EchoStar CORP - Quarter Report: 2021 March (Form 10-Q)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2021.

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

FOR THE TRANSITION PERIOD FROM TO

Commission File Number: 001-33807

EchoStar Corporation

(Exact name of registrant as specified in its charter)

Nevada

26-1232727

(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)

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

Class A common stock

$0.001 par value

The NASDAQ Stock Market LLC

(Title of each class)

(Name of each exchange on which registered)

SATS

(Ticker symbol)

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

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

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

Large accelerated filer

☒

Accelerated filer

☐

Emerging growth company

☐

Non-accelerated filer

☐

Smaller reporting company

☐

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

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

As of April 29, 2021, the registrant’s outstanding common stock consisted of 43,133,424 shares of Class A common stock and 47,687,039 shares of Class B common stock, each $0.001 par value.

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TABLE OF CONTENTS


Disclosure Regarding Forward Looking Statements		i

	PART I - FINANCIAL INFORMATION

Item 1.	Financial Statements	1
	Consolidated Balance Sheets as of March 31, 2021 (unaudited) and December 31, 2020 (audited)	1
	Consolidated Statements of Operations for the three months ended March 31, 2021 and 2020 (unaudited)	3
	Consolidated Statements of Comprehensive Income (Loss) for the three months ended March 31, 2021 and 2020 (unaudited)	4
	Consolidated Statements of Stockholders’ Equity for the three months ended March 31, 2021 and 2020 (unaudited)	5
	Consolidated Statements of Cash Flows for the three months ended March 31, 2021 and 2020 (unaudited)	6
	Notes to the Consolidated Financial Statements (unaudited)	7
Item 2 .	Management’s Discussion and Analysis of Financial Condition and Results of Operations	35
Item 3 .	Quantitative and Qualitative Disclosures about Market Risk	49
Item 4 .	Controls and Procedures	49

	PART II - OTHER INFORMATION

Item 1 .	Legal Proceedings	50
Item 1A.	Risk Factors	50
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	50
Item 3.	Defaults Upon Senior Securities	50
Item 4.	Mine Safety Disclosures	50
Item 5 .	Other Information	50
Item 6 .	Exhibits	52
	Signatures	53

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DISCLOSURE REGARDING FORWARD LOOKING STATEMENTS

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

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

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

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

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

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

•risks related to our dependency upon third-party providers; 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 Discussion and Analysis of Financial Condition and Results of Operations in Part I, Item 2 of this Form 10-Q and in Part II, Item 7 of our Form 10-K and those discussed in other documents we file with the SEC.

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

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

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

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PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ECHOSTAR CORPORATION

CONSOLIDATED BALANCE SHEETS

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

(Unaudited)


	As of
	March 31, 2021		December 31, 2020
Assets
Current assets:
Cash and cash equivalents	$	1,583,747	$	896,005
Marketable investment securities	735,418		1,638,271
Trade accounts receivable and contract assets, net	187,280		183,989
Other current assets, net	190,958		189,821
Total current assets	2,697,403		2,908,086
Non-current assets:
Property and equipment, net	2,420,917		2,390,313
Operating lease right-of-use assets	131,601		128,303
Goodwill	510,945		511,597
Regulatory authorizations, net	476,092		478,762
Other intangible assets, net	16,316		18,433
Other investments, net	347,615		284,937
Other non-current assets, net	350,920		352,921
Total non-current assets	4,254,406		4,165,266
Total assets	$	6,951,809	$	7,073,352

Liabilities and Stockholders' Equity
Current liabilities:
Trade accounts payable	$	106,500	$	122,366
Current portion of long-term debt, net	808,758		898,237
Contract liabilities	112,507		104,569
Accrued expenses and other current liabilities	304,018		299,999
Total current liabilities	1,331,783		1,425,171
Non-current liabilities:
Long-term debt, net	1,495,436		1,495,256
Deferred tax liabilities, net	378,271		359,896
Operating lease liabilities	118,569		114,886
Other non-current liabilities	69,885		70,893
Total non-current liabilities	2,062,161		2,040,931
Total liabilities	3,393,944		3,466,102

Commitments and contingencies

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

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ECHOSTAR CORPORATION

CONSOLIDATED BALANCE SHEETS

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

(Unaudited)


Stockholders' equity:
Preferred stock, $0.001 par value, 20,000,000 shares authorized, none issued and outstanding at both March 31, 2021 and December 31, 2020	—		—
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, 57,712,888 shares issued and 44,551,347 shares outstanding at March 31, 2021 and 57,254,201 shares issued and 48,863,374 shares outstanding at December 31, 2020	58		57
Class B convertible common stock, $0.001 par value, 800,000,000 shares authorized, 47,687,039 shares issued and outstanding at both March 31, 2021 and December 31, 2020	48		48
Class C convertible common stock, $0.001 par value, 800,000,000 shares authorized, none issued and outstanding at both March 31, 2021 and December 31, 2020	—		—
Class D common stock, $0.001 par value, 800,000,000 shares authorized, none issued and outstanding at both March 31, 2021 and December 31, 2020	—		—
Additional paid-in capital	3,333,047		3,321,426
Accumulated other comprehensive income (loss)	(215,476)		(187,876)
Accumulated earnings (losses)	662,110		583,591
Treasury shares, at cost	(285,681)		(174,912)
Total EchoStar Corporation stockholders' equity	3,494,106		3,542,334
Non-controlling interests	63,759		64,916
Total stockholders' equity	3,557,865		3,607,250
Total liabilities and stockholders' equity	$	6,951,809	$	7,073,352

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

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ECHOSTAR CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(Amounts in thousands, except per share amounts)

(Unaudited)


	For the three months ended March 31,
	2021		2020
Revenue:
Services and other revenue	$	430,337	$	408,357
Equipment revenue	52,245		57,309
Total revenue	482,582		465,666
Costs and expenses:
Cost of sales - services and other (exclusive of depreciation and amortization)	132,789		145,252
Cost of sales - equipment (exclusive of depreciation and amortization)	45,151		45,908
Selling, general and administrative expenses	114,119		125,281
Research and development expenses	7,545		6,254
Depreciation and amortization	129,286		132,368
Impairment of long-lived assets	230		—
Total costs and expenses	429,120		455,063
Operating income (loss)	53,462		10,603
Other income (expense):
Interest income, net	5,949		15,583
Interest expense, net of amounts capitalized	(34,667)		(36,233)
Gains (losses) on investments, net	78,600		(46,672)
Equity in earnings (losses) of unconsolidated affiliates, net	1,374		2,613
Foreign currency transaction gains (losses), net	(4,069)		(10,844)
Other, net	(930)		(279)
Total other income (expense), net	46,257		(75,832)
Income (loss) before income taxes	99,719		(65,229)
Income tax benefit (provision), net	(22,147)		7,492
Net income (loss)	77,572		(57,737)
Less: Net loss (income) attributable to non-controlling interests	947		3,442
Net income (loss) attributable to EchoStar Corporation common stock	$	78,519	$	(54,295)

Earnings (losses) per share - Class A and B common stock:
Basic and diluted earnings (losses) per share	$	0.84	$	(0.56)

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

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ECHOSTAR CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Amounts in thousands)

(Unaudited)


	For the three months ended March 31,
	2021		2020
Net income (loss)	$	77,572	$	(57,737)
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments	(26,197)		(80,362)
Unrealized gains (losses) on available-for-sale securities	(86)		(3,366)
Other	(6,920)		(2,675)
Amounts reclassified to net income (loss):
Realized losses (gains) on available-for-sale debt securities	(7)		—
Total other comprehensive income (loss), net of tax	(33,210)		(86,403)
Comprehensive income (loss)	44,362		(144,140)
Less: Comprehensive loss (income) attributable to non-controlling interests	6,557		19,765
Comprehensive income (loss) attributable to EchoStar Corporation	$	37,805	$	(124,375)

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

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ECHOSTAR CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020

(Amounts in thousands)

(Unaudited)


	Common Stock		Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss)		Accumulated Earnings (Losses)		Treasury Shares, at cost		Non-controlling Interests		Total
Balance, December 31, 2019	$	105	$	3,290,483	$	(122,138)	$	632,809	$	(131,454)	$	75,748	$	3,745,553
Cumulative effect of accounting changes	—		—		—		(9,068)		—		(240)		(9,308)
Balance, January 1, 2020	105		3,290,483		(122,138)		623,741		(131,454)		75,508		3,736,245
Issuances of Class A common stock:
Exercise of stock options	—		178		—		—		—		—		178
Employee benefits	—		6,920		—		—		—		—		6,920
Employee Stock Purchase Plan	—		2,924		—		—		—		—		2,924
Stock-based compensation	—		2,384		—		—		—		—		2,384
Issuance of equity and contribution of assets pursuant to the Yahsat JV formation	—		4,338		—		—		—		(1,514)		2,824
Contribution by non-controlling interest holder	—		—		—		—		—		4,000		4,000
Other comprehensive income (loss)	—		—		(70,080)		—		—		(16,323)		(86,403)
Net income (loss)	—		—		—		(54,295)		—		(3,442)		(57,737)
Treasury share repurchase	—		—		—		—		(5,893)		—		(5,893)
Other, net	—		133		—		—		—		—		133
Balance, March 31, 2020	$	105	$	3,307,360	$	(192,218)	$	569,446	$	(137,347)	$	58,229	$	3,605,575

Balance, December 31, 2020	$	105	$	3,321,426	$	(187,876)	$	583,591	$	(174,912)	$	64,916	$	3,607,250
Issuances of Class A common stock:
Employee benefits	1		7,124		—		—		—		—		7,125
Employee Stock Purchase Plan	—		2,486		—		—		—		—		2,486
Stock-based compensation	—		2,011		—		—		—		—		2,011
Contribution by non-controlling interest holder	—		—		—		—		—		5,400		5,400
Other comprehensive income (loss)	—		—		(27,600)		—		—		(5,610)		(33,210)
Net income (loss)	—		—		—		78,519		—		(947)		77,572
Treasury share repurchase	—		—		—		—		(110,769)		—		(110,769)
Balance, March 31, 2021	$	106	$	3,333,047	$	(215,476)	$	662,110	$	(285,681)	$	63,759	$	3,557,865

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

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ECHOSTAR CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

(Unaudited)


	For the three months ended March 31,
	2021		2020
Cash flows from operating activities:
Net income (loss)	$	77,572	$	(57,737)
Adjustments to reconcile net income (loss) to cash flows provided by (used for) operating activities:
Depreciation and amortization	129,286		132,368
Impairment of long-lived assets	230		—
Losses (gains) on investments, net	(78,600)		46,672
Equity in losses (earnings) of unconsolidated affiliates, net	(1,374)		(2,613)
Foreign currency transaction losses (gains), net	4,069		10,844
Deferred tax provision (benefit), net	18,370		(10,064)
Stock-based compensation	2,011		2,384
Amortization of debt issuance costs	1,118		1,050
Other, net	11,551		(4,899)
Changes in assets and liabilities, net:
Trade accounts receivable and contract assets, net	(6,090)		(7,664)
Other current assets, net	(1,736)		(16,127)
Trade accounts payable	(18,375)		(9,559)
Contract liabilities	7,938		(3,212)
Accrued expenses and other current liabilities	(27,447)		(4,922)
Non-current assets and non-current liabilities, net	(1,636)		(5,226)
Net cash provided by (used for) operating activities	116,887		71,295

Cash flows from investing activities:
Purchases of marketable investment securities	(389,071)		(550,891)
Sales and maturities of marketable investment securities	1,361,632		687,579
Expenditures for property and equipment	(179,235)		(104,604)
Expenditures for externally marketed software	(7,846)		(8,638)
Purchase of other investments	(50,000)		(5,500)
Sales of other investments	1,500		—
Net cash provided by (used for) investing activities	736,980		17,946

Cash flows from financing activities:
Repurchase of the 2021 Senior Unsecured Notes	(62,588)		—
Payment of finance lease obligations	(329)		(215)
Payment of in-orbit incentive obligations	(1,104)		(801)
Net proceeds from Class A common stock options exercised	—		150
Net proceeds from Class A common stock issued under the Employee Stock Purchase Plan	2,486		2,924
Treasury share repurchase	(107,862)		(5,893)
Contribution by non-controlling interest holder	5,400		4,000
Other, net	(292)		817
Net cash provided by (used for) financing activities	(164,289)		982

Effect of exchange rates on cash and cash equivalents	(1,808)		(4,809)
Net increase (decrease) in cash and cash equivalents	687,770		85,414
Cash and cash equivalents, including restricted amounts, beginning of period	896,812		1,521,889
Cash and cash equivalents, including restricted amounts, end of period	$	1,584,582	$	1,607,303

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

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ECHOSTAR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1. ORGANIZATION AND BUSINESS ACTIVITIES

Principal Business

EchoStar Corporation (which, together with its subsidiaries, is referred to as “EchoStar,” the “Company,” “we,” “us” and “our”) is a holding company that was organized in October 2007 as a corporation under the laws of the State of Nevada and has operated as a separately traded public company from DISH Network Corporation (“DISH”) since 2008. Our Class A common stock is publicly traded on the NASDAQ Global Select Market (“NASDAQ”) under the symbol “SATS.”

We are a global provider of broadband satellite technologies, broadband internet services for consumer customers, which include home and small to medium-sized businesses, and satellite services. We also deliver innovative network technologies, managed services and communications solutions for enterprise customers, which include aeronautical and government enterprises. We operate in the following two business segments:

•Hughes — which provides broadband satellite technologies and broadband internet services to domestic and international consumer customers and broadband network technologies, managed services, equipment, hardware, satellite services and communication solutions to service providers and enterprise customers. The Hughes segment also designs, provides and installs gateway and terminal equipment to customers for other satellite systems. In addition, our Hughes segment designs, develops, constructs and provides telecommunication networks comprising satellite ground segment systems and terminals to mobile system operators and our enterprise customers.

•ESS — which uses certain of our owned and leased in-orbit satellites and related licenses to provide satellite services on a full-time and/or occasional-use basis to United States (“U.S.”) government service providers, internet service providers, broadcast news organizations, content providers and private enterprise customers.

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

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

These unaudited Consolidated Financial Statements and the accompanying notes (collectively, the “Consolidated Financial Statements”) are prepared in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) and the instructions to Form 10-Q and Article 10 of Regulation S-X for interim financial information. Accordingly, they do not include all of the information and notes required for complete financial statements prepared in conformity with U.S. 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.

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ECHOSTAR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(Unaudited)

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; (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) asset 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 stockholders’ 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

On January 1, 2021, we adopted Accounting Standard Update (“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

In March 2020, the FASB issued ASU No. 2020-04 - Reference Rate Reform (Topic 848), 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, 2022. 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 impact of adopting this new guidance and do not expect it to have a material impact on our Consolidated Financial Statements.

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ECHOSTAR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(Unaudited)

NOTE 3. REVENUE RECOGNITION

Contract Balances

The following table presents the components of our contract balances:


	As of
	March 31, 2021		December 31, 2020
Trade accounts receivable and contract assets, net:
Sales and services	$	150,021	$	149,513
Leasing	4,656		4,554
Total trade accounts receivable	154,677		154,067
Contract assets	46,267		45,308
Allowance for doubtful accounts	(13,664)		(15,386)
Total trade accounts receivable and contract assets, net	$	187,280	$	183,989

Contract liabilities:
Current	$	112,507	$	104,569
Non-current	10,357		10,519
Total contract liabilities	$	122,864	$	115,088

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


	For the three months ended March 31,
	2021		2020
Revenue	$	63,081	$	52,172

Contract Acquisition Costs

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


	For the three months ended March 31,
	2021		2020
Balance at beginning of period	$	99,837	$	113,592
Additions	18,400		26,474
Amortization expense	(22,769)		(25,675)
Foreign currency translation	(875)		(3,994)
Balance at end of period	$	94,593	$	110,397

Performance Obligations

As of March 31, 2021, the remaining performance obligations for our customer contracts with original expected durations of more than one year was $939.7 million. Performance obligations expected to be satisfied within one year and greater than one year are 37% and 63%, 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.

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Disaggregation of Revenue

Geographic Information

The following table presents our revenue from customer contracts disaggregated by primary geographic market and by segment:


	Hughes		ESS		Corporate and Other		Consolidated Total
For the three months ended March 31, 2021
North America	$	398,759	$	4,089	$	2,612	$	405,460
South and Central America	43,030		—		—		43,030
Other	34,070		—		22		34,092
Total revenue	$	475,859	$	4,089	$	2,634	$	482,582

For the three months ended March 31, 2020
North America	$	382,715	$	4,652	$	2,440	$	389,807
South and Central America	33,956		—		92		34,048
Other	41,811		—		—		41,811
Total revenue	$	458,482	$	4,652	$	2,532	$	465,666

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Nature of Products and Services

The following table presents 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 March 31, 2021
Services and other revenue:
Services	$	413,519	$	2,690	$	1,091	$	417,300
Lease revenue	10,101		1,399		1,537		13,037
Total services and other revenue	423,620		4,089		2,628		430,337
Equipment revenue:
Equipment	28,521		—		6		28,527
Design, development and construction services	21,636		—		—		21,636
Lease revenue	2,082		—		—		2,082
Total equipment revenue	52,239		—		6		52,245
Total revenue	$	475,859	$	4,089	$	2,634	$	482,582

For the three months ended March 31, 2020
Services and other revenue:
Services	$	390,000	$	2,765	$	1,288	$	394,053
Lease revenue	11,173		1,887		1,244		14,304
Total services and other revenue	401,173		4,652		2,532		408,357
Equipment revenue:
Equipment	24,839		—		—		24,839
Design, development and construction services	31,557		—		—		31,557
Lease revenue	913						913
Total equipment revenue	57,309		—		—		57,309
Total revenue	$	458,482	$	4,652	$	2,532	$	465,666

Lease Revenue

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


	For the three months ended March 31,
	2021		2020
Sales-type lease revenue:
Revenue at lease commencement	$	2,082	$	913
Interest income	73		69
Total sales-type lease revenue	2,155		982
Operating lease revenue	12,964		14,235
Total lease revenue	$	15,119	$	15,217

Substantially all of our net investment in sales-type leases consisted of lease receivables totaling $13.4 million and $13.0 million as of March 31, 2021 and December 31, 2020, respectively.

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The following table presents future operating lease payments to be received as of March 31, 2021:


	Amounts
Year ending December 31,
2021 (remainder)	$	36,118
2022	34,082
2023	32,000
2024	29,740
2025	28,482
2026 and beyond	47,562
Total lease payments	$	207,984

The following table presents amounts for assets subject to operating leases, which are included in Property and equipment, net:


	As of
	March 31, 2021						December 31, 2020
	Cost		Accumulated Depreciation		Net		Cost		Accumulated Depreciation		Net
Customer premises equipment	$	1,651,687	$	(1,316,511)	$	335,176	$	1,617,053	$	(1,265,129)	$	351,924
Satellites	104,620		(40,078)		64,542		104,620		(38,335)		66,285
Real estate	48,275		(17,336)		30,939		48,275		(17,094)		31,181
Total	$	1,804,582	$	(1,373,925)	$	430,657	$	1,769,948	$	(1,320,558)	$	449,390

The following table presents depreciation expense for assets subject to operating leases, which is included in Depreciation and amortization:


	For the three months ended March 31,
	2021		2020
Customer premises equipment	$	56,646	$	45,721
Satellites	1,744		1,744
Real estate	242		232
Total	$	58,632	$	47,697

NOTE 4. EARNINGS PER SHARE

We present basic and diluted earnings or losses per share (“EPS”) for our Class A and Class B common stock. Basic EPS for our Class A and Class B common stock excludes potential dilution and is computed by dividing Net income (loss) attributable to EchoStar Corporation common stock by the weighted-average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if shares of common stock were issued pursuant to our stock-based compensation awards. The potential dilution from common stock awards is computed using the treasury stock method based on the average market value of our Class A common stock during the period. The calculation of our diluted weighted-average common shares outstanding excluded options to purchase shares of our Class A common stock, the effect of which would be anti-dilutive.

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The following table presents the calculation of basic and diluted EPS for our Class A and B common stock:


	For the three months ended March 31,
	2021		2020
Net income (loss) attributable to EchoStar Corporation common stock	$	78,519	$	(54,295)

Weighted-average common shares outstanding:
Basic	93,871		97,811
Dilutive impact of stock awards outstanding	25		—
Diluted	93,896		97,811

Earnings (losses) per share:
Basic and diluted earnings (losses) per share	$	0.84	$	(0.56)

The following table presents the number of anti-dilutive options to purchase shares of our Class A common stock which have been excluded from the calculation of our weighted-average common shares outstanding:


	For the three months ended March 31,
	2021	2020
Number of shares	4,750	4,797

NOTE 5. MARKETABLE INVESTMENT SECURITIES

The following table presents our Marketable investment securities:


	As of
	March 31, 2021		December 31, 2020
Marketable investment securities:
Available-for-sale debt securities:
Corporate bonds	$	135,456	$	372,746
Commercial paper	372,623		1,101,888
Other debt securities	87,932		148,292
Total available-for-sale debt securities	596,011		1,622,926
Equity securities	148,557		24,435
Total marketable investment securities, including restricted amounts	744,568		1,647,361
Less: Restricted marketable investment securities	(9,150)		(9,090)
Total marketable investment securities	$	735,418	$	1,638,271

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Debt Securities

Available-for-Sale

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


	Amortized		Unrealized				Estimated
	Cost		Gains		Losses		Fair Value
As of March 31, 2021
Corporate bonds	$	135,456	$	14	$	(14)	$	135,456
Commercial paper	372,623		—		—		372,623
Other debt securities	87,981		7		(56)		87,932
Total available-for-sale debt securities	$	596,060	$	21	$	(70)	$	596,011
As of December 31, 2020
Corporate bonds	$	372,702	$	78	$	(34)	$	372,746
Commercial paper	1,101,888		—		—		1,101,888
Other debt securities	148,292		6		(6)		148,292
Total available-for-sale debt securities	$	1,622,882	$	84	$	(40)	$	1,622,926

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


	For the three months ended March 31,
	2021		2020
Proceeds from sales	$	181,995	$	10,000

As of March 31, 2021, we have $571.9 million of available-for-sale debt securities with contractual maturities of one year or less and $24.1 million with contractual maturities greater than one year.

Fair Value Option

The following table presents the activity on our fair value option corporate bonds:


	For the three months ended March 31,
	2021		2020
Gains (losses) on investments, net	$	—	$	(4,208)

Equity Securities

The following table presents the activity of our equity securities:


	For the three months ended March 31,
	2021		2020
Gains (losses) on investments, net	$	65,568	$	(11,115)

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Fair Value Measurements

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


	Level 1		Level 2		Total
As of March 31, 2021
Cash equivalents (including restricted)	$	805	$	1,493,034	$	1,493,839
Available-for-sale debt securities:
Corporate bonds	$	—	$	135,456	$	135,456
Commercial paper	—		372,623		372,623
Other debt securities	42,256		45,676		87,932
Total available-for-sale debt securities	42,256		553,755		596,011
Equity securities	138,041		10,516		148,557
Total marketable investment securities, including restricted amounts	180,297		564,271		744,568
Less: Restricted marketable investment securities	(9,150)		—		(9,150)
Total marketable investment securities	$	171,147	$	564,271	$	735,418

As of December 31, 2020
Cash equivalents (including restricted)	$	416	$	809,698	$	810,114
Available-for-sale debt securities:
Corporate bonds	$	—	$	372,746	$	372,746
Commercial paper	—		1,101,888		1,101,888
Other debt securities	139,486		8,806		148,292
Total available-for-sale debt securities	139,486		1,483,440		1,622,926
Equity securities	14,441		9,994		24,435
Total marketable investment securities, including restricted amounts	153,927		1,493,434		1,647,361
Less: Restricted marketable investment securities	(9,090)		—		(9,090)
Total marketable investment securities	$	144,837	$	1,493,434	$	1,638,271

As of March 31, 2021 and December 31, 2020, we did not have any investments that were categorized within Level 3 of the fair value hierarchy.

NOTE 6. PROPERTY AND EQUIPMENT

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


	As of
	March 31, 2021		December 31, 2020
Property and equipment, net:
Satellites, net	$	1,659,154	$	1,602,076
Other property and equipment, net	761,763		788,237
Total property and equipment, net	$	2,420,917	$	2,390,313

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Satellites

As of March 31, 2021, our operating satellite fleet consisted of 10 satellites, seven of which are owned and three of which are leased. They are all in geosynchronous orbit, approximately 22,300 miles above the equator.

The following table presents our operating satellite fleet as of March 31, 2021 which consists of both owned and leased satellites:

Satellite

Segment

Launch Date

Nominal Degree Orbital Location (Longitude)

Depreciable Life (In Years)

Owned:

SPACEWAY 3 (1)

Hughes

August 2007

95 W

EchoStar XVII

Hughes

July 2012

107 W

EchoStar XIX

Hughes

December 2016

97.1 W

Al Yah 3 (2)

Hughes

January 2018

20 W

EchoStar IX (3)

ESS

August 2003

121 W

EUTELSAT 10A (“W2A”) (4)

Corporate and Other

April 2009

10 E

EchoStar XXI

Corporate and Other

June 2017

10.25 E

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 its acquisition of Hughes Communications, Inc. and its subsidiaries (the “Hughes Acquisition”).

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

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

(4) We acquired the S-band payload on this satellite in December 2013. Prior to acquisition, the S-band payload experienced an anomaly at the time of launch and, as a result, is not fully operational.

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


	Depreciable Life (In Years)	As of
		March 31, 2021		December 31, 2020
Satellites, net:
Satellites - owned	7 to 15	$	1,802,072	$	1,805,590
Satellites - acquired under finance leases	15	352,261		352,245
Construction in progress	—	505,939		409,032
Total satellites		2,660,272		2,566,867
Accumulated depreciation:
Satellites - owned		(923,704)		(890,783)
Satellites - acquired under finance leases		(77,414)		(74,008)
Total accumulated depreciation		(1,001,118)		(964,791)
Total satellites, net		$	1,659,154	$	1,602,076

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


	For the three months ended March 31,
	2021		2020
Depreciation expense:
Satellites - owned	$	32,161	$	32,073
Satellites - acquired under finance leases	7,201		6,013
Total depreciation expense	$	39,362	$	38,086

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


	For the three months ended March 31,
	2021		2020
Capitalized interest	$	8,563	$	6,681

Construction in Progress

In August 2017, we entered into a contract for the design and construction of the EchoStar XXIV satellite, a new, next-generation, high throughput geostationary satellite. The EchoStar XXIV satellite is primarily intended to provide additional capacity for our HughesNet satellite internet service (“HughesNet service”) in North, Central and South America as well as enterprise broadband services. Capital expenditures associated with the construction and launch of the EchoStar XXIV satellite are included in Corporate and Other in our segment reporting.

Satellite-Related Commitments

As of March 31, 2021 and December 31, 2020 our satellite-related commitments were $389.7 million and $487.7 million, respectively. These include payments pursuant to agreements for the construction of the EchoStar XXIV satellite, payments pursuant to the EchoStar XXIV launch contract, payments pursuant to regulatory authorizations, non-lease costs associated with our finance lease satellites, in-orbit incentives relating to certain satellites and commitments for satellite service arrangements.

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

Satellite Anomalies and Impairments

We are not aware of any anomalies with respect to our owned or leased satellites or payloads that have had any significant adverse effect on their remaining useful lives, the commercial operation of the satellites or payloads or our operating results or financial position as of and for the three months ended March 31, 2021.

Fair Value of In-Orbit Incentives

As of March 31, 2021 and December 31, 2020, the fair values of our in-orbit incentive obligations approximated their carrying amounts of $54.3 million and $55.4 million, respectively.

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NOTE 7. REGULATORY AUTHORIZATIONS

The following table presents our Regulatory authorizations, net:


	Finite lived
	Cost		Accumulated Amortization		Total		Indefinite lived		Total
Balance, December 31, 2019	$	58,451	$	(20,144)	$	38,307	$	440,291	$	478,598
Amortization expense	—		(964)		(964)		—		(964)
Currency translation adjustments	(1,828)		366		(1,462)		(5,008)		(6,470)
Balance, March 31, 2020	$	56,623	$	(20,742)	$	35,881	$	435,283	$	471,164

Balance, December 31, 2020	$	61,381	$	(26,639)	$	34,742	$	444,020	$	478,762
Amortization expense	—		(1,134)		(1,134)		—		(1,134)
Currency translation adjustments	(2,345)		1,124		(1,221)		(315)		(1,536)
Balance, March 31, 2021	$	59,036	$	(26,649)	$	32,387	$	443,705	$	476,092

Weighted-average useful life (in years)			13

NOTE 8. OTHER INVESTMENTS

The following table presents our Other investments, net:


	As of
	March 31, 2021		December 31, 2020
Other investments, net:
Equity method investments	$	151,545	$	151,070
Other equity investments	93,987		31,662
Other debt investments, net	102,083		102,205
Total other investments, net	$	347,615	$	284,937

Equity Method Investments

Dish Mexico

We own 49% of DISH Mexico, S. de R.L. de C.V. and its subsidiaries (“Dish Mexico”), a joint venture that we entered into in 2008 to provide direct-to-home satellite services in Mexico.

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.

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Broadband Connectivity Solutions (Restricted) Limited

In August 2018, we entered into an agreement with Yahsat to establish a new entity, Broadband Connectivity Solutions (Restricted) Limited (together with its subsidiaries, “BCS”), 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. The transaction was consummated in December 2018 when we invested $100.0 million in cash in exchange for a 20% interest in BCS. Under the terms of the agreement, we may also acquire, for further cash investments, additional ownership interests in BCS in the future provided certain conditions are met. We supply network operations and management services and equipment to BCS.

Financial Information for Our Equity Method Investments

The following table presents revenue recognized:


	For the three months ended March 31,
	2021		2020
Deluxe	$	1,631	$	1,255
BCS	$	1,348	$	1,669

The following table presents trade accounts receivable:


	As of
	March 31, 2021		December 31, 2020
Deluxe	$	1,318	$	716
BCS	$	5,043	$	9,347

Other Equity Investments

The following table presents the activity on our investments:


	For the three months ended March 31,
	2021		2020
Gain (loss) on investments, net	$	14,156	$	(21,347)

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NOTE 9. LONG-TERM DEBT

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


	Effective Interest Rate	As of
		March 31, 2021				December 31, 2020
		Carrying Amount		Fair Value		Carrying Amount		Fair Value
Senior Secured Notes:
5 1/4% Senior Secured Notes due 2026	5.320%	$	750,000	$	830,933	$	750,000	$	834,045
Senior Unsecured Notes:
7 5/8% Senior Unsecured Notes due 2021	8.062%	809,486		821,555		900,000		924,003
6 5/8% Senior Unsecured Notes due 2026	6.688%	750,000		834,383		750,000		852,810
Less: Unamortized debt issuance costs		(5,292)		—		(6,507)		—
Total long-term debt		2,304,194		2,486,871		2,393,493		2,610,858
Less: Current portion, net		(808,758)		(821,555)		(898,237)		(924,003)
Long-term debt, net		$	1,495,436	$	1,665,316	$	1,495,256	$	1,686,855

As of March 31, 2021, we have repurchased a total of $90.5 million in principal of the 2021 Senior Unsecured Notes in open market trades.

NOTE 10. 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 $22.1 million for the three months ended March 31, 2021 compared to our income tax benefit of $7.5 million for the three months ended March 31, 2020. Our estimated effective income tax rate was 22.2% and 11.5% for the three months ended March 31, 2021 and 2020, respectively. The variations in our effective tax rate from the U.S. federal statutory rate for the three months ended March 31, 2021 were primarily due to excluded foreign losses where the company carries a full valuation allowance and by the change in net unrealized gains that are capital in nature. The variations in our effective tax rate from the U.S. federal statutory rate for the three months ended March 31, 2020 were primarily due to the increase in our valuation allowance associated with certain foreign losses and the impact of state and local taxes, partially offset by the change in net unrealized losses that are capital in nature and research and experimentation credits.

NOTE 11. RELATED PARTY TRANSACTIONS - DISH NETWORK

Overview

EchoStar Corporation 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 Corporation 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, we and certain of our 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

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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 and its subsidiaries (“DISH Network”) and our joint venture Dish Mexico, and (2) telemetry, tracking and control (“TT&C”) services for satellites owned by DISH Network and a portion of our other businesses (collectively, the “BSS Business”) to one of our former subsidiaries, EchoStar BSS Corporation (“BSS Corp.”), (ii) we distributed to each holder of shares of our Class A or Class B common stock entitled to receive consideration in the transaction an amount of shares of common stock of BSS Corp., par value $0.001 per share (“BSS Common Stock”), equal to one share of BSS Common Stock for each share of our Class A or Class B common stock owned by such stockholder (the “Distribution”); and (iii) immediately after the Distribution, (1) Merger Sub merged with and into BSS Corp. (the “Merger”), such that BSS Corp. became a wholly-owned subsidiary of DISH and with DISH then owning and operating the BSS Business, and (2) each issued and outstanding share of BSS Common Stock owned by EchoStar stockholders was converted into the right to receive 0.23523769 shares of DISH Class A common stock, par value $0.001 per share (“DISH Common Stock”) ((i) - (iii) collectively, the “BSS Transaction”).

In connection with and following the Spin-off, the Share Exchange and the BSS Transaction, we and DISH Network entered into certain agreements pursuant to which we obtain certain products, services and rights from DISH Network; DISH Network obtains certain products, services and rights from us; and we and DISH Network indemnify each other against certain liabilities arising from our respective businesses. Generally, the amounts we 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 may also enter into additional agreements with DISH Network in the future.

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.

Services and Other Revenue — DISH Network

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


	For the three months ended March 31,
	2021		2020
Services and other revenue - DISH Network	$	8,421	$	10,313

The following table presents the related trade accounts receivable:


	As of
	March 31, 2021		December 31, 2020
Trade accounts receivable - DISH Network	$	7,041	$	5,612

Satellite Capacity Leased to DISH Network. Effective January 2008, DISH Network began leasing satellite capacity from us on the EchoStar IX satellite. Subject to availability, DISH Network generally has the right to continue leasing satellite capacity from us on the EchoStar IX satellite on a month-to-month basis.

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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.

Real Estate Leases to DISH Network. We have entered into lease agreements pursuant to which DISH Network leases certain real estate from us. The rent on a per square foot basis for each of the leases is comparable to per square foot rental rates of similar commercial property in the same geographic area at the time of the leases or subsequent amendments. Additionally, DISH Network compensates us for its portion of the taxes, insurance, utilities and/or maintenance of the premises. The terms of each of the leases are set forth below:

•100 Inverness Occupancy License Agreement — In March 2017, we and DISH Network entered into a license agreement for DISH Network to use certain of our space at 100 Inverness Terrace East, Englewood, Colorado for an initial period ending in December 2020. Effective December 2020, we amended this agreement to extend the license until December 2021. This agreement may be terminated by either party upon 180 days’ prior notice. Subsequent to December 2021, this agreement will be converted to a month-to-month lease agreement unless extended by mutual consent or terminated by one of the parties upon 30 days’ notice. In connection with the BSS Transaction, we transferred to DISH Network the Englewood Satellite Operations Center located at 100 Inverness Terrace East, including any and all equipment, hardware licenses, software, processes, software licenses, furniture and technical documentation associated with the satellites transferred in the BSS Transaction.

•Meridian Lease Agreement — The lease for all of 9601 S. Meridian Blvd., Englewood, Colorado was originally for a period ending in December 2016. We and DISH Network have amended this lease over time to, among other things, extend the term through December 2021. After December 2021, this agreement may be converted by mutual consent to a month-to-month lease agreement with either party having the right to terminate upon 30 days’ notice.

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 our 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. The provision of hosting services will continue until May 2022. 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.

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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 our 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 2022 and will automatically renew for an additional five-year period until February 2027 unless terminated by DBSD North America upon at least 180 days’ written notice to us. In addition, DBSD North America generally may terminate any and all such services for convenience, subject to providing us with prior notice and/or payment of termination charges.

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

Operating Expenses — DISH Network

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


	For the three months ended March 31,
	2021		2020
Operating expenses - DISH Network	$	1,307	$	1,455

The following table presents the related trade accounts payable:


	As of
	March 31, 2021		December 31, 2020
Trade accounts payable - DISH Network	$	426	$	752

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Amended and Restated Professional Services Agreement. In connection with the Spin-off, we 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, we and DISH Network agreed that we 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, we and DISH Network agreed that DISH Network would continue to have the right, but not the obligation, to engage us 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 us (previously provided under a services agreement) and provide other support services. In connection with the consummation of the Share Exchange, we and DISH amended and restated the Professional Services Agreement (as amended to date, the “Amended and Restated Professional Services Agreement”) to provide that we and DISH Network shall have the right to receive additional services that either we 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, we and DISH further amended the Amended and Restated Professional Services Agreement to provide that we and DISH Network shall have the right to receive additional services that either we 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. The term of the Amended and Restated Professional Services Agreement is through January 1, 2022 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.

Real Estate Leases from DISH Network. Effective March 2017, we entered into a lease with DISH Network for certain space at 530 EchoStar Drive in Cheyenne, Wyoming for an initial period ending in February 2019. In August 2018, we exercised our option to renew this lease for a one-year period ending in February 2020. In connection with the BSS Transaction, we transferred the Cheyenne Satellite Operations Center, including any equipment, software licenses, and furniture located within, to DISH Network and amended this lease to reduce the space provided to us for the Cheyenne Satellite Access Center for a period ending in September 2021. In March 2021, we exercised our option to renew this lease for a one-year period ending September 2022. The rent on a per square foot basis is comparable to per square foot rental rates of similar commercial property in the same geographic area at the time of the lease or subsequent amendments and includes our portion of the taxes, insurance, utilities and/or maintenance of the premises.

Collocation and Antenna Space Agreements. We and DISH Network have 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 August 2015, and provided us with renewal options for two consecutive three-year terms. Effective August 2015, we exercised our first renewal option for a period ending in August 2018 and in April 2018 we exercised our second renewal option for a period ending in August 2021. 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 to be effective May 2020. 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. 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 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

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2020. The fees for the services provided under these agreements depend on the number of racks located at the location.

Also in connection with the BSS Transaction, in September 2019, we entered into an agreement pursuant to which DISH Network provides us with antenna space and power in Cheyenne, Wyoming for a period of five years commencing in August 2020, with four three-year renewal terms, with prior written notice of renewal required no more than 120 days but no less than 90 days prior to the end of the then-current term. In March 2021, we entered into additional agreements pursuant to which DISH Network provides us with a gateway, including antenna space in Cheyenne, Wyoming and 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 Hughes Broadband MSA has an initial term of five years through March 2022 with automatic renewal for successive one-year terms. Either party has the ability to terminate the Hughes Broadband MSA, in whole or in part, for any reason upon at least 90 days’ notice to the other party. Upon expiration or termination of the Hughes Broadband MSA, we will continue to provide our Gen 5 HughesNet service to subscribers and make certain payments to DISH Network pursuant to the terms and conditions of the Hughes Broadband MSA. We incurred sales incentives and other costs under the Hughes Broadband MSA totaling $1.9 million and $4.6 million for the three months ended March 31, 2021 and 2020, respectively.

2019 TT&C Agreement. In September 2019, in connection with the BSS Transaction, we entered into an agreement pursuant to which DISH Network provides TT&C services to us for a period ending in September 2021, with the option for us 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.

Other Receivables - DISH Network

The following table presents our other receivables owed from DISH Network:


	As of
	March 31, 2021		December 31, 2020
Other receivables - DISH Network	$	92,748	$	92,680

Tax Sharing Agreement. Effective December 2007, we and DISH Network entered into a tax sharing agreement (the “Tax Sharing Agreement”) in connection with the Spin-off. This agreement governs our and DISH Network’s 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 us for such taxes. However, DISH Network is not liable for and does not indemnify us 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 Code, because of: (i) a direct or indirect acquisition of any of our stock, stock options or assets; (ii) any action that we take or fail to take or (iii) any action that we 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, we 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

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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 our consolidated federal income tax returns for certain tax years prior to and for the year of the Spin-off, in September 2013, we 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 our consolidated tax returns. Prior to the agreement with DISH Network in 2013, the federal tax benefits were reflected as a deferred tax asset for depreciation and amortization, which was netted in our non-current deferred tax liabilities. The agreement with DISH Network in 2013 requires DISH Network to pay us the federal tax benefit it receives at such time as we would have otherwise been able to realize such tax benefit. We recorded a non-current receivable from DISH Network in Other receivables - DISH Network and a corresponding increase in our Deferred tax liabilities, net to reflect the effects of this agreement in September 2013. In addition, in September 2013, we and DISH Network agreed upon a tax sharing arrangement for filing certain combined state income tax returns and a method of allocating the respective tax liabilities between us and DISH Network for such combined returns, through the taxable period ending on December 31, 2017 (the “State Tax Arrangement”).

In August 2018, we and DISH Network amended the Tax Sharing Agreement and the 2013 agreements (the “Tax Sharing Amendment”). Under the Tax Sharing Amendment, to the extent permitted by applicable tax law, DISH Network is entitled to apply the benefit of our 2009 net operating losses (the “SATS 2009 NOLs”) to DISH Network’s federal tax return for the year ended December 31, 2008, in exchange for DISH Network paying us over time the value of the net annual federal income taxes paid by us that would have been otherwise offset by the SATS 2009 NOLs. The Tax Sharing Amendment also requires us and DISH Network to pay the other for the benefits of certain past and future federal research and development tax credits that we or DISH Network receive or received as a result of being part of a controlled group under the Code, and requires DISH Network to compensate us for certain past tax losses utilized by DISH Network and for certain past and future excess California research and development tax credits generated by us and used by DISH Network. In addition, the Tax Sharing Amendment extends the term of the State Tax Arrangement to the earlier to occur of termination of the Tax Sharing Agreement, a change in control of either us or DISH Network or, for any particular state, if we and DISH Network no longer file a combined tax return for such state.

We and DISH Network filed combined income tax returns in certain states from 2008 through 2019. We have earned and recognized tax benefits for certain state income tax credits that we would be unable to fully utilize currently if we had filed separately from DISH Network. We have charged Additional paid-in capital in prior periods when DISH Network has utilized such tax benefits. We expect to increase Additional paid-in capital upon receipt of any consideration that DISH Network pays to us in exchange for these tax credits.

Other Agreements

Master Transaction Agreement. In May 2019, we 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) we transferred the BSS Business to BSS Corp.; (ii) we completed the Distribution; and (iii) immediately after the Distribution, (1) BSS Corp. became a wholly-owned subsidiary of DISH such that DISH owns and operates the BSS Business and (2) each issued and outstanding share of BSS Common Stock owned by EchoStar stockholders was converted into the right to receive 0.23523769 shares of DISH Common Stock. Following the consummation of the BSS Transaction, we no longer operate the BSS Business, which was a substantial portion of our ESS segment. The Master Transaction Agreement contained customary representations and warranties by us and DISH Network, including our 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. We 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 and DISH Network entered into an intellectual property and technology license agreement (the “BSS IPTLA”) pursuant to which we and DISH Network license to each other certain intellectual property and technology. The BSS IPTLA will continue in perpetuity, unless mutually terminated by the

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parties. Pursuant to the BSS IPTLA, we granted to DISH Network a license to our 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, among other things, for the continued use of all intellectual property and technology that is used in our retained businesses but the ownership of which was transferred to DISH Network pursuant to the BSS Transaction.

BSS Transaction Tax Matters Agreement. Effective September 2019, in connection with the BSS Transaction, we, BSS Corp. and DISH entered into a tax matters agreement. This agreement governs certain of our rights, responsibilities and obligations with respect to taxes of the BSS Business transferred pursuant to the BSS Transaction. Generally, we are 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 we and DISH made certain tax-related representations and are subject to various tax-related covenants after the consummation of the BSS Transaction. Both we 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 us 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, we 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 we are 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 we consummated the Share Exchange, following which we 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, we 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 us related to the transferred assets, assumed liabilities and the financial condition of the transferred businesses. We 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 us 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, we and DISH Network entered into an intellectual property and technology license agreement (“IPTLA”) pursuant to which we 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 granted to DISH Network a license to our 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, among other things, for the continued use of all intellectual property and technology that is used in our 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, we and DISH entered into a tax matters agreement. This agreement governs certain of our rights, responsibilities and obligations with respect to taxes of the transferred businesses pursuant to the Share Exchange. Generally, we are 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 we and DISH Network made certain tax-related representations and are subject to various tax-related covenants after the consummation of the Share Exchange. Both we 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 us 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.

Share Exchange Employee Matters Agreement. Effective March 2017, in connection with the Share Exchange, we 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 transferred businesses. DISH Network assumed employee-related liabilities relating to the transferred businesses as part of the Share Exchange, except that we are responsible for certain pre-Share Exchange employee related litigation, and compensation and benefits for employees who transferred to DISH Network in connection with the Share Exchange.

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 43% ownership in Hughes Systique, Mr. Pradman Kaul, the President of our subsidiary Hughes Communications, Inc. and a member of our board of directors, and his brother, who is the Chief Executive Officer and President of Hughes Systique, own in the aggregate approximately 25%, on an undiluted basis, of Hughes Systique’s outstanding shares as of March 31, 2021. Furthermore, Mr. Pradman Kaul serves on the board of directors of Hughes Systique. Hughes Systique is a variable interest entity and we are considered the primary beneficiary of Hughes Systique due to, among other factors, our ability to direct the activities that most significantly impact the economic performance of Hughes Systique. As a result, we consolidate Hughes Systique’s financial statements in these Consolidated Financial Statements.

TerreStar Solutions

DISH Network owns more than 15% of TerreStar Solutions, Inc. (“TSI”). In May 2018, we and TSI entered into an equipment and services agreement pursuant to which we design, manufacture and install upgraded ground communications network equipment for TSI’s network and provide, among other things, warranty and support services. We recognized revenue of $0.4 million and $2.2 million, for the three months ended March 31, 2021 and 2020, respectively. As of March 31, 2021 and December 31, 2020, we had $1.5 million and $0.4 million trade accounts receivable from TSI.

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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 our spin-off from DISH in 2008, we 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, we assumed certain liabilities that relate to 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 we will generally only be liable for our acts or omissions following the Spin-off and DISH Network will indemnify us 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, we 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 us and DISH Network for, in the case of the Share Exchange, certain pre-existing liabilities and legal proceedings and, in the case of the BSS Transaction, certain losses with respect to breaches of certain representations and covenants and certain liabilities.

Litigation

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

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

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

Shareholder Litigation

On July 2, 2019, the City of Hallandale Beach Police Officers’ and Firefighters’ Personnel Retirement Trust, purporting to sue on behalf of a class of EchoStar Corporation’s stockholders, filed a complaint in the District Court of Clark County, Nevada against our directors, Charles W. Ergen, R. Stanton Dodge, Anthony M. Federico, Pradman P. Kaul, C. Michael Schroeder, Jeffrey R. Tarr, William D. Wade, and Michael T. Dugan; our chief financial officer, David J. Rayner; EchoStar Corporation; our subsidiary Hughes Satellite Systems Corporation (“HSSC”); our former subsidiary BSS Corp.; and DISH and its subsidiary Merger Sub. On September 5, 2019, the defendants filed motions to dismiss. On October 11, 2019, the plaintiffs filed an amended complaint removing Messrs. Dodge, Federico, Kaul, Schroeder, Tarr and Wade as defendants. The amended complaint alleges that Mr. Ergen, as our controlling stockholder, breached fiduciary duties to EchoStar Corporation’s minority stockholders by structuring the BSS Transaction with inadequate consideration and improperly influencing our and HSSC’s boards of directors to approve the BSS Transaction. The amended complaint also alleges that the other defendants aided and abetted such alleged breaches. The plaintiffs seek equitable and monetary relief, including the issuance of additional DISH Common Stock, and other costs and disbursements, including attorneys’ fees on behalf of the purported class. On November 11, 2019, we and the other defendants filed separate motions to dismiss plaintiff’s amended complaint and during a hearing on January 13, 2020 the court denied these motions. On February 10, 2020, we and the other defendants filed answers to the amended complaint. The Court certified plaintiff’s class on January 11, 2021. We intend to vigorously defend this case. We cannot predict its outcome with any degree of certainty.

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

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(Unaudited)

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 an additional payment on March 31, 2021.

The following table presents the components of the accrual:


	As of
	March 31, 2021		December 31, 2020
Additional license fees	$	3,867	$	3,890
Penalties	3,969		3,992
Interest and interest on penalties	77,774		76,871
Less: Payments	(8,574)		(2,975)
Total accrual	$	77,036	$	81,778

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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(Unaudited)

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 and ESS, as described in Note 1. Organization and Business Activities.

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 revenue, EBITDA and capital expenditures for each of our business segments:


	Hughes		ESS		Corporate and Other		Consolidated Total
For the three months ended March 31, 2021
External revenue	$	475,859	$	4,001	$	2,722	$	482,582
Intersegment revenue	—		88		(88)		—
Total revenue	$	475,859	$	4,089	$	2,634	$	482,582

EBITDA	$	198,578	$	1,919	$	58,173	$	258,670
Capital expenditures	$	82,196	$	—	$	97,039	$	179,235

For the three months ended March 31, 2020
External revenue	$	458,482	$	4,367	$	2,817	$	465,666
Intersegment revenue	—		285		(285)		—
Total revenue	$	458,482	$	4,652	$	2,532	$	465,666

EBITDA	$	154,641	$	2,030	$	(65,440)	$	91,231
Capital expenditures	$	91,517	$	—	$	13,087	$	104,604

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


	For the three months ended March 31,
	2021		2020
Net income (loss)	$	77,572	(57,737)
Interest income, net	(5,949)		(15,583)
Interest expense, net of amounts capitalized	34,667		36,233
Income tax provision (benefit), net	22,147		(7,492)
Depreciation and amortization	129,286		132,368
Net loss (income) attributable to non-controlling interests	947		3,442
EBITDA	$	258,670	$	91,231

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(Unaudited)

NOTE 15. SUPPLEMENTAL FINANCIAL INFORMATION

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

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


	As of
	March 31, 2021		December 31, 2020
Other current assets, net:
Trade accounts receivable - DISH Network	$	7,041	$	5,612
Inventory	95,632		97,992
Prepaids and deposits	57,221		55,381
Other, net	31,064		30,836
Total other current assets	$	190,958	$	189,821

Other non-current assets, net:
Other receivables - DISH Network	$	92,748	$	92,680
Restricted marketable investment securities	9,150		9,090
Restricted cash	835		807
Deferred tax assets, net	1,691		1,781
Capitalized software, net	118,953		116,661
Contract acquisition costs, net	94,593		99,837
Contract fulfillment costs, net	1,916		2,580
Other, net	31,034		29,485
Total other non-current assets, net	$	350,920	$	352,921

Accrued Expenses and Other Current Liabilities

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


	As of
	March 31, 2021		December 31, 2020
Accrued expenses and other current liabilities:
Trade accounts payable - DISH Network	$	426	$	752
Accrued interest	34,659		42,388
Accrued compensation	55,036		62,299
Accrued taxes	20,827		20,297
Operating lease obligation	15,018		14,699
Other	178,052		159,564
Total accrued expenses and other current liabilities	$	304,018	$	299,999

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(Unaudited)

Inventory

The following table presents the components of inventory:


	As of
	March 31, 2021		December 31, 2020
Raw materials	$	5,308	$	4,564
Work-in-process	7,054		8,280
Finished goods	83,270		85,148
Total inventory	$	95,632	$	97,992

Supplemental and Non-cash Investing and Financing Activities

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


	For the three months ended March 31,
	2021		2020
Supplemental disclosure of cash flow information:
Cash paid for interest, net of amounts capitalized	$	38,018	$	43,847
Cash paid for income taxes	$	407	$	716

Non-cash investing and financing activities:
Employee benefits paid in Class A common stock	$	7,124	$	6,920
Increase (decrease) in capital expenditures included in accounts payable, net	$	(1,395)	$	(5,549)
Non-cash net assets received in exchange for a 20% ownership interest in our existing Brazilian subsidiary	$	—	$	2,824

Common Stock Repurchase Program

On October 29, 2020, our Board of Directors authorized us to repurchase up to $500.0 million of our Class A common stock through and including December 31, 2021. Purchases under our repurchase authorization may be made through privately negotiated transactions, open market repurchases, one or more trading plans in accordance with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended, or otherwise, subject to market conditions and other factors. We may elect to purchase some or all, or not to purchase the maximum amount or any of, the remaining shares allowable under this program and we may also enter into additional share repurchase programs authorized by our Board of Directors. All shares repurchased reflected in the table below have been converted to treasury shares. The following table presents information with respect to purchases made by the Company:


Period	Total Number of Shares (or Units) Purchased	Average Price Paid Per Share (or Unit)		Total Number of Shares (or Units) Purchased as Part of Publicly Disclosed Plans or Program	Maximum Number (or Approximate Dollar Value) of Shares (or Units) That May Yet Be Purchased under the Plans or Program
January 1 - 31	2,108,312	$	22.65	2,108,312	$	408,759
February 1 - 28	1,668,399	23.13		1,668,399	370,148
March 1 - 31	994,003	24.51		994,003	345,772
Total	4,770,714	$	23.21	4,770,714	$	345,772

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Unless the context indicates otherwise, the terms “we,” “us,” “EchoStar,” the “Company” and “our” refer to EchoStar Corporation and its subsidiaries. The following Management’s Discussion and Analysis of our Financial Condition and Results of Operations (“Management’s Discussion and Analysis”) should be read in conjunction with our accompanying Consolidated Financial Statements and notes thereto (“Accompanying Consolidated Financial Statements”) in Item 1 of this Quarterly Report on Form 10-Q (“Form 10-Q”). This Management’s Discussion and 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 Discussion and 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

We currently operate in two business segments: Hughes and ESS. These segments are consistent with the way we make decisions regarding the allocation of resources, as well as how operating results are reviewed by our chief operating decision maker, who is the Company’s Chief Executive Officer.

All amounts presented in this Management’s Discussion and Analysis, unless otherwise noted, are expressed in thousands of United States (“U.S.”) dollars, except share and per share amounts and unless otherwise noted.

Highlights from our financial results are as follows:

Consolidated Results of Operations for the Three Months Ended March 31, 2021:

• Revenue of $482.6 million

•Operating income (loss) of $53.5 million

•Net income (loss) of $77.6 million

• Net income (loss) attributable to EchoStar common stock of $78.5 million and basic and diluted earnings (losses) per share of common stock of $0.84

•Earnings before interest, taxes, depreciation and amortization, and net income (loss) attributable to non-controlling interests (“EBITDA”) of $258.7 million (see reconciliation of this non-GAAP measure in Results of Operations)

Consolidated Financial Condition as of March 31, 2021:

•Total assets of $7.0 billion

•Total liabilities of $3.4 billion

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED

•Total stockholders’ equity of $3.6 billion

•Cash and cash equivalents and marketable investment securities of $2.3 billion

Hughes Segment

Our Hughes segment is a global provider of broadband satellite technologies and broadband internet services to consumer customers and broadband network technologies, managed services, equipment, hardware, satellite services and communications solutions to consumer and enterprise customers. The Hughes segment also designs, provides and installs gateway and terminal equipment to customers for other satellite systems. In addition, our Hughes segment designs, develops, constructs and provides telecommunication networks comprising satellite ground segment systems and terminals to mobile system operators and our enterprise customers.

We incorporate advances in technology to reduce costs and to increase the functionality and reliability of our products and services. Through advanced and proprietary methodologies, technologies, software and techniques, we continue to improve the efficiency of our networks. We invest in technologies to enhance our system and network management capabilities, specifically our managed services for enterprises. We also continue to invest in next generation technologies that can be applied to our future products and services.

We continue to focus our efforts on growing our consumer revenue by maximizing utilization of our existing satellites while planning for new satellites to be launched or acquired. Our consumer revenue growth depends on our success in adding new and retaining existing subscribers across wholesale and retail channels, as well as increasing our Average Revenue Per User/subscriber (“ARPU”). Service costs related to ongoing support for our direct and indirect customers and partners are typically impacted most significantly by our growth. The growth of our enterprise businesses relies heavily on global economic conditions and the competitive landscape for pricing relative to competitors and alternative technologies. We have seen a limited number of our enterprise customers file for bankruptcy protection. We have reserved an amount related to pre-petition receivables and are working closely with these customers on providing post-petition services and products, as well as working with the customer regarding collection of pre-petition amounts.

Our Hughes segment currently uses capacity from three of our satellites (the SPACEWAY 3 satellite, the EchoStar XVII satellite and the EchoStar XIX satellite), our Al Yah 3 Brazilian payload and additional satellite capacity acquired from third-party providers to provide services to our customers. Growth of our consumer subscriber base in the U.S. continues to be constrained where we are nearing or have reached maximum capacity in most areas. While these constraints are not expected to be resolved until we launch new satellites, we continue to focus on revenue growth in all areas and consumer subscriber growth in the areas where we have available capacity.

In May 2019, we entered into an agreement with Bharti Airtel Limited (“BAL”) and its subsidiary, Bharti Airtel Services Limited (together with BAL, “Bharti”), pursuant to which Bharti will contribute its very small aperture terminal (“VSAT”) telecommunications services and hardware business in India to our two existing Indian subsidiaries that conduct our VSAT services and hardware business. The combined entities will provide broadband satellite and hybrid solutions for enterprise networks. Upon consummation of the transaction, Bharti will have a 33% ownership interest in the combined business. The completion of the transaction is subject to customary regulatory approvals and closing conditions. No assurance can be given that the transaction will be consummated on the terms agreed to or at all.

In August 2017, we entered into a long-term contract for the design and construction of the EchoStar XXIV satellite, a new, next-generation, high throughput geostationary satellite. The EchoStar XXIV satellite is primarily intended to provide additional capacity for our HughesNet satellite internet service (“HughesNet service”) in North, Central and South America as well as enterprise broadband services. The EchoStar XXIV satellite is expected to be launched in the second half of 2022. Further delays or impediments could have a material adverse impact on our business operations, future revenues, financial position and prospects, the completion of manufacture of the EchoStar XXIV satellite and our planned expansion of satellite broadband services throughout North, South and Central America. In December 2020, we entered into an agreement with a launch provider for the launch of EchoStar XXIV. Capital expenditures associated with the construction and launch of the EchoStar XXIV satellite are included in Corporate and Other in our segment reporting.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED

We continue our efforts to expand our consumer satellite services business outside of the U.S. We have been delivering high-speed consumer satellite broadband services in Brazil since July 2016 and are also providing satellite broadband internet service in several other Latin American countries. In September 2015, we entered into 15-year agreements with affiliates of Telesat Canada for Ka-band capacity on the Telesat T19V satellite located at the 63 degree west longitude orbital location, which was launched in July 2018. Telesat T19V was placed in service during the fourth quarter of 2018 and augmented the capacity being provided by the EUTELSAT 65 West A satellite and the EchoStar XIX satellite in South America. In March 2021, we entered into an agreement for additional capacity on the Telesat T19V satellite over Puerto Rico.

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
	March 31, 2021	December 31, 2020
United States	1,164,000	1,189,000
Latin America	389,000	375,000
Total broadband subscribers	1,553,000	1,564,000

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


	For the three months ended
	March 31, 2021	December 31, 2020
United States	(25,000)	(27,000)
Latin America	14,000	11,000
Total net subscriber additions	(11,000)	(16,000)

Our U.S. consumer subscriber base in certain areas continues to be capacity constrained and we are managing the available capacity to maintain service quality to our existing subscribers. While the balancing of total subscribers relative to capacity utilization in the first quarter resulted in lower total subscribers, ARPU increased.

In Latin America, we continued to see growth in our subscriber base and net subscriber additions compared to the fourth quarter of 2020, mainly due to higher gross subscriber additions.

As of March 31, 2021 and December 31, 2020, our Hughes segment had $1.4 billion and $1.3 billion of contracted revenue backlog, respectively. We define Hughes contracted revenue backlog as our expected future revenue under enterprise customer contracts that are non-cancelable, including lease revenue.

ESS Segment

Our ESS segment provides satellite services on a full-time and/or occasional-use basis to U.S. government service providers, internet service providers, broadcast news organizations, content providers and private enterprise customers. We operate our ESS business using primarily the EchoStar IX satellite and the EchoStar 105/SES-11 satellite and related infrastructure. Revenue in our ESS segment depends largely on our ability to continuously make use of our available satellite capacity with existing customers and our ability to enter into commercial relationships with new customers. Our ESS segment, like others in the fixed satellite services industry, has encountered, and may continue to encounter, negative pressure on transponder rates and demand.

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As of March 31, 2021 and December 31, 2020, our ESS segment had contracted revenue backlog of $9.2 million and $6.7 million, respectively. We define contracted revenue backlog for our ESS segment as contracted future satellite lease revenue.

Other Business Opportunities

Our industry continues to evolve with the increasing worldwide demand for broadband internet access for information, entertainment and commerce. The current COVID-19 pandemic has made even more evident the worldwide need and demand for connectivity and communications to facilitate an ever-increasing virtual global community and workplace. In addition to fiber and wireless systems, technologies such as geostationary high throughput satellites, low-earth orbit (“LEO”) networks, medium-earth orbit (“MEO”) systems, balloons and High Altitude Platform Systems are expected to continue to play significant roles in enabling global broadband access, networks and services. We intend to use our expertise, technologies, capital, investments, global presence, relationships and other capabilities to continue to provide broadband internet systems, equipment, networks and services for information, the internet-of-things, entertainment, education, remote-connectivity and commerce across industries and communities globally for consumer and enterprise customers. We are closely tracking the developments in next-generation satellite businesses, and we are seeking to utilize our services, technologies, licenses and expertise to find new commercial opportunities for our business.

We intend to continue to selectively explore opportunities to pursue investments, commercial alliances, partnerships, joint ventures, acquisitions, dispositions and other strategic initiatives and transactions, domestically and internationally, that we believe may allow us to increase our existing market share, increase our satellite capacity, expand into new satellite and other technologies, markets and customers, broaden our portfolio of services, products and intellectual property, make our business more valuable, align us for future growth and expansion, maximize the return on our investments and strengthen our business and relationships with our customers. We may allocate or dispose of significant resources for long-term value that may not have a short or medium-term or any positive impact on our revenue, results of operations, or cash flow.

S-Band Strategy

We intend to continue to explore the development and deployment of S-band technologies that we expect will reduce the cost of satellite communications for internet of things, machine-to-machine communications, public protection, disaster relief and other end-to-end services worldwide and the integration of our products and services into new global, hybrid networks that leverage multiple satellites and terrestrial technologies. We believe we remain in a unique position to deploy a mobile satellite service (“MSS”) and complementary ground component (“CGC”) network in the European Union and its member states (“E.U.”), the United Kingdom (“U.K.”) and other European countries through our EchoStar XXI satellite, which was placed into service in November 2017, and the EUTELSAT 10A payload. We have positioned ourselves to continue to develop the S-band spectrum globally by acquiring Sirion Global Pty Ltd., which we have renamed EchoStar Global which holds global S-band non-geostationary satellite spectrum rights for MSS. Additionally, we entered into a contract with Tyvak Nano-Satellite Systems, Inc. for the design and construction of S-band nano-satellites. We launched two nano-satellites in the third quarter of 2020. Following launch, both nano-satellites experienced technical anomalies that precluded them from fulfilling their intended regulatory milestone missions. We obtained milestone relief due to these force majeure events. We expect to launch our third nano-satellite mid-year 2021. Our nano-satellites are designed to facilitate our continued growth in the global S-band market and enable us to leverage our acquisition of EchoStar Global. In addition, in Mexico we hold licenses for S-band MSS and terrestrial services.

Cybersecurity

On December 8, 2020, the cyber security company FireEye announced that they detected a sophisticated nation state level cyber campaign that targeted FireEye, other public and private companies, and government organizations. FireEye reported that the attack against them was facilitated through the Orion IT management software owned by a company called SolarWinds. Based on information from FireEye, we reviewed all instances of SolarWinds software in use at the Company and have determined that the version we are using is not susceptible to the malware within the version that is compromised.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED

The SolarWinds hack continues to evolve. Specifically, there have been many reports of intrusions into Microsoft Exchange on-premise systems possibly due to the SolarWinds issue and other unrelated matters. While we are customers of Microsoft, to date, our investigations into the announced issues indicate that we were not detrimentally affected by the vulnerabilities due to our security controls and other proactive measures which include security patching. We continue to receive information about these breaches from the U.S. government and private security firms, and we use this data to update our defense systems and to investigate our own networks for compromise. We will continue to update our systems as more information comes to light in reference to these issues.

We are not aware of any additional cyber-incidents with respect to our owned or leased satellites or other networks, equipment or systems that have had a material adverse effect on our business, costs, operations, prospects, results of operation or financial position during the three months ended March 31, 2021 and through May 6, 2021. 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.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED

RESULTS OF OPERATIONS

Three Months Ended March 31, 2021 Compared to the Three Months Ended March 31, 2020

The following table presents our consolidated results of operations for the three months ended March 31, 2021 compared to the three months ended March 31, 2020:


	For the three months ended March 31,						Variance
Statements of Operations Data	2021			2020			Amount		%
Revenue:
Services and other revenue	$	430,337		$	408,357		$	21,980	5.4
Equipment revenue	52,245			57,309			(5,064)		(8.8)
Total revenue	482,582			465,666			16,916		3.6
Costs and expenses:
Cost of sales - services and other	132,789			145,252			(12,463)		(8.6)
% of total services and other revenue	30.9		%	35.6		%
Cost of sales - equipment	45,151			45,908			(757)		(1.6)
% of total equipment revenue	86.4		%	80.1		%
Selling, general and administrative expenses	114,119			125,281			(11,162)		(8.9)
% of total revenue	23.6		%	26.9		%
Research and development expenses	7,545			6,254			1,291		20.6
% of total revenue	1.6		%	1.3		%
Depreciation and amortization	129,286			132,368			(3,082)		(2.3)
Impairment of long-lived assets	230			—			230		*
Total costs and expenses	429,120			455,063			(25,943)		(5.7)
Operating income (loss)	53,462			10,603			42,859		*
Other income (expense):
Interest income, net	5,949			15,583			(9,634)		(61.8)
Interest expense, net of amounts capitalized	(34,667)			(36,233)			1,566		(4.3)
Gains (losses) on investments, net	78,600			(46,672)			125,272		*
Equity in earnings (losses) of unconsolidated affiliates, net	1,374			2,613			(1,239)		(47.4)
Foreign currency transaction gains (losses), net	(4,069)			(10,844)			6,775		(62.5)
Other, net	(930)			(279)			(651)		*
Total other income (expense), net	46,257			(75,832)			122,089		*
Income (loss) before income taxes	99,719			(65,229)			164,948		*
Income tax benefit (provision), net	(22,147)			7,492			(29,639)		*
Net income (loss)	77,572			(57,737)			135,309		*
Less: Net loss (income) attributable to non-controlling interests	947			3,442			(2,495)		(72.5)
Net income (loss) attributable to EchoStar Corporation common stock	$	78,519		$	(54,295)		$	132,814	*

Other data:
EBITDA (1)	$	258,670		$	91,231		$	167,439	*
Subscribers, end of period	1,553,000			1,516,000			37,000		2.4

* Percentage is not meaningful.

(1) A reconciliation of EBITDA to Net income (loss), the most directly comparable U.S. GAAP measure in our Accompanying 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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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED

The following discussion relates to our results of operations for the three months ended March 31, 2021 and 2020.

Services and other revenue. Services and other revenue totaled $430.3 million for the three months ended March 31, 2021, an increase of $22.0 million, or 5.4%, as compared to 2020.

•Services and other revenue from our Hughes segment for the three months ended March 31, 2021 increased by $22.4 million, or 5.6%, to $423.6 million compared to 2020. The increase was primarily attributable to increases in sales of broadband services to our consumer customers of $27.0 million, partially offset by a decrease in sales of services to our enterprise customers of $3.1 million. These variances reflect the negative impact of exchange rate fluctuations of $5.4 million, primarily attributable to our consumer customers.

Equipment revenue. Equipment revenue totaled $52.2 million for the three months ended March 31, 2021, a decrease of $5.1 million, or 8.8%, as compared to 2020. The decrease was primarily attributable to decreases in hardware sales of $4.8 million to our mobile satellite systems customers.

Cost of sales - services and other. Cost of sales - services and other totaled $132.8 million for the three months ended March 31, 2021, a decrease of $12.5 million, or 8.6%, as compared to 2020. The decrease was attributable to lower costs of services provided to our consumer and enterprise customers primarily associated with field services and leased satellite capacity as well as a non-recurring decrease in a certain international regulatory fee of $4.5 million.

Cost of sales - equipment. Cost of sales - equipment totaled $45.2 million for the three months ended March 31, 2021, a decrease of $0.8 million, or 1.6%, as compared to 2020.

Selling, general and administrative expenses. Selling, general and administrative expenses totaled $114.1 million for the three months ended March 31, 2021, a decrease of $11.2 million, or 8.9%, as compared to 2020. The decrease was primarily attributable to decreased sales and marketing expenses of $9.6 million from our Hughes segment mainly associated with our consumer customers and decreases in bad debt expense of $2.4 million.

Depreciation and amortization. Depreciation and amortization expenses totaled $129.3 million for the three months ended March 31, 2021, a decrease of $3.1 million, or 2.3%, as compared to 2020. The decrease was primarily attributable to decreases in other property and equipment depreciation expense of $2.0 million and decreases in amortization of intangibles of $1.5 million.

Interest income, net. Interest income, net totaled $5.9 million for the three months ended March 31, 2021, a decrease of $9.6 million, or 61.8%, as compared to 2020, primarily attributable to decreases in the yield on our marketable investment securities.

Interest expense, net of amounts capitalized. Interest expense, net of amounts capitalized, totaled $34.7 million for the three months ended March 31, 2021, a decrease of $1.6 million, or 4.3%, as compared to 2020. The decrease was primarily attributable to an increase of $1.3 million in capitalized interest relating to the construction of the EchoStar XXIV satellite and its related infrastructure.

Gains (losses) on investments, net. Gains (losses) on investments, net totaled $78.6 million in gains for the three months ended March 31, 2021, an increase of $125.3 million, as compared to 2020. The change was primarily attributable to the gains on marketable investment securities and other equity securities of $98.2 million in 2021 and a $21.3 million impairment loss in 2020.

Equity in earnings (losses) of unconsolidated affiliates, net. Equity in earnings (losses) of unconsolidated affiliates, net totaled $1.4 million in earnings for the three months ended March 31, 2021, a decrease in earnings of $1.2 million, or 47.4%, as compared to 2020. The decrease was related to decreased earnings from our investments in our equity method investees.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED

Foreign currency transaction gains (losses), net. Foreign currency transaction gains (losses), net totaled $4.1 million in losses for the three months ended March 31, 2021, as compared to $10.8 million in losses for the three months ended March 31, 2020, a positive change of $6.8 million. The change was due to the net impact of foreign exchange rate fluctuations of certain foreign currencies during the quarter.

Income tax benefit (provision), net. Income tax benefit (provision), net was $(22.1) million for the three months ended March 31, 2021, as compared to $7.5 million for the three months ended March 31, 2020. Our effective income tax rate was 22.2% and 11.5% for the three months ended March 31, 2021 and 2020, respectively. The variations in our effective tax rate from the U.S. federal statutory rate for the three months ended March 31, 2021 were primarily due to excluded foreign losses where the company carries a full valuation allowance and the change in net unrealized gains that are capital in nature. The variations in our current year effective tax rate from the U.S. federal statutory rate for the three months ended March 31, 2020 were primarily due to the increase in our valuation allowance associated with certain foreign losses and by the impact of state and local taxes partially offset by the change in net unrealized gains that are capital in nature and research and experimentation credits.

Net income (loss) attributable to EchoStar Corporation common stock. The following table reconciles the change in Net income (loss) attributable to EchoStar Corporation common stock:


	Amounts
Net income (loss) attributable to EchoStar Corporation for the three months ended March 31, 2020	$	(54,295)
Decrease (increase) in income tax benefit (provision), net	(29,639)
Increase (decrease) in interest income, net	(9,634)
Increase (decrease) in net income (loss) attributable to non-controlling interest	(2,495)
Decrease (increase) in equity in earnings (losses) of unconsolidated affiliates, net	(1,239)
Increase (decrease) in other, net	(651)
Decrease (increase) in interest expense, net of amounts capitalized	1,566
Increase (decrease) in foreign currency transaction gains (losses), net	6,775
Increase (decrease) in operating income (loss), including depreciation and amortization	42,859
Increase (decrease) in gains (losses) on investments, net	125,272
Net income (loss) attributable to EchoStar Corporation for the three months ended March 31, 2021	$	78,519

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


	For the three months ended March 31,				Variance
	2021		2020		Amount		%
Net income (loss)	$	77,572	$	(57,737)	$	135,309	*
Interest income, net	(5,949)		(15,583)		9,634		(61.8)
Interest expense, net of amounts capitalized	34,667		36,233		(1,566)		(4.3)
Income tax provision (benefit), net	22,147		(7,492)		29,639		*
Depreciation and amortization	129,286		132,368		(3,082)		(2.3)
Net loss (income) attributable to non-controlling interests	947		3,442		(2,495)		(72.5)
EBITDA	$	258,670	$	91,231	$	167,439	*

* Percentage is not meaningful

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED

The following table reconciles the change in EBITDA:


	Amounts
EBITDA for the three months ended March 31, 2020	$	91,231
Increase (decrease) in gains (losses) on investments, net	125,272
Increase (decrease) in operating income (loss), excluding depreciation and amortization	39,777
Increase (decrease) in foreign currency transaction gains (losses), net	6,775
Increase (decrease) in other, net	(651)
Decrease (increase) in equity in earnings (losses) of unconsolidated affiliates, net	(1,239)
Decrease (increase) in net loss (income) attributable to non-controlling interests	(2,495)
EBITDA for the three months ended March 31, 2021	$	258,670

Segment Operating Results and Capital Expenditures

The following tables present our operating results, capital expenditures and EBITDA by segment for the three months ended March 31, 2021, as compared to the three months ended March 31, 2020:


	Hughes		ESS		Corporate and Other		Consolidated Total
For the three months ended March 31, 2021
Total revenue	$	475,859	$	4,089	$	2,634	$	482,582
Capital expenditures	82,196		—		97,039		179,235
EBITDA	198,578		1,919		58,173		258,670

For the three months ended March 31, 2020
Total revenue	$	458,482	$	4,652	$	2,532	$	465,666
Capital expenditures	91,517		—		13,087		104,604
EBITDA	154,641		2,030		(65,440)		91,231

Hughes Segment


	For the three months ended March 31,				Variance
	2021		2020		Amount		%
Total revenue	$	475,859	$	458,482	$	17,377	3.8
Capital expenditures	82,196		91,517		(9,321)		(10.2)
EBITDA	198,578		154,641		43,937		28.4

Total revenue was $475.9 million for the three months ended March 31, 2021, an increase of $17.4 million, or 3.8%, as compared to 2020. Services and other revenue increased primarily due to increases in sales of broadband services to our consumer customers of $27.0 million, partially offset by a decrease in sales of services to our enterprise customers of $3.1 million. Equipment revenue decreased primarily due to decreases in hardware sales of $4.8 million to our mobile satellite systems customers. These variances reflect the negative impact of exchange rate fluctuations of $5.9 million.

Capital expenditures were $82.2 million for the three months ended March 31, 2021, a decrease of $9.3 million, or 10.2%, as compared to 2020, primarily due to decreases in expenditures associated with our consumer business, partially offset by increased expenditures related to construction of our satellite-related ground infrastructure.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED

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


	Amounts
EBITDA for the three months ended March 31, 2020	$	154,641
Increase (decrease) in operating income (loss), excluding depreciation and amortization	41,297
Increase (decrease) in foreign currency transaction gains (losses), net	4,165
Increase (decrease) in other, net	887
Increase (decrease) in gains (losses) on investments, net	164
Decrease (increase) in equity in earnings (losses) of unconsolidated affiliates, net	(81)
Decrease (increase) in net loss (income) attributable to non-controlling interests	(2,495)
EBITDA for the three months ended March 31, 2021	$	198,578

ESS Segment


	For the three months ended March 31,				Variance
	2021		2020		Amount		%
Total revenue	$	4,089	$	4,652	$	(563)	(12.1)
EBITDA	1,919		2,030		(111)		(5.5)

Total revenue was $4.1 million for the three months ended March 31, 2021, a decrease of $0.6 million, or 12.1%, as compared to 2020, primarily due to a decrease in transponder services provided to third parties.

EBITDA was $1.9 million for the three months ended March 31, 2021, a decrease of $0.1 million, or 5.5%, as compared to 2020, primarily due to the decrease in overall ESS revenue.

Corporate and Other


	For the three months ended March 31,				Variance
	2021		2020		Amount		%
Total revenue	$	2,634	$	2,532	$	102	4.0
Capital expenditures	97,039		13,087		83,952		*
EBITDA	58,173		(65,440)		123,613		*

* Percentage is not meaningful

Capital expenditures were $97.0 million for the three months ended March 31, 2021, an increase of $84.0 million, as compared to 2020, primarily due to increases in expenditures related to the EchoStar XXIV satellite program.

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


	Amounts
EBITDA for the three months ended March 31, 2020	$	(65,440)
Increase (decrease) in other, net	(1,538)
Increase (decrease) in operating income (loss), excluding depreciation and amortization	(1,409)
Decrease (increase) in equity in earnings (losses) of unconsolidated affiliates, net	(1,159)
Increase (decrease) in foreign currency transaction gains (losses), net	2,610
Increase (decrease) in gains (losses) on investments, net	125,109
EBITDA for the three months ended March 31, 2021	$	58,173

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED

LIQUIDITY AND CAPITAL RESOURCES

Cash, Cash Equivalents and Marketable Investment Securities

We consider all liquid investments purchased with an original maturity of 90 days or less to be cash equivalents.

As of March 31, 2021 our cash, cash equivalents and marketable investment securities totaled $2.3 billion, of which $0.7 billion, we held as marketable investment securities, consisting of various debt and equity instruments including corporate bonds, corporate equity securities, government bonds and mutual funds.

Cash Flow Activities

The following table summarizes our cash flows provided by (used for) operating, investing and financing activities, as reflected in the Consolidated Statement of Cash Flows:


	For the three months ended March 31,				Variance
	2021		2020
Operating activities	$	116,887	$	71,295	$	45,592
Investing activities	736,980		17,946		719,034
Financing activities	(164,289)		982		(165,271)
Effect of exchange rates on cash and cash equivalents	(1,808)		(4,809)		3,001
Net increase (decrease) in cash and cash equivalents	$	687,770	$	85,414	$	602,356

Cash flows provided by (used for) operating activities increased by $45.6 million primarily attributable to changes in net income (loss) of $135.3 million and deferred tax provision (benefit), net of $28.4 million, partially offset by changes in losses (gains) on investments, net of $125.3 million.

Cash flows provided by (used for) investing activities increased by $719.0 million primarily attributable to our marketable investment securities net activity, increase in expenditures for property and equipment and increase in purchases of other investments.

Cash flows provided by (used for) financing activities decreased by $165.3 million primarily attributable to repurchases of our 2021 senior unsecured notes and from increased treasury share repurchases.

Obligations and Future Capital Requirements

Contractual Obligations

As of March 31, 2021, our satellite-related commitments were $389.7 million. These primarily include payments pursuant to agreements for the construction of the EchoStar XXIV satellite, payments pursuant to the EchoStar XXIV launch contract, 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.

Off-Balance Sheet Arrangements

We generally do not engage in off-balance sheet financing activities or use derivative financial instruments for hedge accounting or speculative purposes.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED

Letters of Credit

The following table presents the components of our letters of credit as of March 31, 2021:


	Amounts
Restricted cash	$	9,364
Insurance bonds	4,029
Credit arrangement available to our foreign subsidiaries	31,357
Total letters of credit	$	44,750

Certain letters of credit are secured by assets of our foreign subsidiaries.

Satellites

As our satellite fleet ages, we will be required to evaluate replacement alternatives such as acquiring, leasing or constructing additional satellites, with or without customer commitments for capacity. We may also construct, acquire or lease additional satellites in the future to provide satellite services at additional orbital locations or to improve the quality of our satellite services.

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 the agreements governing certain portions of our long-term debt and our joint venture agreements with Al Yah Satellite Communications Company PrJSC (“Yahsat”), we are required, subject to certain limitations on coverage, to maintain only for the SPACEWAY 3 satellite, the EchoStar XVII satellite and the Al Yah 3 Brazilian payload, insurance or other contractual arrangements during the commercial in-orbit service of such satellite or payload. Our other satellites and payloads, either in orbit or under construction, are not covered by launch or in-orbit insurance or other contractual arrangements. We will continue to assess circumstances going forward and make insurance-related decisions on a case-by-case basis.

Future Capital Requirements

We primarily rely on our existing cash and marketable investment securities balances, as well as cash flow generated through our operations to fund our business. Revenue in our ESS segment depends largely on our ability to continuously make use of our available satellite capacity with existing customers and our ability to enter into commercial relationships with new customers. Consumer revenue in our Hughes segment depends on our success in adding new and retaining existing subscribers and driving higher average revenue per subscriber across our wholesale and retail channels. Revenue in our enterprise and equipment businesses relies heavily on global economic conditions and the competitive landscape for pricing relative to competitors and alternative technologies. Service costs related to ongoing support of our direct and indirect customers and partners are typically impacted most significantly by our growth. There can be no assurance that we will have positive cash flows from operations. Furthermore, if we experience negative cash flows, our existing cash and marketable investment securities balances may be reduced.

We have a significant amount of outstanding indebtedness. As of March 31, 2021, our total indebtedness was $2.3 billion. Refer to our Form 10-K for a discussion of the terms of our long-term debt. Our liquidity requirements will continue to be significant, primarily due to our remaining debt service requirements and the design and construction of our new EchoStar XXIV satellite. Our 7 5/8% Senior Unsecured Notes due 2021 (the “2021 Notes”) with an outstanding principal balance of $809.5 million mature and are due and payable in June 2021. As of March 31, 2021, we have repurchased a total of $90.5 million in principal of the 2021 Senior Unsecured Notes in open market trades. We may from time to time seek to purchase amounts of our outstanding debt in open market purchases, privately negotiated transactions or otherwise, depending on market conditions, our liquidity needs and other factors. The amounts we may repurchase may be material. In addition, our future capital expenditures are likely to increase if we make acquisitions or additional investments in infrastructure, technologies or joint ventures to support and expand our business, or if we decide to purchase or build additional satellites or other technologies or assets.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED

Other aspects of our business operations may also require additional capital. We also expect to owe U.S. Federal income tax for 2021.

We anticipate that our existing cash and marketable investment securities are sufficient to repay our 2021 Notes that mature and are due and payable in June 2021 and to fund the currently anticipated operations of our business through the next twelve months.

Stock Repurchases

Our Board of Directors previously authorized us to repurchase up to $500.0 million of our Class A common stock through and including December 31, 2020. On October 29, 2020, our Board of Directors terminated its prior authorization and authorized us to repurchase, pursuant to its new authorization, up to $500.0 million of our Class A common stock through and including December 31, 2021. Purchases under our repurchase authorization may be made through privately negotiated transactions, open market repurchases, one or more trading plans in accordance with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended, or otherwise, subject to market conditions and other factors. We may elect not to purchase the maximum amount or any of the shares allowable under this program and we may also enter into additional share repurchase programs authorized by our Board of Directors. During the three months ended March 31, 2021, we repurchased 4,770,714 shares of our Class A common stock for $110.8 million under this program. The remaining authorization under this program was $345.8 million as of March 31, 2021.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our critical accounting policies are those that involve a high degree of estimation, judgment and complexity. Our critical accounting policies are those related to (i) contingent liabilities, (ii) revenue recognition and (iii) impairment of assets.

Our critical accounting policies are described in our Form 10-K under the heading Part II - Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. There have been no significant changes in our critical accounting policies from those presented in our Form 10-K.

NEW ACCOUNTING PRONOUNCEMENTS

For a discussion of new accounting pronouncements, refer to Note 2. Summary of Significant Accounting Policies in our Accompanying Consolidated Financial Statements.

SEASONALITY

For our Hughes segment, service revenue is generally not impacted by seasonal fluctuations other than those associated with fluctuations related to sales and promotional activities.

Our ESS segment is not generally affected by seasonal impacts.

We cannot predict with any certainty whether these trends will continue in the near future as the economy and our customers react to the COVID-19 pandemic and experience associated disruptions and dislocations.

INFLATION

Inflation has not materially affected our operations during the past three years, but we are unable to predict the extent or nature of any future inflationary pressure at this time. We believe that our ability to increase the prices charged for our products and services in future periods will depend primarily on competitive pressures or contractual terms. However, we may not be able to maintain pricing levels consistent with inflationary pressure on expenses.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED

EXPLANATION OF KEY METRICS AND OTHER ITEMS

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

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

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

Cost of sales - equipment. Cost of sales - equipment consists primarily of the cost of broadband equipment and networks sold 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 stock-based compensation expense. It also includes professional fees (e.g. legal, information systems and accounting services) and other expenses associated with facilities and administrative services.

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

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

Interest income, net. Interest income, net primarily includes interest earned on our cash, cash equivalents and marketable investment securities, and other investments including premium amortization and discount accretion on debt securities.

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

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

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

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

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

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED

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 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 U.S. 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.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Refer to our Form 10-K, under the heading Part II - Item 7A. Quantitative and Qualitative Disclosures About Market Risk, for a more complete discussion of our risks. As of March 31, 2021, our market risk has not changed materially from those presented in our Form 10-K.

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 13a-15(e) and Rule 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) 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 13a-15(f) and Rule 15d-15(f) under the Exchange Act) that occurred during the three months ended March 31, 2021 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

Item 1A, Risk Factors, of our Form 10-K for the year ended December 31, 2020 includes a detailed discussion of our risk factors.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

Pursuant to a stock repurchase program approved by our board of directors, we are authorized to repurchase up to $500.0 million of our Class A common stock through December 31, 2021. During the year ended December 31, 2020, we repurchased 1,905,906 shares of our Class A common stock.

The following table provides information regarding repurchases of our Class A common stock during the three months ended March 31, 2021:


Period	Total Number of Shares (or Units) Purchased	Average Price Paid Per Share (or Unit)		Total Number of Shares (or Units) Purchased as Part of Publicly Disclosed Plans or Program	Maximum Number (or Approximate Dollar Value) of Shares (or Units) That May Yet Be Purchased under the Plans or Program (1)
January 1 - 31	2,108,312	$	22.65	2,108,312	$	408,759
February 1 - 28	1,668,399	23.13		1,668,399	370,148
March 1 - 31	994,003	24.51		994,003	345,772
Total	4,770,714	$	23.21	4,770,714	$	345,772

(1) On October 29, 2020, our Board of Directors authorized us to repurchase up to $500.0 million of our Class A common stock through and including December 31, 2021. Purchases under our repurchase authorization may be made through privately negotiated transactions, open market repurchases, one or more trading plans in accordance with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended, or otherwise, subject to market conditions and other factors. We may elect to purchase some or all, or not to purchase the maximum amount or any of, the remaining shares allowable under this program and we may also enter into additional share repurchase programs authorized by our Board of Directors. All shares repurchased reflected in the table above have been converted to treasury shares.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

Financial Results

On May 6, 2021, we issued a press release (the “Press Release”) announcing our financial results for the quarter ended March 31, 2021. 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 Exchange Act, or otherwise, and shall not be incorporated by

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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 Exchange Act, except as otherwise expressly stated in any such filing.

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ITEM 6. EXHIBITS


Exhibit No.						Description
31.1(H)						Section 302 Certification of Chief Executive Officer.
31.2(H)						Section 302 Certification of Chief Financial Officer.
32.1(I)						Section 906 Certifications of Chief Executive Officer and Chief Financial Officer.
99.1(I)						Press release dated May 6, 2021 issued by EchoStar Corporation regarding financial results for the period ended March 31, 2021.
101.INS						XBRL Instance Document. The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH						XBRL Taxonomy Extension Schema.
101.CAL						XBRL Taxonomy Extension Calculation Linkbase.
101.DEF						XBRL Taxonomy Extension Definition Linkbase.
101.LAB						XBRL Taxonomy Extension Label Linkbase.
101.PRE						XBRL Taxonomy Extension Presentation Linkbase.

(H) Filed herewith.

(I) Furnished herewith.

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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.


		ECHOSTAR CORPORATION


Date: May 6, 2021	By:	/s/ Michael T. Dugan
		Michael T. Dugan
		Chief Executive Officer, President and Director
		(Principal Executive Officer)


Date: May 6, 2021	By:	/s/ David J. Rayner
		David J. Rayner
		Executive Vice President, Chief Financial Officer, Chief Operating Officer and Treasurer
		(Principal Financial and Accounting Officer)