EchoStar Announces First Quarter 2017 Results

May 10, 2017

ENGLEWOOD, Colo., May 10, 2017 /PRNewswire/ -- EchoStar Corporation (NASDAQ: SATS) today announced its financial results for the quarter ended March 31, 2017.

EchoStar Corporation Logo. (PRNewsFoto/EchoStar Corporation) (PRNewsFoto/EchoStar Corporation)

First Quarter 2017 Financial Highlights:

Consolidated revenues of $433 million.
Consolidated net income from continuing operations of $31 million
Consolidated net income attributable to EchoStar common stock of $39 million and diluted earnings per share of $0.41.
Consolidated EBITDA of $183 million (see reconciliation of this non-GAAP measure below).
Approximately 1,043,000 Hughes consumer broadband subscribers as of March 31, 2017.
Cash, cash equivalents and current marketable investment securities of $3.18 billion as of March 31, 2017

In the current quarter we changed the way we present our segments. Historically our business segments reflected an allocation of the costs of our corporate functions. Under our new presentation, these costs are no longer allocated to the operating segments and are now reported as part of the Corporate and Other segment (previously "All Other and Eliminations").

In addition, results of our EchoStar Technology segment, which was transferred to DISH Network Corporation in the Share Exchange transaction, are included in Discontinued Operations.

Set forth below is a table highlighting EchoStar's segment results for the three months ended March 31, 2017 and 2016:

	For the Three Months Ended March 31,
	2017		2016
	(Dollars in thousands)
Revenue
Hughes	$	329,320	$	326,238
EchoStar Satellite Services	100,326		102,989
Corporate & Other	3,505		2,747
Total	$	433,151	$	431,974

EBITDA
Hughes	$	100,852	$	110,356
EchoStar Satellite Services	83,063		88,640
Corporate & Other	(601)		(13,444)
Total	$	183,314	$	185,552

Net income attributable to EchoStar common stock	$	38,924	$	50,674
Diluted earnings per share (in dollars)	$	0.41	$	0.54
Net income from continuing operations	$	30,775	$	35,385

Capital expenditures for property and equipment from continuing operations	$	89,950	$	205,795

The following table reconciles total consolidated Net income to EBITDA.

	For the Three Months Ended March 31,
	2017		2016
	(In thousands)
Net income	$	37,352	$	48,443

Interest income and expense, net	37,105		19,206
Income tax (benefit) provision	(12)		20,172
Depreciation and amortization	115,083		110,077
Net income from discontinued operations	(6,577)		(13,058)
Net loss attributable to noncontrolling interest in HSS Tracking Stock and other noncontrolling interests	363		712
EBITDA	$	183,314	$	185,552

Note on Use of Non-GAAP Financial Measures

EBITDA is defined as "Net income" excluding "Interest expense, net of amounts capitalized," "Interest income", "Income tax benefit (provision)" and "Depreciation and amortization." EBITDA is not a measure determined in accordance with US GAAP. This non-GAAP measure is reconciled to Net income in the table above. 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. Management also believes that EBITDA is useful to investors because it is frequently used by securities analysts, investors, and other interested parties to evaluate the performance of companies in our industry.

The consolidated financial statements of EchoStar for the periods ended March 31, 2017 and 2016 are attached to this press release. Detailed financial data and other information are available in EchoStar's Quarterly Report on Form 10-Q for the period ended March 31, 2017 filed today with the Securities and Exchange Commission.

EchoStar will host its earnings conference call on Wednesday, May 10, 2017 at 12:00 noon Eastern Time. The call-in numbers are (877) 815-1625 (toll-free) and (716) 247-5178 (international), Conference ID # 18953417.

About EchoStar Corporation

EchoStar Corporation (NASDAQ: SATS) is a premier global provider of satellite communications solutions. Headquartered in Englewood, Colo., and conducting business around the globe, EchoStar is a pioneer in secure communications technologies through its Hughes Network Systems and EchoStar Satellite Services business segments.

Safe Harbor Statement under the US Private Securities Litigation Reform Act of 1995
This press release may contain statements that are forward looking, as that term is defined by the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on management's beliefs, as well as assumptions made by, and information currently available to, management. When used in this release, the words "believe," "anticipate," "estimate," "expect," "intend," "project," "plans," and similar expressions and the use of future dates are intended to identify 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, 2016 and Quarterly Report on Form 10-Q for the period ended March 31, 2017, each 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.

ECHOSTAR CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except share amounts) (Unaudited)

	As of
	March 31, 2017		December 31, 2016
Assets
Current Assets:
Cash and cash equivalents	$	2,799,545	$	2,570,365
Marketable investment securities, at fair value	383,015		522,516
Trade accounts receivable, net of allowance for doubtful accounts of $11,371 and $12,956, respectively	167,860		182,527
Trade accounts receivable - DISH Network, net of allowance for doubtful accounts of zero	50,284		19,417
Inventory	79,422		62,620
Prepaids and deposits	45,604		43,456
Other current assets	12,495		10,862
Current assets of discontinued operations	213,191		311,524
Total current assets	3,751,416		3,723,287
Noncurrent Assets:
Restricted cash and marketable investment securities	8,343		12,926
Property and equipment, net of accumulated depreciation of $2,724,049 and $2,598,492, respectively	3,425,548		3,398,195
Regulatory authorizations, net	545,620		544,633
Goodwill	504,173		504,173
Other intangible assets, net	73,006		80,734
Investments in unconsolidated entities	165,992		171,016
Other receivable - DISH Network	91,029		90,586
Other noncurrent assets, net	181,899		166,385
Noncurrent assets of discontinued operations	—		316,924
Total noncurrent assets	4,995,610		5,285,572
Total assets	$	8,747,026	$	9,008,859
Liabilities and Stockholders' Equity
Current Liabilities:
Trade accounts payable	$	134,461	$	170,297
Trade accounts payable - DISH Network	3,691		1,072
Current portion of long-term debt and capital lease obligations	37,270		32,984
Deferred revenue and prepayments	54,596		59,989
Accrued interest	57,012		46,487
Accrued compensation	30,013		53,454
Accrued expenses and other	106,391		95,726
Current liabilities of discontinued operations	311		71,429
Total current liabilities	423,745		531,438
Noncurrent Liabilities:
Long-term debt and capital lease obligations, net of unamortized debt issuance costs	3,620,044		3,622,463
Deferred tax liabilities, net	736,186		746,667
Other noncurrent liabilities	121,341		90,785
Noncurrent liabilities of discontinued operations	—		10,701
Total noncurrent liabilities	4,477,571		4,470,616
Total liabilities	4,901,316		5,002,054
Commitments and Contingencies (Note 14)
Stockholders' Equity:
Preferred Stock, $.001 par value, 20,000,000 shares authorized:
Hughes Retail Preferred Tracking Stock, $.001 par value, zero authorized, issued and outstanding at March 31, 2017 and 13,000,000 shares authorized and 6,290,499 issued and outstanding at December 31, 2016	—		6
Common stock, $.001 par value, 4,000,000,000 shares authorized:
Class A common stock, $.001 par value, 1,600,000,000 shares authorized, 53,320,812 shares issued and 47,788,494 shares outstanding at March 31, 2017 and 52,243,465 shares issued and 46,711,147 shares outstanding at December 31, 2016	53		52
Class B common stock, $.001 par value, 800,000,000 shares authorized, 47,687,039 shares issued and outstanding at each of March 31, 2017 and December 31, 2016	48		48
Class C common stock, $.001 par value, 800,000,000 shares authorized, none issued and outstanding at each of March 31, 2017 and December 31, 2016	—		—
Class D common stock, $.001 par value, 800,000,000 shares authorized, none issued and outstanding at each of March 31, 2017 and December 31, 2016	—		—
Additional paid-in capital	3,644,370		3,828,677
Accumulated other comprehensive loss	(80,191)		(124,803)
Accumulated earnings	366,470		314,247
Treasury stock, at cost	(98,162)		(98,162)
Total EchoStar stockholders' equity	3,832,588		3,920,065
Noncontrolling interest in HSS Tracking Stock	—		73,910
Other noncontrolling interests	13,122		12,830
Total stockholders' equity	3,845,710		4,006,805
Total liabilities and stockholders' equity	$	8,747,026	$	9,008,859

ECHOSTAR CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share amounts) (Unaudited)

	For the Three Months Ended March 31,
	2017		2016
Revenue:
Services and other revenue - DISH Network	$	114,955	$	116,449
Services and other revenue - other	269,791		269,897
Equipment revenue - DISH Network	31		2,769
Equipment revenue - other	48,374		42,859
Total revenue	433,151		431,974
Costs and Expenses:
Cost of sales - services and other (exclusive of depreciation and amortization)	131,783		125,582
Cost of sales - equipment (exclusive of depreciation and amortization)	43,938		43,108
Selling, general and administrative expenses	82,991		80,545
Research and development expenses	7,705		6,932
Depreciation and amortization	115,083		110,077
Total costs and expenses	381,500		366,244
Operating income	51,651		65,730

Other Income (Expense):
Interest income	8,291		3,965
Interest expense, net of amounts capitalized	(45,396)		(23,171)
Gains on investments, net	12,035		2,462
Other-than-temporary impairment loss on available-for-sale securities	(3,298)		—
Equity in earnings (losses) of unconsolidated affiliates, net	6,408		(808)
Other, net	1,072		7,379
Total other expense, net	(20,888)		(10,173)
Income from continuing operations before income taxes	30,763		55,557
Income tax benefit (provision)	12		(20,172)
Net income from continuing operations	30,775		35,385
Net income from discontinued operations	6,577		13,058
Net income	37,352		48,443
Less: Net loss attributable to noncontrolling interest in HSS Tracking Stock	(655)		(823)
Less: Net income attributable to other noncontrolling interests	292		111
Net income attributable to EchoStar	37,715		49,155
Less: Net loss attributable to Hughes Retail Preferred Tracking Stock	(1,209)		(1,519)
Net income attributable to EchoStar common stock	$	38,924	$	50,674

Amounts attributable to EchoStar common stock:
Net income from continuing operations	$	32,347	$	37,616
Net income from discontinued operations	6,577		13,058
Net income attributable to EchoStar common stock	$	38,924	$	50,674

Weighted-average common shares outstanding - Class A and B common stock:
Basic	94,745		93,331
Diluted	95,893		93,852

Earnings per share - Class A and B common stock:
Basic:
Continuing operations	$	0.34	$	0.40
Discontinued operations	0.07		0.14
Total basic earnings per share	$	0.41	$	0.54

Diluted:
Continuing operations	$	0.34	$	0.40
Discontinued operations	0.07		0.14
Total diluted earnings per share	$	0.41	$	0.54

ECHOSTAR CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited)

	For the Three Months Ended March 31,
	2017		2016
Cash Flows from Operating Activities:
Net income	$	37,352	$	48,443
Adjustments to reconcile net income to net cash flows from operating activities:
Depreciation and amortization	126,742		126,734
Equity in losses (earnings) of unconsolidated affiliates, net	(5,249)		963
Gain and impairment on investments, net	(8,737)		(2,462)
Stock-based compensation	956		4,384
Deferred tax provision	343		25,684
Dividends received from unconsolidated entity	7,500		—
Changes in current assets and current liabilities, net	(13,857)		(18,184)
Changes in noncurrent assets and noncurrent liabilities, net	(6,003)		3,388
Other, net	2,308		3,899
Net cash flows from operating activities	141,355		192,849
Cash Flows from Investing Activities:
Purchases of marketable investment securities	(45,905)		(321,892)
Sales and maturities of marketable investment securities	205,296		323,889
Expenditures for property and equipment	(102,463)		(235,223)
Refunds and other receipts related to capital expenditures	—		24,087
Changes in restricted cash and marketable investment securities	4,583		(662)
Sale of investment in unconsolidated entity	17,781		—
Expenditures for externally marketed software	(10,832)		(5,959)
Other, net	—		1,460
Net cash flows from investing activities	68,460		(214,300)
Cash Flows from Financing Activities:
Repayment of debt and capital lease obligations	(8,736)		(10,542)
Net proceeds from Class A common stock options exercised	26,325		2,315
Net proceeds from Class A common stock issued under the Employee Stock Purchase Plan	2,409		4,020
Cash exchanged for Tracking Stock	(651)		—
Other, net	(1,475)		(302)
Net cash flows from financing activities	17,872		(4,509)
Effect of exchange rates on cash and cash equivalents	715		536
Net increase (decrease) in cash and cash equivalents	228,402		(25,424)
Cash and cash equivalents, beginning of period	2,571,143		924,240
Cash and cash equivalents, end of period	$	2,799,545	$	898,816

Supplemental Disclosure of Cash Flow Information:
Cash paid for interest (including capitalized interest)	$	54,053	$	10,476
Capitalized interest	$	21,824	$	22,021
Cash paid for income taxes	$	1,035	$	2,586
Employee benefits paid in Class A common stock	$	11,199	$	11,126
Property and equipment financed under capital lease obligations	$	7,485	$	2,351
Increase (decrease) in capital expenditures included in accounts payable, net	$	(6,315)	$	3,670
Capitalized in-orbit incentive obligations	$	31,000	$	—
Noncash net assets exchanged for Tracking Stock	$	299,425	$	—

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SOURCE EchoStar Corporation

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