehensive Income (Loss)

For the Three Months Ended June 30, 2022


	Hughes Satellite Systems Corporation		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations		Total
Revenue:
Services and other revenue	$	—	$	340,844	$	81,718	$	(6,099)	$	416,463
Equipment revenue	—		83,557		5,247		(4,184)		84,620
Total revenue	—		424,401		86,965		(10,283)		501,083
Costs and expenses:
Cost of sales - services and other (exclusive of depreciation and amortization)	—		106,689		42,687		(6,760)		142,616
Cost of sales - equipment (exclusive of depreciation and amortization)	—		69,716		3,408		(3,076)		70,048
Selling, general and administrative expenses	—		84,969		22,303		(447)		106,825
Research and development expenses	—		8,680		85		—		8,765
Depreciation and amortization	—		72,661		37,203		—		109,864
Impairment of long-lived assets	—		—		—		—		—
Total costs and expenses	—		342,715		105,686		(10,283)		438,118
Operating income (loss)	—		81,686		(18,721)		—		62,965
Other income (expense):
Interest income, net	3,185		1,357		1,014		(1,277)		4,279
Interest expense, net of amounts capitalized	(22,460)		955		(2,868)		1,277		(23,096)
Gains (losses) on investments, net	(3)		217		—		—		214
Equity in earnings (losses) of unconsolidated affiliates, net	—		338		(1,639)		—		(1,301)
Equity in earnings (losses) of subsidiaries, net	43,364		(25,206)		—		(18,158)		—
Foreign currency transaction gains (losses), net	—		2,910		(5,788)		—		(2,878)
Other, net	—		(216)		(23)		—		(239)
Total other income (expense), net	24,086		(19,645)		(9,304)		(18,158)		(23,021)
Income (loss) before income taxes	24,086		62,041		(28,025)		(18,158)		39,944
Income tax benefit (provision), net	4,408		(18,677)		(575)		—		(14,844)
Net income (loss)	28,494		43,364		(28,600)		(18,158)		25,100
Less: Net loss (income) attributable to non-controlling interests	—		—		3,394		—		3,394
Net income (loss) attributable to HSSC	$	28,494	$	43,364	$	(25,206)	$	(18,158)	$	28,494
Comprehensive income (loss):
Net income (loss)	$	28,494	$	43,364	$	(28,600)	$	(18,158)	$	25,100
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments	—		—		(39,143)		—		(39,143)
Unrealized gains (losses) on available-for-sale securities	(46)		—		—		—		(46)

Amounts reclassified to net income (loss):
Realized losses (gains) on available-for-sale securities	3		—		—				3
Equity in other comprehensive income (loss) of subsidiaries, net	(32,150)		(32,150)		—		64,300		—
Total other comprehensive income (loss), net of tax	(32,193)		(32,150)		(39,143)		64,300		(39,186)
Comprehensive income (loss)	(3,699)		11,214		(67,743)		46,142		(14,086)
Less: Comprehensive loss (income) attributable to non-controlling interests	—		—		10,387		—		10,387
Comprehensive income (loss) attributable to HSSC	$	(3,699)	$	11,214	$	(57,356)	$	46,142	$	(3,699)

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HUGHES SATELLITE SYSTEMS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(Unaudited)

Consolidating Statement of Operations and Comprehensive Income (Loss)

For the Six Months Ended June 30, 2023


	Hughes Satellite Systems Corporation		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations		Total
Revenue:
Services and other revenue	$	—	$	606,992	$	151,457	$	(13,261)	$	745,188
Equipment revenue	—		137,552		15,200		(9,078)		143,674
Total revenue	—		744,544		166,657		(22,339)		888,862
Costs and expenses:
Cost of sales - services and other (exclusive of depreciation and amortization)	—		196,866		83,047		(15,018)		264,895
Cost of sales - equipment (exclusive of depreciation and amortization)	—		105,084		9,894		(7,142)		107,836
Selling, general and administrative expenses	270		169,372		37,089		(179)		206,552
Research and development expenses	—		14,953		143		—		15,096
Depreciation and amortization	—		138,650		56,924		—		195,574

Total costs and expenses	270		624,925		187,097		(22,339)		789,953
Operating income (loss)	(270)		119,619		(20,440)		—		98,909
Other income (expense):
Interest income, net	34,921		2,759		2,190		(1,766)		38,104
Interest expense, net of amounts capitalized	(44,941)		3,166		(4,724)		1,766		(44,733)
Gains (losses) on investments, net	230		—		—		—		230
Equity in earnings (losses) of unconsolidated affiliates, net	1,059		—		(2,156)		—		(1,097)
Other-than-temporary impairment losses on equity method investments	—		—		(33,400)		—		(33,400)
Equity in earnings (losses) of subsidiaries, net	40,690		(51,616)		—		10,926		—
Foreign currency transaction gains (losses), net	—		(570)		6,883		—		6,313
Other, net	—		—		(1,219)		—		(1,219)
Total other income (expense), net	31,959		(46,261)		(32,426)		10,926		(35,802)
Income (loss) before income taxes	31,689		73,358		(52,866)		10,926		63,107
Income tax benefit (provision), net	1,492		(32,668)		(2,043)		—		(33,219)
Net income (loss)	33,181		40,690		(54,909)		10,926		29,888
Less: Net loss (income) attributable to non-controlling interests	—		—		3,293		—		3,293
Net income (loss) attributable to HSSC	$	33,181	$	40,690	$	(51,616)	$	10,926	$	33,181
Comprehensive income (loss):
Net income (loss)	$	33,181	$	40,690	$	(54,909)	$	10,926	$	29,888
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments	—		—		22,550		—		22,550
Unrealized gains (losses) on available-for-sale securities	(221)		—		—		—		(221)
Other	—		—		—		—		—
Amounts reclassified to net income (loss):
Realized losses (gains) on available-for-sale securities	229		—		—		—		229
Equity in other comprehensive income (loss) of subsidiaries, net	18,688		18,688		—		(37,376)		—
Total other comprehensive income (loss), net of tax	18,696		18,688		22,550		(37,376)		22,558
Comprehensive income (loss)	51,877		59,378		(32,359)		(26,450)		52,446
Less: Comprehensive loss (income) attributable to non-controlling interests	—		—		(569)		—		(569)
Comprehensive income (loss) attributable to HSSC	$	51,877	$	59,378	$	(32,928)	$	(26,450)	$	51,877

Table of Contents

HUGHES SATELLITE SYSTEMS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(Unaudited)

Consolidating Statement of Operations and Comprehensive Income (Loss)

For the Six Months Ended June 30, 2022


	Hughes Satellite Systems Corporation		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations		Total
Revenue:
Services and other revenue	$	—	$	685,122	$	164,401	$	(12,119)	$	837,404
Equipment revenue	—		166,542		11,280		(10,485)		167,337
Total revenue	—		851,664		175,681		(22,604)		1,004,741
Costs and expenses:
Cost of sales - services and other (exclusive of depreciation and amortization)	—		212,310		84,544		(14,884)		281,970
Cost of sales - equipment (exclusive of depreciation and amortization)	—		139,134		6,841		(6,822)		139,153
Selling, general and administrative expenses	—		175,603		43,738		(898)		218,443
Research and development expenses	—		16,216		165		—		16,381
Depreciation and amortization	—		150,967		72,575		—		223,542
Impairment of long-lived assets	—		—		—		—		—
Total costs and expenses	—		694,230		207,863		(22,604)		879,489
Operating income (loss)	—		157,434		(32,182)		—		125,252
Other income (expense):
Interest income, net	4,311		2,702		2,087		(2,541)		6,559
Interest expense, net of amounts capitalized	(44,917)		1,779		(5,877)		2,541		(46,474)
Gains (losses) on investments, net	(3)		217		—		—		214
Equity in earnings (losses) of unconsolidated affiliates, net	—		440		(3,455)		—		(3,015)
Equity in earnings (losses) of subsidiaries, net	93,120		(35,048)		—		(58,072)		—
Foreign currency transaction gains (losses), net	—		3,807		(30)		—		3,777
Other, net	—		(271)		(157)		—		(428)
Total other income (expense), net	52,511		(26,374)		(7,432)		(58,072)		(39,367)
Income (loss) before income taxes	52,511		131,060		(39,614)		(58,072)		85,885
Income tax benefit (provision), net	9,284		(37,940)		(1,316)		—		(29,972)
Net income (loss)	61,795		93,120		(40,930)		(58,072)		55,913
Less: Net loss (income) attributable to non-controlling interests	—		—		5,882		—		5,882
Net income (loss) attributable to HSSC	$	61,795	$	93,120	$	(35,048)	$	(58,072)	$	61,795
Comprehensive income (loss):
Net income (loss)	$	61,795	$	93,120	$	(40,930)	$	(58,072)	$	55,913
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments	—		—		7,543		—		7,543
Unrealized gains (losses) on available-for-sale securities	(516)		—		—		—		(516)

Amounts reclassified to net income (loss):
Realized losses (gains) on available-for-sale securities	3		—		—		—		3
Equity in other comprehensive income (loss) of subsidiaries, net	4,980		4,980		—		(9,960)		—
Total other comprehensive income (loss), net of tax	4,467		4,980		7,543		(9,960)		7,030
Comprehensive income (loss)	66,262		98,100		(33,387)		(68,032)		62,943
Less: Comprehensive loss (income) attributable to non-controlling interests	—		—		3,319		—		3,319
Comprehensive income (loss) attributable to HSSC	$	66,262	$	98,100	$	(30,068)	$	(68,032)	$	66,262

Table of Contents

HUGHES SATELLITE SYSTEMS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(Unaudited)

Consolidating Statement of Cash Flows

For the Six months ended June 30, 2023


	Hughes Satellite Systems Corporation		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations		Total
Cash flows from operating activities:
Net income (loss)	$	33,181	$	40,690	$	(54,909)	$	10,926	$	29,888
Adjustments to reconcile net income (loss) to cash flows provided by (used for) operating activities:	(56,296)		167,773		67,769		(10,926)		168,320
Net cash provided by (used for) operating activities	(23,115)		208,463		12,860		—		198,208

Cash flows from investing activities:
Purchases of marketable investment securities	(859,190)		—		—		—		(859,190)
Sales and maturities of marketable investment securities	611,643		—		—		—		611,643

Expenditures for property and equipment	—		(76,194)		(14,781)		—		(90,975)

Expenditures for externally marketed software	—		(15,253)		—		—		(15,253)


Distributions (contributions) and advances from (to) subsidiaries, net	123,931		—		—		(123,931)		—



Net cash provided by (used for) investing activities	(123,616)		(91,447)		(14,781)		(123,931)		(353,775)

Cash flows from financing activities:


Payment of in-orbit incentive obligations	—		(2,460)		—		—		(2,460)



Contribution (distributions) and advances (to) from parent, net	—		(123,931)		—		123,931		—
Net cash provided by (used for) financing activities	—		(126,391)		—		123,931		(2,460)

Effect of exchange rates on cash and cash equivalents	—		—		3,476		—		3,476
Net increase (decrease) in cash and cash equivalents	(146,731)		(9,375)		1,555		—		(154,551)
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	$	400,874	$	15,943	$	83,105	$	—	$	499,922

Table of Contents

HUGHES SATELLITE SYSTEMS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(Unaudited)

Consolidating Statement of Cash Flows

For the Six months ended June 30, 2022


	Hughes Satellite Systems Corporation		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations		Total
Cash flows from operating activities:
Net income (loss)	$	61,795	$	93,120	$	(40,930)	$	(58,072)	$	55,913
Adjustments to reconcile net income (loss) to cash flows provided by (used for) operating activities:	(90,384)		142,006		86,303		58,072		195,997
Net cash provided by (used for) operating activities	(28,589)		235,126		45,373		—		251,910

Cash flows from investing activities:
Purchases of marketable investment securities	(164,541)		—		(6,464)		—		(171,005)
Sales and maturities of marketable investment securities	662,347		—		—		—		662,347
Expenditures for property and equipment	—		(94,658)		(31,224)		—		(125,882)
Expenditures for externally marketed software	—		(11,967)		—		—		(11,967)
Distributions (contributions) and advances from (to) subsidiaries, net	143,460		—		—		(143,460)		—
India JV formation	—		(7,892)		—		—		(7,892)
Dividend received from unconsolidated affiliate	—		2,000		—		—		2,000
Net cash provided by (used for) investing activities	641,266		(112,517)		(37,688)		(143,460)		347,601

Cash flows from financing activities:
Payment of finance lease obligations	—		—		(114)		—		(114)
Payment of in-orbit incentive obligations	—		(1,908)		—		—		(1,908)
Dividend paid to EchoStar	(100,000)		—		—		—		(100,000)
Contribution (distributions) and advances (to) from parent, net	—		(143,460)		—		143,460		—
Net cash provided by (used for) financing activities	(100,000)		(145,368)		(114)		143,460		(102,022)

Effect of exchange rates on cash and cash equivalents	—		—		(672)		—		(672)
Net increase (decrease) in cash and cash equivalents	512,677		(22,759)		6,899		—		496,817
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	$	837,441	$	19,791	$	69,733	$	—	$	926,965

Table of Contents

HUGHES SATELLITE SYSTEMS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(Unaudited)

NOTE 17. SUBSEQUENT EVENTS

On July 28, 2023, EchoStar successfully launched EchoStar XXIV, the next generation ultra high density satellite. The satellite is expected to begin service in the fourth quarter of 2023. Once in service, the satellite is expected to bring further consumer broadband capacity across North and South America and catalyze sales in other markets, including in-flight Wi-Fi, enterprise networking and cellular backhaul for mobile network operators across the two continents. Until the satellite reaches its orbital position and completes in-orbit testing, we cannot reasonably estimate the impact the satellite will have to our Consolidated Financial Statements.

On August 8, 2023, EchoStar entered into an Agreement and Plan of Merger with DISH Network Corporation, a Nevada corporation, and Eagle Sub Corp, a Nevada corporation and a wholly owned subsidiary of DISH (“Merger Sub”). The Merger Agreement provides, among other things, that subject to the satisfaction or waiver of the conditions set forth in the agreement, Merger Sub will merge with and into EchoStar (the “Merger”), with EchoStar surviving the Merger as a wholly owned subsidiary of DISH.

On the terms and subject to the conditions set forth in the Merger Agreement, at the effective time of the Merger (the “Effective Time”), each share of EchoStar Class A Common Stock, par value $0.001 per share (“EchoStar Class A Common Stock”), EchoStar Class C Common Stock, par value $0.001 per share (“EchoStar Class C Common Stock”) and EchoStar Class D Common Stock, par value $0.001 per share (“EchoStar Class D Common Stock”), outstanding immediately prior to the Effective Time, will be converted into the right to receive a number of validly issued, fully paid and non-assessable shares of DISH Class A Common Stock, par value $0.01 per share (“DISH Class A Common Stock”), equal to 2.85 (the “Exchange Ratio”). On the terms and subject to the conditions set forth in the Merger Agreement, at the Effective Time of the Merger, each share of EchoStar Class B Common Stock, par value $0.001 per share (“EchoStar Class B Common Stock”), outstanding immediately prior to the Effective Time will be converted into the right to receive a number of validly issued, fully paid and non-assessable shares of DISH Class B Common Stock, par value $0.01 per share (the “DISH Class B Common Stock” and, together with the DISH Class A Common Stock, the “DISH Common Stock”), equal to the Exchange Ratio. Any shares of EchoStar Class A Common Stock, EchoStar Class B Common Stock, EchoStar Class C Common Stock and EchoStar Class D Common Stock (collectively, “EchoStar Common Stock”) that are held in EchoStar’s treasury or held directly by DISH or Merger Sub immediately prior to the Effective Time will be cancelled and cease to exist and no consideration shall be paid or payable in respect thereof.

Concurrently with the entry into the Merger Agreement, Charles W. Ergen and Ergen family stockholders entered into a support agreement with EchoStar and DISH, pursuant to which the Ergen stockholders agreed to convert a number of shares of EchoStar Class B Common Stock owned by them to EchoStar Class A Common Stock prior to the Effective Time (which number will be determined in accordance with the Merger Agreement) such that the Ergen stockholders’ voting power of DISH does not increase as a result of the Merger from the voting power owned by them as of the date of the entry into the Merger Agreement. The parties have agreed to enter into a registration rights agreement reasonably acceptable to the parties providing for the registration of the Ergen stockholders’ shares of DISH Class A Common Stock or DISH Class B Common Stock received as part of the Merger consideration and/or DISH Class B Common Stock held by such stockholders immediately prior to the closing of the Merger.

The board of directors of EchoStar (the “Board”), acting upon the unanimous recommendation of a special transaction committee of independent directors of the Board, has unanimously approved, adopted and declared advisable the Merger Agreement and the transactions contemplated by the Merger Agreement. The closing of the Merger is expected to occur in the fourth calendar quarter of 2023, subject to the satisfaction of certain regulatory approvals and other customary closing conditions. The Merger Agreement provides certain termination rights for each of DISH and EchoStar, including, among others, if the consummation of the Merger does not occur on or before February 8, 2024.

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 Corporate and Other.

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.

On August 8, 2023, EchoStar entered into an Agreement and Plan of Merger (the “Merger Agreement”) with DISH Network Corporation, a Nevada corporation (“DISH”), and Eagle Sub Corp, a Nevada corporation and a wholly owned subsidiary of DISH (“Merger Sub”). The Merger Agreement provides, among other things, that subject to the satisfaction or waiver of the conditions set forth in the agreement, Merger Sub will merge with and into EchoStar (the “Merger”), with EchoStar surviving the Merger as a wholly owned subsidiary of DISH.

Concurrently with the entry into the Merger Agreement, Charles W. Ergen and Ergen family stockholders entered into a support agreement with EchoStar and DISH, pursuant to which the Ergen stockholders agreed to not vote, or cause or direct to be voted, the shares of DISH Class A Common Stock owned by them, other than with respect of any matter presented to the holders of DISH Class A Common Stock on which holders of DISH Class B Common Stock are not entitled to vote, for three years following the closing of the Merger, such that the Ergen stockholders’

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voting power of DISH does not increase as a result of the Merger from the voting power owned by them as of the date of the entry into the Merger Agreement. The parties have agreed to enter into a registration rights agreement reasonably acceptable to the parties providing for the registration of the Ergen stockholders’ shares of DISH Class A Common Stock or DISH Class B Common Stock received as part of the Merger consideration and/or DISH Class B Common Stock held by such stockholders immediately prior to the closing of the Merger.

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.

Anticipating the launch of EchoStar XXIV, as discussed below, our consumer business, marketed under the HughesNet® brand, has been focused on optimizing financial returns of our existing satellites, while planning for new satellite capacity. 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. We expect that our enterprise business will also benefit from the new capacity added with EchoStar XXIV. 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. Prior to the launch of EchoStar XXIV, we were nearing or had reached capacity in most areas of the U.S., which constrained growth within our consumer subscriber base. Growth within our Latin America consumer subscriber base in certain areas had also become capacity constrained. These constraints are expected to be addressed by the launch of the EchoStar XXIV satellite.

The EchoStar XXIV satellite was launched in July 2023 and is expected to begin service in the fourth quarter of 2023. Once in service, the satellite is expected to bring further consumer broadband capacity across North and South America and generate additional sales in other markets, including in-flight Wi-Fi, enterprise networking and cellular backhaul for mobile network operators across the two continents.

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
	June 30, 2023	March 31, 2023
United States	846,000	890,000
Latin America	276,000	287,000
Total broadband subscribers	1,122,000	1,177,000

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

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	For the three months ended
	June 30, 2023	March 31, 2023
United States	(44,000)	(41,000)
Latin America	(11,000)	(10,000)
Total net subscriber decreases	(55,000)	(51,000)

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 June 30, 2023, these factors resulted in lower total subscribers as compared to the three months ended March 31, 2023.

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. Capacity constraints in certain other areas also limit our ability to add new subscribers. For the three months ended June 30, 2023, the decline in net subscribers was primarily due to more selective customer screening as compared to the three months ended March 31, 2023.

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 consumers.

As of June 30, 2023, our Hughes segment had $1.5 billion of contracted revenue backlog, which was primarily flat compared to December 31, 2022. We define Hughes segment contracted revenue backlog as our expected future revenue under enterprise customer contracts that are non-cancelable, including lease revenue.

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

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 make continuous use of our available satellite capacity on behalf of 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 without diminishing its capacity.

As of June 30, 2023, our ESS segment had $14.6 million of contracted revenue backlog, a decrease of 34.6%, 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.

Satellite Anomalies and Impairments

In the second quarter of 2023, we reduced the estimated useful life of the Al Yah 3 satellite, which serves our Brazilian customers, as a result of certain technical anomalies. In order to safeguard the future operability of the satellite, the Company has, in conjunction with recommendations from the satellite manufacturers, implemented immediate and long-term remedial actions. A revised estimate of the satellite’s remaining lifetime has been calculated using operational data of two previous quarters. Although the anomalies are expected to shorten the remaining useful life of the satellite, they have not affected its current operation.

We are not aware of any other anomalies with respect to our owned or leased satellites as of June 30, 2023. There can be no assurance, however, that undetected existing or future anomalies will not have a significant adverse

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effect on our operations or revenue 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 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 six months ended June 30, 2023 and through August 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 expenses.

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, 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

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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.

Other-than-temporary impairment losses on equity method investments. Other-than-temporary impairment losses on equity method investments primarily includes impairment charges for losses on our equity method investments which were deemed permanent in nature.

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, gains from repayment of other debt investments, 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. 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.

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RESULTS OF OPERATIONS

Six Months Ended June 30, 2023 Compared to the Six Months Ended June 30, 2022

The following table presents our consolidated results of operations for the six months ended June 30, 2023 compared to the six months ended June 30, 2022:


	For the six months ended June 30,						Variance
Statements of Operations Data (1)	2023			2022			Amount		%
Revenue:
Services and other revenue	$	745,188		$	837,404		$	(92,216)	(11.0)
Equipment revenue	143,674			167,337			(23,663)		(14.1)
Total revenue	888,862			1,004,741			(115,879)		(11.5)
Costs and expenses:
Cost of sales - services and other	264,895			281,970			(17,075)		(6.1)
% of total services and other revenue	35.5		%	33.7		%
Cost of sales - equipment	107,836			139,153			(31,317)		(22.5)
% of total equipment revenue	75.1		%	83.2		%
Selling, general and administrative expenses	206,552			218,443			(11,891)		(5.4)
% of total revenue	23.2		%	21.7		%
Research and development expenses	15,096			16,381			(1,285)		(7.8)
% of total revenue	1.7		%	1.6		%
Depreciation and amortization	195,574			223,542			(27,968)		(12.5)

Total costs and expenses	789,953			879,489			(89,536)		(10.2)
Operating income (loss)	98,909			125,252			(26,343)		(21.0)
Other income (expense):
Interest income, net	38,104			6,559			31,545		*
Interest expense, net of amounts capitalized	(44,733)			(46,474)			1,741		(3.7)
Gains (losses) on investments, net	230			214			16		7.5
Equity in earnings (losses) of unconsolidated affiliates, net	(1,097)			(3,015)			1,918		(63.6)
Foreign currency transaction gains (losses), net	6,313			3,777			2,536		67.1
Other-than-temporary impairment losses on equity method investments	(33,400)			—			(33,400)		*
Other, net	(1,219)			(428)			(791)		184.8
Total other income (expense), net	(35,802)			(39,367)			3,565		(9.1)
Income (loss) before income taxes	63,107			85,885			(22,778)		(26.5)
Income tax benefit (provision), net	(33,219)			(29,972)			(3,247)		10.8
Net income (loss)	29,888			55,913			(26,025)		(46.5)
Less: Net loss (income) attributable to non-controlling interests	3,293			5,882			(2,589)		(44.0)
Net income (loss) attributable to HSSC	$	33,181		$	61,795		$	(28,614)	(46.3)

Other data:
EBITDA (2)	$	268,603		$	355,224		$	(86,621)	(24.4)
Subscribers, end of period	1,122,000			1,346,000			(224,000)		(16.6)

* 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.

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The following discussion relates to our results of operations for the six months ended June 30, 2023 compared to the six months ended June 30, 2022:

Services and other revenue. Services and other revenue totaled $745.2 million for the six months ended June 30, 2023, a decrease of $92.2 million, or 11.0%, 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 $83.3 million.

Equipment revenue. Equipment revenue totaled $143.7 million for the six months ended June 30, 2023, a decrease of $23.7 million, or 14.1%, as compared to 2022. The decrease was primarily attributable to a decrease of $21.6 million in hardware sales to our international enterprise customers and a net decrease of $6.8 million related to our North American customers due to lower hardware sales and positive adjustments on profit margin on long-term contracts, partially offset by an increase of $6.1 million in sales to our mobile satellite system customers.

Cost of sales - services and other. Cost of sales - services and other totaled $264.9 million for the six months ended June 30, 2023, a decrease of $17.1 million, or 6.1%, as compared to 2022. The decrease was primarily attributable to lower sales of broadband services and corresponding decreases in cost of services provided to our consumer and enterprise customers of $16.7 million, mainly related to service delivery expenses, such as space segment, customer care and field maintenance.

Cost of sales - equipment. Cost of sales - equipment totaled $107.8 million for the six months ended June 30, 2023, a decrease of $31.3 million, or 22.5%, as compared to 2022. The decrease was primarily attributable to the corresponding decrease in equipment revenue, partially offset by an increase in our warranty reserve.

Selling, general and administrative expenses. Selling, general and administrative expenses totaled $206.6 million for the six months ended June 30, 2023, a decrease of $11.9 million, or 5.4%, as compared to 2022. The decrease was primarily attributable to decreases in sales and marketing expenses of $17.0 million, partially offset by increases general and administrative expenses.

Depreciation and amortization. Depreciation and amortization expenses totaled $195.6 million for the six months ended June 30, 2023, a decrease of $28.0 million, or 12.5%, as compared to 2022. The decrease was primarily attributable to decreases in other property and equipment depreciation expense of $27.6 million.

Interest income, net. Interest income, net totaled $38.1 million for the six months ended June 30, 2023, an increase of $31.5 million, as compared to 2022, primarily attributable to increases in the yield on our marketable investment securities and an increase in our marketable investment securities average balance.

Interest expense, net of amounts capitalized. Interest expense, net of amounts capitalized, totaled $44.7 million for the six months ended June 30, 2023, a decrease of $1.7 million, or 3.7%, as compared to 2022. The decrease was primarily attributable to a decrease of $1.2 million in capitalized interest relating to the EchoStar XXIV satellite program.

Foreign currency transaction gains (losses), net. Foreign currency transaction gains (losses), net totaled $6.3 million in gains for the six months ended June 30, 2023, as compared to $3.8 million in gains for the six months ended June 30, 2022, a positive change of $2.5 million. The change was due to the net impact of foreign exchange rate fluctuations of certain foreign currencies in Latin and Central America.

Other-than-temporary impairment losses on equity method investments. Other-than-temporary impairment losses on equity method investments was $33.4 million for the six months ended June 30, 2023, related to the impairment of our investment in Broadband Connectivity Solutions (Restricted) Limited (BCS) as a result of increased competition and economic environment for this business.

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Income tax benefit (provision), net. Income tax benefit (provision), net was $33.2 million provision for the six months ended June 30, 2023, as compared to $30.0 million provision for the six months ended June 30, 2022. Our effective income tax rate was 52.6% and 34.9% for the six months ended June 30, 2023 and 2022, respectively. The variations in our effective tax rate from the U.S. federal statutory rate for the six months ended June 30, 2023 were primarily due to excluded investment impairment losses and excluded foreign losses where the Company carries a full valuation allowance. The variations in our effective tax rate from the U.S. federal statutory rate for the six months ended June 30, 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 six months ended June 30, 2022	$	61,795
Increase (decrease) in interest income, net	31,545
Increase (decrease) in foreign currency transaction gains (losses), net	2,536
Decrease (increase) in equity in earnings (losses) of unconsolidated affiliates, net	1,918
Decrease (increase) in interest expense, net of amounts capitalized	1,741
Increase (decrease) in gains (losses) on investments, net	16
Increase (decrease) in other, net	(791)
Decrease (increase) in net income (loss) attributable to non-controlling interests	(2,589)
Decrease (increase) in income tax benefit (provision), net	(3,247)
Increase (decrease) in operating income (loss), including depreciation and amortization	(26,343)
Decrease (increase) in other-than-temporary impairment losses on equity method investments	(33,400)
Net income (loss) attributable to HSSC for the six months ended June 30, 2023	$	33,181

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 six months ended June 30,				Variance
	2023		2022		Amount		%
Net income (loss)	$	29,888	$	55,913	$	(26,025)	(46.5)
Interest income, net	(38,104)		(6,559)		(31,545)		*
Interest expense, net of amounts capitalized	44,733		46,474		(1,741)		(3.7)
Income tax provision (benefit), net	33,219		29,972		3,247		10.8
Depreciation and amortization	195,574		223,542		(27,968)		(12.5)
Net loss (income) attributable to non-controlling interests	3,293		5,882		(2,589)		(44.0)
EBITDA	$	268,603	$	355,224	$	(86,621)	(24.4)

* Percentage is not meaningful.

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The following table reconciles the change in EBITDA:


	Amounts
EBITDA for the six months ended June 30, 2022	$	355,224
Increase (decrease) in foreign currency transaction gains (losses), net	2,536
Decrease (increase) in equity in earnings (losses) of unconsolidated affiliates, net	1,918
Increase (decrease) in gains (losses) on investments, net	16
Increase (decrease) in other, net	(791)
Decrease (increase) in net loss (income) attributable to non-controlling interests	(2,589)
Decrease (increase) in other-than-temporary impairment losses on equity method investments	(33,400)
Increase (decrease) in operating income (loss), excluding depreciation and amortization	(54,311)
EBITDA for the six months ended June 30, 2023	$	268,603

Segment Operating Results and Capital Expenditures

The following tables present our total revenue, capital expenditures and EBITDA by segment for the six months ended June 30, 2023, as compared to the six months ended June 30, 2022:


	Hughes		ESS		Corporate and Other		Consolidated Total
For the six months ended June 30, 2023
Total revenue	$	875,530	$	12,117	$	1,215	$	888,862
Capital expenditures	90,975		—		—		90,975
EBITDA	298,231		9,217		(38,845)		268,603

For the six months ended June 30, 2022
Total revenue	$	985,947	$	9,324	$	9,470	$	1,004,741
Capital expenditures	125,882		—		—		125,882
EBITDA	371,098		6,212		(22,086)		355,224

Hughes Segment


	For the six months ended June 30,				Variance
	2023		2022		Amount		%
Total revenue	$	875,530	$	985,947	$	(110,417)	(11.2)
Capital expenditures	90,975		125,882		(34,907)		(27.7)
EBITDA	298,231		371,098		(72,867)		(19.6)

Total revenue was $875.5 million for the six months ended June 30, 2023, a decrease of $110.4 million, or 11.2%, as compared to 2022. Services and other revenue decreased primarily due to lower sales of broadband services to our consumer customers of $83.3 million. Equipment revenue decreased was primarily attributable to a decrease of $21.6 million in hardware sales to our international enterprise customers and a net decrease of $6.8 million related to our North American customers due to lower hardware sales and positive adjustments on profit margin on long-term contracts, partially offset by an increase of $6.1 million in sales to our mobile satellite system customers.

Capital expenditures were $91.0 million for the six months ended June 30, 2023, a decrease of $34.9 million, or 27.7%, 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.

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


	Amounts
EBITDA for the six months ended June 30, 2022	$	371,098
Increase (decrease) in foreign currency transaction gains (losses), net	2,625
Decrease (increase) in equity in earnings (losses) of unconsolidated affiliates, net	1,298
Increase (decrease) in gains (losses) on investments, net	(217)
Increase (decrease) in other, net	(789)
Decrease (increase) in net loss (income) attributable to non-controlling interests	(2,589)
Decrease (increase) in other-than-temporary impairment losses on equity method investments	(33,400)
Increase (decrease) in operating income (loss), excluding depreciation and amortization	(39,795)
EBITDA for the six months ended June 30, 2023	$	298,231

ESS Segment


	For the six months ended June 30,				Variance
	2023		2022		Amount		%
Total revenue	$	12,117	$	9,324	$	2,793	30.0
EBITDA	9,217		6,212		3,005		48.4

Total revenue was $12.1 million for the six months ended June 30, 2023, an increase of $2.8 million, or 30.0%, compared to 2022, primarily due to an increase in transponder services provided to third parties.

EBITDA was $9.2 million for the six months ended June 30, 2023, an increase of $3.0 million, or 48.4%, as compared to 2022, primarily due to the increase in overall ESS segment revenue and lower expenses.

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Corporate and Other


	For the six months ended June 30,				Variance
	2023		2022		Amount		%
Total revenue	$	1,215	$	9,470	$	(8,255)	(87.2)

EBITDA	(38,845)		(22,086)		(16,759)		75.9

Total revenue was $1.2 million for the six months ended June 30, 2023, a decrease of $8.3 million, or 87.2% as compared to 2022, primarily due to a decrease in satellite leasing revenue related to the EchoStar XXI satellite.

EBITDA was a loss of $38.8 million for the six months ended June 30, 2023, a decrease of $16.8 million, or 75.9% as compared to 2022, primarily due to a decrease in service revenue and an increase in Selling, general and administrative expenses.

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


	Amounts
EBITDA for the six months ended June 30, 2022	$	(22,086)
Decrease (increase) in equity in earnings (losses) of unconsolidated affiliates, net	619
Increase (decrease) in gains (losses) on investments, net	233
Increase (decrease) in foreign currency transaction gains (losses), net	(91)
Increase (decrease) in operating income (loss), excluding depreciation and amortization	(17,520)

EBITDA for the six months ended June 30, 2023	$	(38,845)

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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 June 30, 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.

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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

The following information updates, and should be read in conjunction with, the information in Part I, Item 1A, Risk Factors, of our Form 10-K for the year ended December 31, 2022.

Risks Relating to the DISH Merger

Because the market price of DISH common stock will fluctuate, EchoStar stockholders cannot be sure of the value of DISH common stock they will receive in the Merger. In addition, because the exchange ratio is fixed, the number of shares of DISH common stock to be received by EchoStar stockholders in the Merger will not change between now and the time the Merger is completed to reflect changes in the trading prices of DISH common stock or EchoStar common stock.

As a result of the Merger, each share of EchoStar Class A common stock and each share of EchoStar Class B common stock issued and outstanding immediately prior to the effective time (other than shares held directly by EchoStar as treasury shares or by DISH) will be converted automatically into 2.85 shares of DISH Class A common stock and 2.85 shares of DISH Class B common stock, respectively. The exchange ratio is fixed and will not be adjusted prior to the closing to account for changes in the trading prices of DISH common stock or EchoStar common stock or, except as otherwise set forth in the merger agreement, other factors. The exact value of the consideration to EchoStar stockholders will therefore depend on the price per share of DISH common stock at the closing of the Merger, which may be greater than, less than or the same as the price per share of DISH common stock at the time of entry into the Merger Agreement.

The market price of DISH common stock is subject to general price fluctuations in the market for publicly traded equity securities and has experienced volatility in the past. Stock price changes may result from a variety of factors, including general market and economic conditions, changes in the business, operations and prospects of DISH or EchoStar and regulatory considerations, many of which are factors beyond DISH’s and EchoStar’s control.

We will be subject to business uncertainties and contractual restrictions while the Merger is pending

Uncertainty about the effect of the Merger on employees, commercial partners and customers may have an adverse effect on us. These uncertainties may impair our ability to retain and motivate key personnel and could cause customers and others that deal with us to defer or decline entering into contracts with us or making other decisions concerning us or seek to change existing business relationships with us. Certain of our contracts contain change of control restrictions that may give rise to a right of termination or cancellation in connection with the Merger. In addition, if key employees depart because of uncertainty about their future roles and the potential complexities of the Merger, our business could be harmed. Furthermore, the Merger Agreement contains restrictions on our ability to take certain actions outside the ordinary course of business prior to the closing of the Merger, which may delay or prevent us from undertaking certain actions or business opportunities that may arise prior to the closing.

The Merger Agreement restricts our ability to pursue alternatives to the Merger

The merger agreement contains provisions that make it more difficult for us to enter into alternative transactions. The merger agreement prohibits us from soliciting alternative acquisition proposals from third parties, providing information to third parties and engaging in discussions with third parties regarding alternative acquisition proposals. These provisions could discourage a potential third-party acquirer that might have an interest in us from considering or pursuing an alternative transaction with us or proposing such a transaction, even if it were prepared to pay consideration with a higher per share value than the total value proposed to be paid in the Merger.

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The Merger is subject to a number of conditions, including receipt of certain regulatory approvals. Failure to complete the Merger could negatively impact our business, financial results and stock price

The completion of the Merger is subject to the satisfaction of a number of conditions including, among others, the receipt of certain regulatory approvals. As a condition to granting the necessary approvals or clearances, governmental authorities may impose requirements, limitations or costs or place restrictions on the conduct of the business of the combined company after the completion of the Merger. Any one of these requirements, limitations, costs, or restrictions could jeopardize or delay the completion of or reduce the anticipated benefits of the Merger. If the Merger is not completed, our ongoing business may be adversely affected and we will be subject to several risks and consequences, including the following:

•we will be required to pay certain costs relating to the Merger, whether or not the Merger is completed, such as significant fees and expenses relating to financial advisory, legal, accounting, consulting and other advisory fees and expenses, employee-benefit and related expenses and regulatory filings; and

•matters relating to the Merger may require substantial commitments of time and resources by our management, which could otherwise have been devoted to day-to-day operations and other opportunities that may have been beneficial to us.

In addition, if the Merger is not completed, we may experience negative reactions from the financial markets and from our employees, commercial partners and customers. We could also be subject to litigation, including litigation related to failure to complete the Merger or to enforce DISH’s’ obligations under the Merger Agreement. If the Merger is not consummated, there can be no assurance that the risks described above will not materially affect our business, financial results and stock price.

Litigation relating to the Merger may be filed against our board of directors and/or our special committee that could prevent or delay the closing of the Merger and/or result in the payment of damages following the closing

In connection with the Merger, it is possible that our stockholders may file lawsuits against our board of directors and/or our special committee. Among other remedies, these stockholders could seek damages and/or to enjoin the Merger. The outcome of any litigation is uncertain and any such potential lawsuits could prevent or delay the closing and/or result in substantial costs to us. Any such actions may create uncertainty relating to the Merger and may be costly and distracting to management. Further, the defense or settlement of any lawsuit or claim that remains unresolved at the time the Merger is completed may adversely affect the combined company’s business, financial condition, results of operations and cash flows following the Merger.

The shares of DISH common stock to be received by EchoStar stockholders upon the closing will have different rights from shares of EchoStar common stock

Upon the closing, our stockholders will no longer be stockholders of EchoStar. Instead, our former stockholders will become DISH stockholders and their rights as DISH stockholders will be governed by the terms of the certificate of incorporation and bylaws of DISH. These documents are in some respects different than the terms of our certificate of incorporation and bylaws, which currently govern the rights of our stockholders.

Our business may not be integrated successfully or such integration may be more difficult, time consuming or costly than expected. Operating costs, customer loss and business disruption, including difficulties in maintaining relationships with employees, customers, suppliers or vendors, may be greater than expected following the Merger. Synergies from the Merger may not be realized within expected timeframes or at all

The combination of two separate businesses is complex, costly and time-consuming and may divert significant management attention and resources to combining our and DISH’s business practices and operations. This process may disrupt our business. The failure to meet the challenges involved in combining the two businesses and to realize the anticipated benefits of the Merger could cause an interruption of, or a loss of momentum in, the activities of DISH and could adversely affect the results of operations of the combined company following the Merger. The overall combination of our and DISH’s businesses may also result in material unanticipated problems, expenses,

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liabilities, competitive responses, and loss of customer and other business relationships. The difficulties of combining the operations of the companies include, among others:

•the diversion of management attention to integration matters;

•difficulties in integrating operations and systems, including intellectual property and communications systems, administrative and information technology infrastructure and financial reporting and internal control systems;

•challenges in conforming standards, controls, procedures and accounting and other policies, business cultures and compensation structures between the two companies;

•difficulties in integrating employees and attracting and retaining key personnel;

•challenges in retaining existing, and obtaining new customers, suppliers and other commercial relationships;

•difficulties in managing the expanded operations of a significantly larger and more complex company; and

•potential unknown liabilities, adverse consequences and unforeseen increased expenses associated with the Merger.

Many of these factors are outside of our control and/or will be outside the control of DISH and any one of them could result in lower revenues, higher costs and diversion of management time and energy, which could materially impact the business, financial condition and results of operations of DISH. In addition, even if the operations of our and DISH’s businesses are integrated successfully, the full benefits of the Merger may not be realized, including, among others, the synergies, cost savings or sales or growth opportunities that are expected. These benefits may not be achieved within the anticipated time frame or at all. All of these factors could negatively impact the price of the DISH common stock following the Merger. As a result, it cannot be assured that the combination of us and DISH will result in the realization of the full benefits expected from the Merger within the anticipated time frames or at all.

The market price for DISH common stock following the closing of the Merger may be affected by factors different from those that historically have affected or currently affect our common stock

Upon the closing of the Merger, our stockholders will receive shares of DISH common stock. DISH’s business and financial position will differ from our business and financial position before the closing and, accordingly, the results of operations of DISH will be affected by some factors that are different from those currently affecting our operating results. Accordingly, the market price and performance of DISH common stock is likely to be different from the performance of our common stock in the absence of the Merger. In addition, it is anticipated that DISH will issue a significant number of shares of DISH common stock in the Merger. The issuance of these new shares could have the effect of depressing the market price of the DISH common stock.

Following the Merger, DISH will be controlled by one principal stockholder

Charles W. Ergen, our Chairman and the Chairman of DISH, beneficially owns approximately 93% of the total voting power of all classes of our shares and approximately 90.4% of the total voting power of all classes of DISH shares. Mr. Ergen and related stockholders have agreed, pursuant to the support agreement entered into in connection with the Merger,to not vote, or cause or direct to be voted, the shares of DISH Class A Common Stock owned by them, other than with respect of any matter presented to the holders of DISH Class A Common Stock on which holders of DISH Class B Common Stock are not entitled to vote, for three years following the closing of the Merger, such that the Ergen stockholders’ voting power of DISH does not increase as a result of the Merger from the voting power owned by them as of the date of the entry into the Merger Agreement. Through his beneficial ownership of EchoStar and DISH’s equity securities, Mr. Ergen has the ability to elect a majority of the directors and to control all other matters requiring the approval of EchoStar or DISH stockholders, and will continue to have such ability as to DISH following completion of the Merger. As a result of Mr. Ergen’s voting power, we and DISH currently each are, and following the Merger DISH will be, a “controlled company” as defined in the NASDAQ listing rules and, therefore, not subject to certain NASDAQ requirements relating to director independence and nomination and board committee composition. In addition, following the Merger, it may be difficult for a third party to acquire DISH, even if doing so may be beneficial to shareholders, because of DISH’s ownership structure. In addition, future sales of DISH common stock by Mr. Ergen could adversely affect the DISH stock price. The parties have agreed to enter into a registration rights agreement reasonably acceptable to the parties providing for the registration of the Ergen stockholders’ shares of DISH Class A Common Stock or DISH Class B Common Stock received as part of the

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Merger consideration and/or DISH Class B Common Stock held by such stockholders immediately prior to the closing of the Merger.

Our directors and executive officers have interests in the Merger that may be different from, or in addition to, the interests of our other stockholders

Aside from their interests as stockholders, certain of our directors and executive officers have interests in the Merger that may be different from, or in addition to, the interests of our stockholders generally. These interests include, among others, rights to continuing indemnification and directors’ and officers’ liability insurance. Charles Ergen, director and Chairman of both EchoStar and DISH, will serve as a director and Chairman of DISH following the Merger. In addition, Hamid Akhavan, the President and Chief Executive Officer of EchoStar, will serve as President and Chief Executive Officer of the combined company following the Merger. Our special committee was aware of and considered these interests, among other things, in negotiating and deciding to approve, and recommend to the our board of directors, the merger agreement and the Merger, and the our board of directors was aware of and considered these interests, among other things, in deciding to approve the merger agreement and the Merger.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

Financial Results

On August 8, 2023, EchoStar issued a press release (the “Press Release”) announcing its financial results for the quarter ended June 30, 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.

Rule 10b5-1 Trading Plans

None.

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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 August 8, 2023 issued by EchoStar Corporation regarding financial results for the period ended June 30, 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.
104						Cover Page Interactive Data File, formatted in iXBRL and contained in Exhibit 101.

(H) Filed herewith.

(I) Furnished herewith.

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


Date: August 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: August 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 June 30, 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: August 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 and Six Months Ended June 30, 2023

Englewood, CO, August 8, 2023—EchoStar Corporation (Nasdaq: SATS) announced its financial results for the three and six months ended June 30, 2023.

Three Months Ended June 30, 2023 Financial Highlights:

•Consolidated revenue of $453.1 million.

•Net income of $9.1 million, consolidated net income attributable to EchoStar common stock of $11.2 million, and basic and diluted earnings per share of common stock of $0.13.

•Consolidated Adjusted EBITDA of $153.3 million (see discussion and the reconciliation of GAAP to this non-GAAP measure below).

•Cash, cash equivalents and current marketable investment securities were $1.9 billion as of June 30, 2023, up from $1.7 billion as of March 31, 2023.

Six months ended June 30, 2023 Financial Highlights:

•Consolidated revenue of $892.7 million.

•Net income of $36.9 million, consolidated net income attributable to EchoStar common stock of $40.2 million, and basic and diluted earnings per share of common stock of $0.48.

•Consolidated Adjusted EBITDA of $288.2 million (see discussion and the reconciliation of GAAP to this non-GAAP measure below).

“In the second quarter of 2023, the EchoStar team once again delivered a strong performance, ending the quarter with the delivery of the JUPITER 3/EchoStar XXIV satellite to the launch base as scheduled,” said Hamid Akhavan, CEO and President of EchoStar. “While optimizing existing assets and pursuing new avenues of growth, the team also planned the JUPITER 3 launch mission in record time – executing it flawlessly and setting us on the path to future growth.”

Three Months Ended June 30, 2023 - Additional Information:

•Consolidated revenue decreased 9.3% or $46.2 million year over year. The decrease was driven by lower service revenues of $43.2 million partially due to fewer broadband customers. Equipment revenue decreased $3.0 million, primarily due to lower sales to both domestic and international enterprise customers, partially offset by an increase in sales to our mobile satellite system customers and positive adjustments on profit margin on long-term contracts.

•Net income decreased $1.4 million year over year. The decrease was primarily due to an impairment of a certain equity investment of $33.4 million and higher income tax expense of $13.4 million. These items were partially offset by a favorable change in investment losses of $17.1 million, higher interest income of $14.5 million, $6.9 million in foreign exchange gains and $6.7 million in other income due to gain on the repayment from other debt securities.

•Adjusted EBITDA decreased 8.6% or $14.5 million year over year.

◦Hughes segment Adjusted EBITDA decreased $11.3 million year over year. The decrease was driven primarily by lower service and equipment revenue, partially offset by lower sales and marketing expense from our broadband consumer business.

◦ESS segment Adjusted EBITDA increased $1.0 million year over year, primarily due to higher revenue.

◦Corporate and Other Adjusted EBITDA decreased $4.2 million year over year, primarily due to higher corporate expenses.

•Hughes broadband subscribers totaled approximately 1,122,000, declining 106,000 from December 31, 2022. Our current capacity limitations, increasing bandwidth usage by

approximately 16% 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 June 30, 2023, approximately 41% of Hughes segment revenue was attributable to our enterprise customers, increasing from 37% in the same period last year.

•The JUPITER 3/EchoStar XXIV satellite shipped to the launch site in June and subsequently launched successfully on July 28, 2023. Currently, the satellite is being raised to its orbit, 22,236 miles (35,786 kilometers) above the Earth and to its destination at the 95 degrees west orbital slot. It will undergo extensive bus and payload testing before beginning service in the fourth quarter of this year.

Set forth below is a table highlighting certain of EchoStar’s segment results for the three and six months ended June 30, 2023 and 2022 (amounts in thousands) (all US GAAP amounts reference results from operations):


	For the three months ended June 30,				For the six months ended June 30,
	2023		2022		2023		2022

Revenue
Hughes	$	444,335	$	491,841	$	875,530	$	985,947
EchoStar Satellite Services	6,120		4,850		12,117		9,324
Corporate and Other	2,654		2,625		5,059		5,579
Total revenue	$	453,109	$	499,316	$	892,706	$	1,000,850

Net income (loss)	$	9,085	$	10,473	$	36,905	$	99,418

Adjusted EBITDA
Hughes	$	171,114	$	182,423	$	325,277	$	366,710
EchoStar Satellite Services	4,563		3,521		9,218		6,212
Corporate & Other	(22,423)		(18,216)		(46,254)		(39,305)
Total Adjusted EBITDA	$	153,254	$	167,728	$	288,241	$	333,617

Expenditures for property and equipment, net of refunds and other receipts	$	49,016	$	75,779	$	93,087	$	187,917

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


	For the three months ended June 30,				For the six months ended June 30,
	2023		2022		2023		2022

Net income (loss)	$	9,085	$	10,473	$	36,905	$	99,418
Interest income, net	(23,526)		(9,072)		(52,122)		(15,494)
Interest expense, net of amounts capitalized	13,240		14,307		26,526		29,280
Income tax provision (benefit), net	18,773		5,390		30,233		38,172
Depreciation and amortization	105,588		116,555		208,446		236,991
Net loss (income) attributable to non-controlling interests	2,072		3,395		3,293		5,883
EBITDA	$	125,232	$	141,048	$	253,281	$	394,250
(Gains) losses on investments, net	5,485		22,538		12,594		(58,148)
Foreign currency transaction (gains) losses, net	(3,258)		3,642		(6,571)		(2,752)
Impairment of long-lived assets	—		711		3,142		711
Other-than-temporary impairment losses on equity method investments	33,400		—		33,400		—
Gain on repayment of other debt securities	(7,605)		—		(7,605)		—
License fee dispute - India, net of non-controlling interests	—		(211)		—		(444)
Adjusted EBITDA	$	153,254	$	167,728	$	288,241	$	333,617

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 June 30, 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 June 30, 2023 filed today with the Securities and Exchange Commission.

EchoStar will host a webcast to discuss its earnings on Tuesday, August 8, 2023 at 11:00 a.m. Eastern Time. The webcast 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/BIe20855193e2544169ac34ab8964798ff.

About EchoStar Corporation

EchoStar Corporation (Nasdaq: SATS) is a premier technology and networking services provider offering consumer, enterprise, operator and government solutions worldwide under its Hughes®, HughesNet® and EchoStar® brands. In Europe, EchoStar operates under its EchoStar Mobile Limited subsidiary and in Australia, the Company operates as EchoStar Global Australia. For more information, visit www.echostar.com and follow EchoStar on social media.

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

(In thousands, except share and per share amounts)


	As of
	June 30, 2023		December 31, 2022
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	702,055	$	704,541
Marketable investment securities	1,211,407		973,915
Trade accounts receivable and contract assets, net	238,967		236,479
Other current assets, net	244,347		210,446
Total current assets	2,396,776		2,125,381
Non-current assets:
Property and equipment, net	2,168,376		2,237,617
Operating lease right-of-use assets	144,055		151,518
Goodwill	533,295		532,491
Regulatory authorizations, net	460,310		462,531
Other intangible assets, net	14,582		15,698
Other investments, net	193,432		356,705
Other non-current assets, net	326,218		317,062
Total non-current assets	3,840,268		4,073,622
Total assets	$	6,237,044	$	6,199,003

Liabilities and Stockholders' Equity
Current liabilities:
Trade accounts payable	$	91,118	$	101,239
Contract liabilities	107,977		121,739
Accrued expenses and other current liabilities	199,086		199,853
Total current liabilities	398,181		422,831
Non-current liabilities:
Long-term debt, net	1,497,187		1,496,777
Deferred tax liabilities, net	432,877		424,621
Operating lease liabilities	128,374		135,932
Other non-current liabilities	109,299		119,787
Total non-current liabilities	2,167,737		2,177,117
Total liabilities	2,565,918		2,599,948

Commitments and contingencies

ECHOSTAR CORPORATION

Consolidated Balance Sheets

(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 June 30, 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, 59,474,291 shares issued and 36,160,980 shares outstanding at June 30, 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 June 30, 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 June 30, 2023 and December 31, 2022	—		—
Class D common stock, $0.001 par value, 800,000,000 shares authorized, none issued and outstanding at both June 30, 2023 and December 31, 2022	—		—
Additional paid-in capital	3,379,997		3,367,058
Accumulated other comprehensive income (loss)	(153,874)		(172,239)
Accumulated earnings (losses)	873,715		833,517
Treasury shares, at cost, 23,313,311 at both June 30, 2023 and December 31, 2022	(525,824)		(525,824)
Total EchoStar Corporation stockholders' equity	3,574,121		3,502,619
Non-controlling interests	97,005		96,436
Total stockholders' equity	3,671,126		3,599,055
Total liabilities and stockholders' equity	$	6,237,044	$	6,199,003

ECHOSTAR CORPORATION

Consolidated Statements of Operations

(Unaudited, in thousands, except per share amounts)


	For the three months ended June 30,				For the six months ended June 30,
	2023		2022		2023		2022

Revenue:
Services and other revenue	$	371,510	$	414,697	$	749,037	$	833,508
Equipment revenue	81,599		84,619		143,669		167,342
Total revenue	453,109		499,316		892,706		1,000,850
Costs and expenses:
Cost of sales - services and other (exclusive of depreciation and amortization)	132,724		144,235		268,096		285,364
Cost of sales - equipment (exclusive of depreciation and amortization)	56,162		70,054		107,824		139,168
Selling, general and administrative expenses	107,420		113,091		217,481		231,261
Research and development expenses	6,842		8,764		15,097		16,381
Depreciation and amortization	105,588		116,555		208,446		236,991
Impairment of long-lived assets	—		711		3,142		711
Total costs and expenses	408,736		453,410		820,086		909,876
Operating income (loss)	44,373		45,906		72,620		90,974
Other income (expense):
Interest income, net	23,526		9,072		52,122		15,494
Interest expense, net of amounts capitalized	(13,240)		(14,307)		(26,526)		(29,280)
Gains (losses) on investments, net	(5,485)		(22,538)		(12,594)		58,148
Equity in earnings (losses) of unconsolidated affiliates, net	(546)		(1,301)		(1,097)		(3,015)
Other-than-temporary impairment losses on equity method investments	(33,400)		—		(33,400)		—
Foreign currency transaction gains (losses), net	3,258		(3,642)		6,571		2,752

Other, net	9,372		2,673		9,442		2,517
Total other income (expense), net	(16,515)		(30,043)		(5,482)		46,616
Income (loss) before income taxes	27,858		15,863		67,138		137,590
Income tax benefit (provision), net	(18,773)		(5,390)		(30,233)		(38,172)
Net income (loss)	9,085		10,473		36,905		99,418
Less: Net loss (income) attributable to non-controlling interests	2,072		3,395		3,293		5,883
Net income (loss) attributable to EchoStar Corporation common stock	$	11,157	$	13,868	$	40,198	$	105,301

Earnings (losses) per share - Class A and B common stock:
Basic	$	0.13	$	0.16	$	0.48	$	1.24
Diluted	$	0.13	$	0.16	$	0.48	$	1.24

ECHOSTAR CORPORATION

Consolidated Statements of Cash Flows

(Unaudited, in thousands)


	For the six months ended June 30,
	2023		2022

Cash flows from operating activities:
Net income (loss)	$	36,905	$	99,418
Adjustments to reconcile net income (loss) to cash flows provided by (used for) operating activities:
Depreciation and amortization	208,446		236,991
Impairment of long-lived assets	3,142		711
Losses (gains) on investments, net	12,594		(58,148)
Equity in losses of unconsolidated affiliates, net	1,097		3,015
Foreign currency transaction losses (gains), net	(6,571)		(2,752)
Deferred tax provision, net	7,872		24,412
Stock-based compensation	5,375		5,047
Amortization of debt issuance costs	410		386
Gain on repayment of other debt securities	(7,605)		—
Other-than-temporary impairment losses on equity method investments	33,400		—
Other, net	(22,498)		27,397
Changes in assets and liabilities, net:
Trade accounts receivable and contract assets, net	975		(39,271)
Other current assets, net	(41,887)		(6,113)
Trade accounts payable	(16,771)		1,793
Contract liabilities	(13,762)		(6,487)
Accrued expenses and other current liabilities	3,416		(10,119)
Non-current assets and non-current liabilities, net	(13,580)		(24,648)
Net cash provided by (used for) operating activities	190,958		251,632

Cash flows from investing activities:
Purchases of marketable investment securities	(900,560)		(183,529)
Sales and maturities of marketable investment securities	663,873		669,600
Expenditures for property and equipment	(124,458)		(187,917)
Refunds and other receipts related to capital expenditures	31,371		—
Expenditures for externally marketed software	(15,253)		(11,967)
Proceeds from repayment of other debt investment	148,448		—
India JV formation	—		(7,892)
Dividend received from unconsolidated affiliate	—		2,000



Net cash provided by (used for) investing activities	(196,579)		280,295

Cash flows from financing activities:

Payment of finance lease obligations	—		(114)
Payment of in-orbit incentive obligations	(2,460)		(1,908)

Proceeds from Class A common stock issued under the Employee Stock Purchase Plan	2,143		5,046
Treasury share repurchase	—		(77,095)


Net cash provided by (used for) financing activities	(317)		(74,071)

Effect of exchange rates on cash and cash equivalents	3,483		(728)
Net increase (decrease) in cash and cash equivalents	(2,455)		457,128
Cash and cash equivalents, including restricted amounts, beginning of period	705,883		536,874
Cash and cash equivalents, including restricted amounts, end of period	$	703,428	$	994,002