EchoStar(SATS) - 2025 Q2 - Quarterly Report

PART I Disclosure Regarding Forward-Looking Statements The report contains forward-looking statements based on management's current views, subject to known and unknown risks and uncertainties - Forward-looking statements are based on current management views and assumptions, not historical facts[9] - Actual performance, events, or results could differ materially from forward-looking statements due to known and unknown risks and uncertainties[9] - Key risk categories include FCC review, competition, economic risks, operational risks, human capital, products/technology, cybersecurity, acquisition/capital structure, and regulation[10][11][12][13][14][15][16][17][18][19] - Investors should consider described risks and uncertainties and not place undue reliance on forward-looking statements, which speak only as of the date made[18] Item 1. Financial Statements Presents EchoStar's unaudited condensed consolidated financial statements, showing a widening net loss and liquidity concerns Condensed Consolidated Balance Sheets Summarizes EchoStar's financial position, including assets, liabilities, and equity, as of June 30, 2025 Condensed Consolidated Balance Sheet Highlights (in thousands): | Metric | June 30, 2025 | December 31, 2024 | Change | % Change | | :------------------------------------------ | :------------ | :---------------- | :----- | :------- | | Total Assets | $59,882,397 | $60,938,687 | $(1,056,290) | (1.73)% | | Cash and cash equivalents | $2,345,085 | $4,305,393 | $(1,960,308) | (45.53)% | | Regulatory authorizations, net | $40,029,923 | $39,442,166 | $587,757 | 1.49% | | Total Liabilities | $40,090,903 | $40,693,462 | $(602,559) | (1.48)% | | Total Stockholders' Equity (Deficit) | $19,791,494 | $20,245,225 | $(453,731) | (2.24)% | Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) Details EchoStar's revenue, operating income, and net income (loss) for the periods ended June 30, 2025 Condensed Consolidated Statements of Operations Highlights (in thousands, except per share amounts): | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total Revenue | $3,724,959 | $3,952,751 | $7,594,717 | $7,967,594 | | Operating income (loss) | $(213,408) | $(65,369) | $(301,540) | $(80,613) | | Interest income | $65,369 | $13,929 | $130,898 | $44,391 | | Interest expense, net of amounts capitalized | $(279,232) | $(81,166) | $(565,287) | $(180,574) | | Other, net | $35,137 | $(91,498) | $76,527 | $(117,608) | | Net income (loss) | $(306,844) | $(207,458) | $(510,125) | $(315,833) | | Basic net income (loss) per share attributable to EchoStar | $(1.06) | $(0.76) | $(1.77) | $(1.15) | Condensed Consolidated Statements of Changes in Stockholders' Equity (Deficit) Outlines changes in EchoStar's stockholders' equity, including net income (loss) and stock transactions Condensed Consolidated Statements of Changes in Stockholders' Equity (Deficit) Highlights (in thousands): | Metric | Balance, December 31, 2024 | Balance, June 30, 2025 | | :------------------------------------------ | :------------------------- | :--------------------- | | Total EchoStar stockholders' equity (deficit) | $20,245,225 | $19,791,494 | | Net income (loss) attributable to EchoStar (Six Months Ended June 30, 2025) | N/A | $(508,801) | | Issuance of Class A common stock (Six Months Ended June 30, 2025) | N/A | $23,827 | | Non-cash, stock-based compensation (Six Months Ended June 30, 2025) | N/A | $16,123 | Condensed Consolidated Statements of Cash Flows Presents EchoStar's cash flows from operating, investing, and financing activities for the six months ended June 30, 2025 Condensed Consolidated Statements of Cash Flows Highlights (in thousands): | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------ | :----------------------------- | :----------------------------- | | Net cash flows from operating activities | $214,267 | $930,984 | | Net cash flows from investing activities | $(1,799,721) | $(848,165) | | Net cash flows from financing activities | $(365,997) | $(1,444,092) | | Net increase (decrease) in cash, cash equivalents, restricted cash and cash equivalents | $(1,948,486) | $(1,364,974) | | Cash, cash equivalents, restricted cash and cash equivalents, end of period | $2,645,318 | $546,627 | Notes to Condensed Consolidated Financial Statements Provides detailed explanations and additional information supporting the condensed consolidated financial statements - EchoStar operates three primary business segments: Pay-TV, Wireless, and Broadband and Satellite Services[29][36] - The FCC initiated a review of EchoStar's compliance with 5G broadband service obligations, creating regulatory uncertainty that has impacted 5G network buildout decisions and led to delayed interest payments (subsequently cured)[30][284] - Substantial doubt exists about EchoStar's ability to continue as a going concern due to insufficient cash and projected future cash flows to fund obligations for at least the next twelve months, including significant debt maturities in 2026[33][34] Key Subscriber Counts (as of June 30, 2025): | Segment | Subscribers (in millions) | | :-------------------------- | :------------------------ | | Pay-TV | 7.108 | | DISH TV | 5.323 | | SLING TV | 1.785 | | Wireless | 7.357 | | Broadband | 0.819 | - EchoStar has invested over $30 billion in Wireless spectrum licenses, plus $10 billion in capitalized interest, and has deployed 5G VoNR covering over 223 million Americans and 5G broadband service to over 269 million Americans[39][41][42][158][379] - FCC 5G deployment deadlines for certain Wireless spectrum licenses have been extended to December 14, 2026, and potentially to June 14, 2028, with certifications for December 31, 2024, requirements already submitted[44][165][291][292][381] Capitalized Interest (in thousands): | Period | 2025 | 2024 | | :-------------------------- | :------- | :------- | | Three Months Ended June 30 | $309,000 | $267,000 | | Six Months Ended June 30 | $626,000 | $525,000 | Total Debt, Finance Lease and Other Obligations, net of current portion (in thousands): | As of | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :---------------- | | Total | $25,401,688 | $25,660,288 | - EchoStar faces a potential maximum payment of approximately $2.921 billion for default payments related to the re-auction of AWS-3 licenses previously awarded to Northstar Wireless and SNR Wireless, with Auction 113 required by June 23, 2026[33][170][171] - Ongoing legal proceedings include patent infringement lawsuits (e.g., ClearPlay, Entropic, TQ Delta, Uniloc), data breach class actions, and a False Claims Act case related to AWS-3 bidding credits, with potential for substantial damages or injunctions[181][182][183][184][186][187][188][191][192][193][195][242][243][248][249][255][258] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Analyzes EchoStar's financial condition and results, highlighting revenue decline, operating losses, and liquidity challenges Overview Provides an overview of EchoStar's business segments, regulatory challenges, 5G network deployment, and going concern issues - EchoStar operates three primary business segments: Pay-TV, Wireless, and Broadband and Satellite Services[285] - An ongoing FCC review of 5G broadband service compliance has created regulatory uncertainty, impacting 5G network buildout decisions and leading to delayed interest payments (subsequently cured)[284] - The Wireless segment has deployed 5G VoNR covering over 223 million Americans and 5G broadband service to over 269 million Americans, with FCC build-out deadlines extended to December 14, 2026, and potentially to June 14, 2028[288][290][291][292] - Substantial doubt exists about the company's ability to continue as a going concern due to insufficient cash and projected cash flows to fund upcoming debt maturities and other obligations[34] - The company experienced inflationary pressures in commodity and labor costs and faces potential impacts from changes in trade policies[294] Explanation of Key Metrics and Other Items Defines key financial and operational metrics used to evaluate EchoStar's performance and financial health - Key financial metrics include Service revenue, Equipment sales and other revenue, Cost of services, Cost of sales - equipment and other, Selling, general and administrative expenses, Interest expense (net of capitalized amounts), and Other (net)[295][296][297][298][299][300][301] - OIBDA (Operating income (loss) plus Depreciation and amortization) is a non-GAAP measure used to evaluate segment operating performance[302] - Subscriber metrics include DISH TV, SLING TV, Pay-TV, Wireless, and Broadband subscribers, along with their respective Average Monthly Revenue Per User (ARPU) and churn rates[303][304][305][306][307][309][310][311][312][313] - Free cash flow is defined as 'Net cash flows from operating activities' less 'Purchases of property and equipment' (net of refunds) and 'Capitalized interest related to regulatory authorizations'[314][466] Results of Operations – Segments Details the financial performance of EchoStar's Pay-TV, Wireless, and Broadband and Satellite Services segments Consolidated Revenue (in thousands): | Period | 2025 | 2024 | Change (YoY) | % Change | | :-------------------------- | :----------- | :----------- | :----------- | :------- | | Three Months Ended June 30 | $3,724,959 | $3,952,751 | $(227,792) | (5.8)% | | Six Months Ended June 30 | $7,594,717 | $7,967,594 | $(372,877) | (4.7)% | Consolidated Operating Income (Loss) (in thousands): | Period | 2025 | 2024 | Change (YoY) | % Change | | :-------------------------- | :----------- | :----------- | :----------- | :------- | | Three Months Ended June 30 | $(213,408) | $(65,369) | $(148,039) | (226.5)% | | Six Months Ended June 30 | $(301,540) | $(80,613) | $(220,927) | (274.1)% | Pay-TV Segment Performance (Three Months Ended June 30): | Metric | 2025 | 2024 | Change (YoY) | % Change | | :------------------------------------------ | :----------- | :----------- | :----------- | :------- | | Total Revenue | $2,462,249 | $2,676,284 | $(214,035) | (8.0)% | | Operating income (loss) | $595,552 | $667,752 | $(72,200) | (10.8)% | | Pay-TV subscribers (period end, in millions) | 7.108 | 8.074 | (0.966) | (12.0)% | | Net Pay-TV subscriber additions (losses) (in millions) | (0.261) | (0.104) | (0.157) | * | | Pay-TV ARPU | $111.74 | $108.42 | $3.32 | 3.1% | | DISH TV churn rate | 1.29% | 1.39% | (0.10)% | (7.2)% | | DISH TV SAC | $1,150 | $938 | $212 | 22.6% | Wireless Segment Performance (Three Months Ended June 30): | Metric | 2025 | 2024 | Change (YoY) | % Change | | :------------------------------------------ | :----------- | :----------- | :----------- | :------- | | Total Revenue | $934,631 | $892,728 | $41,903 | 4.7% | | Operating income (loss) | $(772,948) | $(700,302) | $(72,646) | (10.4)% | | Wireless subscribers (period end, in millions) | 7.357 | 7.281 | 0.076 | 1.0% | | Net Wireless subscriber additions (losses) (in millions) | 0.212 | (0.016) | 0.228 | * | | Wireless ARPU | $37.40 | $35.91 | $1.49 | 4.1% | | Wireless churn rate | 2.69% | 2.93% | (0.24)% | (8.2)% | Broadband and Satellite Services Segment Performance (Three Months Ended June 30): | Metric | 2025 | 2024 | Change (YoY) | % Change | | :------------------------------------------ | :----------- | :----------- | :----------- | :------- | | Total Revenue | $339,780 | $394,011 | $(54,231) | (13.8)% | | Operating income (loss) | $(36,738) | $(34,586) | $(2,152) | (6.2)% | | Broadband subscribers (period end, in millions) | 0.819 | 0.955 | (0.136) | (14.2)% | | Net Broadband subscriber additions (losses) (in millions) | (0.034) | (0.023) | (0.011) | (47.8)% | Other Consolidated Results Summarizes other consolidated financial outcomes, including net income (loss), interest income, and interest expense Other Consolidated Results Highlights (Six Months Ended June 30, in thousands): | Metric | 2025 | 2024 | Change (YoY) | % Change | | :------------------------------------------ | :----------- | :----------- | :----------- | :------- | | Net income (loss) attributable to EchoStar | $(508,801) | $(312,967) | $(195,834) | (62.6)% | | Interest income | $130,898 | $44,391 | $86,507 | 194.9% | | Interest expense, net of amounts capitalized | $(565,287) | $(180,574) | $(384,713) | (213.0)% | | Other, net | $76,527 | $(117,608) | $194,135 | * | - The increase in interest expense was primarily due to debt issuances in the third and fourth quarters of 2024[447] - The positive 'Other, net' income was driven by a $37 million gain on the sale of the Fiber business, $16 million in net gains on marketable and non-marketable investment securities, and $11 million of early debt extinguishment gains[448] Non-GAAP Performance Measures and Reconciliation Presents non-GAAP measures like OIBDA, used by management to assess segment operating profitability - OIBDA (Operating income (loss) plus Depreciation and amortization) is a non-GAAP measure used by management to evaluate segment operating profitability and performance relative to competitors[451] Segment OIBDA (Six Months Ended June 30, in thousands): | Segment | 2025 | 2024 | Change (YoY) | | :-------------------------- | :----------- | :----------- | :----------- | | Pay-TV | $1,393,250 | $1,508,511 | $(115,261) | | Wireless | $(867,044) | $(757,935) | $(109,109) | | Broadband and Satellite Services | $153,402 | $161,679 | $(8,277) | | Consolidated Total | $679,848 | $912,312 | $(232,464) | Guarantor Financial Information Provides summarized financial data for the combined obligor group guaranteeing EchoStar's senior secured notes - EchoStar's senior secured notes are jointly and severally guaranteed on a senior secured basis by certain wholly-owned subsidiaries (Spectrum Assets Guarantors and Equity Pledge Guarantors)[455] Summarized Balance Sheet for Combined Obligor Group (as of June 30, 2025, in thousands): | Metric | Amount | | :-------------------------- | :----------- | | Current assets | $4,501,051 | | Noncurrent assets | $17,650,350 | | Current liabilities | $335,512 | | Noncurrent liabilities | $9,516,165 | | Due from non-guarantors | $1,370,441 | Summarized Results of Operations for Combined Obligor Group (Six Months Ended June 30, 2025, in thousands): | Metric | Amount | | :-------------------------- | :----------- | | Total revenues | $331 | | Operating income (loss) | $(11,784) | | Net income (loss) | $(135,884) | Liquidity and Capital Resources Discusses EchoStar's cash position, free cash flow, debt maturities, and the need for additional capital - Cash, cash equivalents, current restricted cash, and current marketable investment securities decreased by $1.181 billion to $4.517 billion as of June 30, 2025, primarily due to capital expenditures, debt redemptions, and repurchases[461] Free Cash Flow (Six Months Ended June 30, in thousands): | Metric | 2025 | 2024 | | :------------------------------------------ | :----------- | :----------- | | Net cash flows from operating activities | $214,267 | $930,984 | | Purchases of property and equipment, net of refunds (including capitalized interest related to regulatory authorizations) | $(1,125,385) | $(1,348,729) | | Free cash flow | $(911,118) | $(417,745) | - Substantial doubt exists about the company's ability to continue as a going concern due to insufficient liquidity for upcoming 2026 debt maturities, and negative free cash flow is expected to continue[484][511] - EchoStar will need to raise additional capital or refinance/restructure existing debt to fund future working capital, capital expenditures (especially for 5G Network deployment), and debt service requirements[484][485][487] - The company redeemed $333 million of its Term Loan due 2025 and repurchased $123 million of its 5 1/4% Senior Secured Notes due 2026 during the six months ended June 30, 2025[492][493] - The continued uncertainty related to the FCC inquiries could negatively impact the company's ability to raise capital on favorable terms[490] Item 3. Quantitative and Qualitative Disclosures About Market Risk States no material changes in market risk for the six months ended June 30, 2025 - No material changes in market risk during the six months ended June 30, 2025[496] - Refer to the Annual Report on Form 10-K for the year ended December 31, 2024, for additional information on market risk[496] Item 4. Controls and Procedures Confirms the effectiveness of disclosure controls and procedures with no material changes in internal control - Disclosure controls and procedures were effective as of June 30, 2025[497] - No material changes in internal control over financial reporting during the most recent fiscal quarter[498] PART II Item 1. Legal Proceedings Refers to Note 10 for detailed information on EchoStar's ongoing legal proceedings and contingencies - Detailed information on legal proceedings is provided in Note 10 'Commitments and Contingencies – Contingencies – Litigation' of the Notes to Condensed Consolidated Financial Statements[500] Item 1A. Risk Factors Updates risk factors, emphasizing going concern doubt, potential bankruptcy, FCC review impacts, and trade policy changes - Substantial doubt exists about EchoStar's ability to continue as a going concern due to insufficient cash, projected future cash flows, or committed financing for the next twelve months[511] - EchoStar may take significant actions, including a potential voluntary Chapter 11 bankruptcy filing, to protect its interests in Wireless Licenses and other assets, which could negatively impact investment value and lead to material adverse consequences[502][503] - The FCC's review of 5G network build-out compliance could lead to the loss or impairment of certain spectrum licenses and has effectively frozen decisions regarding the 5G network build-out[505][506][507] - Changes in trade policies, including tariffs and other restrictions, could increase costs, disrupt the supply chain, and negatively affect business, operations, and financial condition[508][509][510] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds Reports no Class A common stock repurchases during the quarter, despite an authorized program - No Class A common stock repurchases were made during the three months ended June 30, 2025[514] Stock Repurchase Program Status (as of June 30, 2025): | Metric | Amount | | :------------------------------------------ | :----------- | | Maximum Approximate Dollar Value of Shares that May Yet be Purchased Under the Programs | $1,000,000,000 | - The Board of Directors authorized stock repurchases of up to $1.0 billion of Class A common stock through December 31, 2025[514] Item 3. Defaults Upon Senior Securities Confirms no defaults upon senior securities - No defaults upon senior securities[7] Item 4. Mine Safety Disclosures States no mine safety disclosures - No mine safety disclosures[7] Item 5. Other Information Reports no Rule 10b5-1 or non-Rule 10b5-1 trading arrangements by directors or officers - No Rule 10b5-1 or non-Rule 10b5-1 trading arrangements were adopted, modified, or terminated by directors or Section 16 officers during the fiscal quarter ended June 30, 2025[515] Item 6. Exhibits Lists exhibits filed, including certifications, FCC letter, and XBRL financial statements - Includes Section 302 and Section 906 Certifications of the Chief Executive Officer and Chief Financial Officer[518] - References a letter from the FCC regarding review of compliance with federal obligations to provide 5G service (Exhibit 99.1)[518] - Financial statements are provided in Inline eXtensible Business Reporting Language (iXBRL) format[518] Signatures Confirms the report's signing by EchoStar's President and CEO, and EVP and CFO on August 1, 2025 - The report was signed by Hamid Akhavan, President and Chief Executive Officer, and Paul W Orban, Executive Vice President and Chief Financial Officer[522] - Date of signing: August 1, 2025[522]