Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED

RESULTS OF OPERATIONS

Year Ended December 31, 2020 Compared to the Year Ended December 31, 2019

The following table presents our consolidated results of operations for the year ended December 31, 2020 compared to the year ended December 31, 2019:

						For the years ended December 31,												Variance
Statements of Operations Data (1)						2020						2019						Amount						%
Revenue:
Services and other revenue						$	1,682,304					$	1,619,271					$	63,033					3.9
Equipment revenue						205,603						266,810						(61,207)						(22.9)
Total revenue						1,887,907						1,886,081						1,826						0.1
Costs and expenses:
Cost of sales - services and other						577,943						561,353						16,590						3.0
% of total services and other revenue						34.4		%				34.7		%
Cost of sales - equipment						166,435						226,002						(59,567)						(26.4)
% of total equipment revenue						80.9		%				84.7		%
Selling, general and administrative expenses						474,912						509,145						(34,233)						(6.7)
% of total revenue						25.2		%				27.0		%
Research and development expenses						29,448						25,739						3,709						14.4
% of total revenue						1.6		%				1.4		%
Depreciation and amortization						525,011						490,765						34,246						7.0
Impairment of long-lived assets						1,685						—						1,685						*
Total costs and expenses						1,775,434						1,813,004						(37,570)						(2.1)
Operating income (loss)						112,473						73,077						39,396						53.9
Other income (expense):
Interest income, net						39,982						82,352						(42,370)						(51.4)
Interest expense, net of amounts capitalized						(147,927)						(251,016)						103,089						(41.1)
Gains (losses) on investments, net						(31,306)						28,912						(60,218)						*
Equity in earnings (losses) of unconsolidated affiliates, net						(7,267)						(14,734)						7,467						(50.7)
Foreign currency transaction gains (losses), net						6,015						(11,590)						17,605						*
Other, net						195						(166)						361						*
Total other income (expense), net						(140,308)						(166,242)						25,934						(15.6)
Income (loss) from continuing operations before income taxes						(27,835)						(93,165)						65,330						(70.1)
Income tax benefit (provision), net						(24,069)						(20,488)						(3,581)						17.5
Net income (loss) from continuing operations						(51,904)						(113,653)						61,749						(54.3)
Net income (loss) from discontinued operations						—						39,401						(39,401)						(100.0)
Net income (loss)						(51,904)						(74,252)						22,348						(30.1)
Less: Net loss (income) attributable to non-controlling interests						11,754						11,335						419						3.7
Net income (loss) attributable to EchoStar Corporation common stock						$	(40,150)					$	(62,917)					$	22,767					(36.2)
Other data:
EBITDA (2)						$	616,875					$	577,599					$	39,276					6.8
Subscribers, end of period						1,564,000						1,477,000						87,000						5.9

• Percentage is not meaningful.

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

(2) A reconciliation of EBITDA to Net income (loss), the most directly comparable 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.

Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED

The following discussion relates to our continuing operations for the years ended December 31, 2020 and 2019 unless otherwise stated.

Services and other revenue. Services and other revenue totaled $1.7 billion for the year ended December 31, 2020, an increase of $63.0 million, or 3.9%, as compared to 2019.

• Services and other revenue from our Hughes segment for the year ended December 31, 2020 increased by $69.2 million, or 4.4%, to $1.7 billion compared to 2019. The increase was primarily attributable to increases in sales of broadband services to our consumer customers of $109.3 million, partially offset by a decrease in sales of services to our enterprise customers of $35.9 million. These variances reflect the negative impact of exchange rate fluctuations of $35.6 million, primarily attributable to our consumer customers.

• Services and other revenue from our Corporate and Other segment for the year ended December 31, 2020 decreased by $7.3 million, or 43.0%, to $9.7 million compared to 2019, primarily attributable to a decrease in income from certain real estate previously leased to DISH Network and transferred as part of the BSS Transaction.

Equipment revenue. Equipment revenue totaled $205.6 million for the year ended December 31, 2020, a decrease of $61.2 million, or 22.9%, as compared to 2019. The decrease was primarily attributable to $43.2 million related to the bankruptcy of a certain customer and $38.9 million decreased sales to our international enterprise customers, partially offset by $24.7 million increased sales to our domestic enterprise customers. These variances reflect the negative impact of exchange rate fluctuations of $3.5 million, primarily attributable to our enterprise customers.

Cost of sales - services and other. Cost of sales - services and other totaled $577.9 million for the year ended December 31, 2020, an increase of $16.6 million, or 3.0%, as compared to 2019. The increase was primarily attributable to the corresponding increase in services and other revenue.

Cost of sales - equipment. Cost of sales - equipment totaled $166.4 million for the year ended December 31, 2020, a decrease of $59.6 million, or 26.4%, as compared to 2019. The decrease was primarily attributable to the corresponding reduction in equipment revenue.

Selling, general and administrative expenses. Selling, general and administrative expenses totaled $474.9 million for the year ended December 31, 2020, a decrease of $34.2 million, or 6.7%, as compared to 2019. The decrease was primarily attributable to expenses related to the license fee dispute in India of $9.4 million in 2019, certain legal proceedings of $25.7 million in 2019, and decreased sales and marketing expenses of $6.4 million in 2020, partially offset by increases in other general and administrative expenses of $7.3 million in 2020.

Depreciation and amortization. Depreciation and amortization expenses totaled $525.0 million for the year ended December 31, 2020, an increase of $34.2 million, or 7.0%, as compared to 2019. The increase was primarily attributable to increases in depreciation expense of $21.8 million relating to our customer premises equipment and $13.4 million relating to the depreciation of assets acquired in the Yahsat Brazil JV Transaction of which $7.9 million are related to non-recurring accelerated depreciation of assets that were scheduled for replacement after the Yahsat Brazil JV Transaction.

Impairment of long-lived assets. Impairment of long-lived assets totaled $1.7 million for the year ended December 31, 2020, attributable to an impairment loss related to our nano-satellites which experienced technical anomalies following launch.

Interest income, net. Interest income, net totaled $40.0 million for the year ended December 31, 2020, a decrease of $42.4 million, or 51.4%, as compared to 2019, primarily attributable to decreases in the yield on our marketable investment securities and lower cash balances.

Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED

Interest expense, net of amounts capitalized. Interest expense, net of amounts capitalized totaled $147.9 million for the year ended December 31, 2020, a decrease of $103.1 million, or 41.1%, as compared to 2019. The decrease was primarily attributable to a decrease of $29.0 million in interest expense and in amortization of deferred financing cost as a result of the purchase and maturity in June 2019 of our 6 1/2% Senior Secured Notes due in 2019, a decrease of $66.1 million of interest expense related to the license fee dispute in India, a decrease of $4.1 million related to a certain legal proceeding in 2019 and an increase of $4.8 million in capitalized interest in 2020 relating to the construction of the EchoStar XXIV satellite and its related infrastructure.

Gains (losses) on investments, net. Gains (losses) on investments, net were $31.3 million in losses for the year ended December 31, 2020, as compared to $28.9 million in gains for the year ended December 31, 2019, a negative change of $60.2 million. The change was primarily attributable to $69.0 million of net negative variances on marketable investment securities compared to 2019, partially offset by an $6.9 million loss in Other Equity Investments in 2020.

Equity in earnings (losses) of unconsolidated affiliates, net. Equity in earnings (losses) of unconsolidated affiliates, net totaled $7.3 million in losses for the year ended December 31, 2020, a decrease in losses of $7.5 million, or 50.7%, as compared to 2019. The decrease in losses was related to decreased losses from our investments in our equity method investees.

Foreign currency transaction gains (losses), net. Foreign currency transaction gains (losses), net totaled $6.0 million in gains for the year ended December 31, 2020, as compared to $11.6 million in losses for the year ended December 31, 2019, a positive change of $17.6 million. The change was due to the net weakening of the U.S. dollar against certain foreign currencies in 2020 compared to 2019.

Income tax benefit (provision), net. Income tax benefit (provision), net was $(24.1) million for the year ended December 31, 2020, as compared to $(20.5) million for the year ended December 31, 2019. Our effective income tax rate was (86.5)% and (59.8)% for the years ended December 31, 2020 and 2019, respectively. The variations in our effective tax rate from the U.S. federal statutory rate for the year ended December 31, 2020 were primarily due to the increase in our valuation allowance associated with certain foreign losses, permanent book tax differences and the impact of state and local taxes, partially offset by the change in net losses that are capital in nature and research and experimentation credits. The variations in our current year effective tax rate from the U.S. federal statutory rate for the year ended December 31, 2019 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.

Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED

Net income (loss) attributable to EchoStar Corporation common stock. Net income (loss) attributable to EchoStar Corporation common stock was $(40.2) million for the year ended December 31, 2020, as compared to $(62.9) million for the year ended December 31, 2019, a change of $22.8 million as set forth in the following table:

						Amounts
Net income (loss) attributable to EchoStar Corporation for the year ended December 31, 2019						$	(62,917)
Decrease (increase) in interest expense, net of amounts capitalized						103,089
Increase (decrease) in operating income (loss), including depreciation and amortization						39,396
Increase (decrease) in foreign currency transaction gains (losses), net						17,605
Decrease (increase) in equity in earnings (losses) of unconsolidated affiliates, net						7,467
Increase (decrease) in net income (loss) attributable to non-controlling interest						419
Increase (decrease) in other, net						361
Decrease (increase) in income tax benefit (provision), net						(3,581)
Increase (decrease) in net income (loss) from discontinued operations						(39,401)
Increase (decrease) in interest income, net						(42,370)
Increase (decrease) in gains (losses) on investments, net						(60,218)
Net income (loss) attributable to EchoStar Corporation for the year ended December 31, 2020						$	(40,150)

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 years ended December 31,												Variance
						2020						2019						Amount						%
Net income (loss)						$	(51,904)					$	(74,252)					$	22,348					(30.1)
Interest income, net						(39,982)						(82,352)						42,370						(51.4)
Interest expense, net of amounts capitalized						147,927						251,016						(103,089)						(41.1)
Income tax provision (benefit), net						24,069						20,488						3,581						17.5
Depreciation and amortization						525,011						490,765						34,246						7.0
Net loss (income) from discontinued operations						—						(39,401)						39,401						(100.0)
Net loss (income) attributable to non-controlling interests						11,754						11,335						419						3.7
EBITDA						$	616,875					$	577,599					$	39,276					6.8

Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED

EBITDA was $616.9 million for the year ended December 31, 2020, an increase of $39.3 million, or 6.8%, as compared to 2019 as set forth in the following table:

						Amounts
EBITDA for the year ended December 31, 2019						$	577,599
Increase (decrease) in operating income (loss), excluding depreciation and amortization						73,642
Increase (decrease) in foreign currency transaction gains (losses), net						17,605
Decrease (increase) in equity in earnings (losses) of unconsolidated affiliates, net						7,467
Decrease (increase) in net loss (income) attributable to non-controlling interests						419
Increase (decrease) in other, net						361
Increase (decrease) in gains (losses) on investments, net						(60,218)
EBITDA for the year ended December 31, 2020						$	616,875

Segment Operating Results and Capital Expenditures

The following tables present our operating results, capital expenditures and EBITDA by segment for the year ended December 31, 2020, as compared to the year ended December 31, 2019:

						Hughes						ESS						Corporate and Other						Consolidated Total
For the year ended December 31, 2020
Total revenue						$	1,860,834					$	17,398					$	9,675					$	1,887,907
Capital expenditures						355,197						41						53,560						408,798
EBITDA						727,608						7,873						(118,606)						616,875
For the year ended December 31, 2019
Total revenue						$	1,852,742					$	16,257					$	17,082					$	1,886,081
Capital expenditures						308,781						—						109,293						418,074
EBITDA						625,660						6,994						(55,055)						577,599

Hughes Segment

						For the years ended December 31,												Variance
						2020						2019						Amount						%
Total revenue						$	1,860,834					$	1,852,742					$	8,092					0.4
Capital expenditures						355,197						308,781						46,416						15.0
EBITDA						727,608						625,660						101,948						16.3

Total revenue was $1.9 billion for the year ended December 31, 2020, an increase of $8.1 million, or 0.4%, as compared to 2019. Services and other revenue increased primarily due to increases in sales of broadband services to our consumer customers of $109.3 million, partially offset by a decrease in sales of services to our enterprise customers of $35.9 million. These variances reflect the negative impact of exchange rate fluctuations of $35.6 million, primarily attributable to our consumer customers. Equipment revenue decreased primarily due to $43.2 million related to the bankruptcy of a certain customer and $38.9 million decreased sales to our international enterprise customers, partially offset by $24.7 million increased sales to our domestic enterprise customers. These variances reflect the negative impact of exchange rate fluctuations of $3.5 million, primarily attributable to our enterprise customers.

Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED

Capital expenditures were $355.2 million for the year ended December 31, 2020, an increase of $46.4 million, or 15.0%, as compared to 2019, primarily due to increases in expenditures associated with our consumer business and construction of our satellite-related ground infrastructure.

EBITDA was $727.6 million for the year ended December 31, 2020, an increase of $101.9 million, or 16.3%, as compared to 2019 as set forth in the following table:

						Amounts
EBITDA for the year ended December 31, 2019						$	625,660
Increase (decrease) in operating income (loss), excluding depreciation and amortization						80,562
Increase (decrease) in foreign currency transaction gains (losses), net						13,298
Increase (decrease) in gains (losses) on investments, net						8,770
Decrease (increase) in net loss (income) attributable to non-controlling interests						419
Increase (decrease) in other, net						255
Decrease (increase) in equity in earnings (losses) of unconsolidated affiliates, net						(1,356)
EBITDA for the year ended December 31, 2020						$	727,608

ESS Segment

						For the years ended December 31,												Variance
						2020						2019						Amount						%
Total revenue						$	17,398					$	16,257					$	1,141					7.0
Capital expenditures						41						—						41						*
EBITDA						7,873						6,994						879						12.6

• Percentage is not meaningful

Total revenue was $17.4 million for the year ended December 31, 2020, an increase of $1.1 million, or 7.0%, as compared to 2019, primarily due to an increase in transponder services provided to third parties.

EBITDA was $7.9 million for the year ended December 31, 2020, an increase of $0.9 million, or 12.6%, as compared to 2019, primarily due to the increase in overall ESS revenue.

Corporate and Other

						For the years ended December 31,												Variance
						2020						2019						Amount						%
Total revenue						$	9,675					$	17,082					$	(7,407)					(43.4)
Capital expenditures						53,560						109,293						(55,733)						(51.0)
EBITDA						(118,606)						(55,055)						(63,551)						*

Total revenue was $9.7 million for the year ended December 31, 2020, a decrease of $7.4 million, or 43.4%, as compared to 2019 which was primarily attributable to a decrease in income from certain real estate previously leased to DISH Network and transferred as part of the BSS Transaction.

Capital expenditures were $53.6 million for the year ended December 31, 2020, a decrease of $55.7 million, or 51.0%, as compared to 2019, primarily due to decreases in satellite expenditures on the EchoStar XXIV satellite.

Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED

EBITDA was a loss of $118.6 million for the year ended December 31, 2020, an increased in loss of $63.6 million as compared to 2019 as set forth in the following table:

						Amounts
EBITDA for the year ended December 31, 2019						$	(55,055)
Decrease (increase) in equity in earnings (losses) of unconsolidated affiliates, net						8,823
Increase (decrease) in foreign currency transaction gains (losses), net						4,306
Increase (decrease) in other, net						116
Increase (decrease) in operating income (loss), excluding depreciation and amortization						(7,808)
Increase (decrease) in gains (losses) on investments, net						(68,988)
EBITDA for the year ended December 31, 2020						$	(118,606)

Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED

Year Ended December 31, 2019 Compared to the Year Ended December 31, 2018

The following table presents our consolidated results of operations for the year ended December 31, 2019 compared to the year ended December 31, 2018:

						For the years ended December 31,												Variance
Statements of Operations Data (1)						2019						2018						Amount						%
Revenue:
Services and other revenue						$	1,619,271					$	1,557,228					$	62,043					4.0
Equipment revenue						266,810						205,410						61,400						29.9
Total revenue						1,886,081						1,762,638						123,443						7.0
Costs and expenses:
Cost of sales - services and other						561,353						563,907						(2,554)						(0.5)
% of total services and other revenue						34.7		%				36.2		%
Cost of sales - equipment						226,002						176,600						49,402						28.0
% of total equipment revenue						84.7		%				86.0		%
Selling, general and administrative expenses						509,145						436,088						73,057						16.8
% of total revenue						27.0		%				24.7		%
Research and development expenses						25,739						27,570						(1,831)						(6.6)
% of total revenue						1.4		%				1.6		%
Depreciation and amortization						490,765						457,116						33,649						7.4
Impairment of long-lived assets						—						65,220						(65,220)						(100.0)
Total costs and expenses						1,813,004						1,726,501						86,503						5.0
Operating income (loss)						73,077						36,137						36,940						*
Other income (expense):
Interest income, net						82,352						80,275						2,077						2.6
Interest expense, net of amounts capitalized						(251,016)						(219,288)						(31,728)						14.5
Gains (losses) on investments, net						28,912						(12,622)						41,534						*
Equity in earnings (losses) of unconsolidated affiliates, net						(14,734)						(5,954)						(8,780)						*
Foreign currency transaction gains (losses), net						(11,590)						(15,583)						3,993						(25.6)
Other, net						(166)						11,249						(11,415)						*
Total other income (expense), net						(166,242)						(161,923)						(4,319)						2.7
Income (loss) from continuing operations before income taxes						(93,165)						(125,786)						32,621						(25.9)
Income tax benefit (provision), net						(20,488)						(6,576)						(13,912)						*
Net income (loss) from continuing operations						(113,653)						(132,362)						18,709						(14.1)
Net income (loss) from discontinued operations						39,401						93,729						(54,328)						(58.0)
Net income (loss)						(74,252)						(38,633)						(35,619)						92.2
Less: Net loss (income) attributable to non-controlling interests						11,335						(1,842)						13,177						*
Net income (loss) attributable to EchoStar Corporation common stock						$	(62,917)					$	(40,475)					$	(22,442)					55.4
Other data:
EBITDA (2)						$	577,599					$	468,501					$	109,098					23.3
Subscribers, end of period						1,477,000						1,361,000						116,000						8.5

• Percentage is not meaningful.

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

(2) A reconciliation of EBITDA to Net income (loss), the most directly comparable 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.

Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED

Services and other revenue. Services and other revenue totaled $1.6 billion for the year ended December 31, 2019, an increase of $62.0 million, or 4.0%, as compared to 2018.

• Services and other revenue from our Hughes segment for the year ended December 31, 2019 increased by $74.9 million, or 5.0%, to $1.6 billion, as compared to 2018. The increase was primarily attributable to increases in sales of broadband services to our consumer customers of $102.0 million, primarily offset by a decrease in sales of services to our enterprise customers of $30.7 million.

• Services and other revenue from our ESS segment for the year ended December 31, 2019 decreased by $11.0 million, or 40.3%, to $16.3 million, as compared to 2018. The decrease was due to a decrease of $9.2 million in transponder services provided to third parties and a decrease of $1.6 million in satellite capacity leased to DISH Network on the EchoStar IX satellite.

Equipment revenue. Equipment revenue totaled $266.8 million for the year ended December 31, 2019, an increase of $61.4 million, or 29.9%, as compared to 2018. The increase was primarily attributable to our Hughes segment due to increases in hardware sales of $45.9 million to our enterprise customers and $15.5 million to our mobile satellite systems customers.

Cost of sales - services and other. Cost of sales - services and other totaled $561.4 million for the year ended December 31, 2019, a decrease of $2.6 million, or 0.5%, as compared to 2018. The decrease was primarily attributable to our Hughes segment due to lower costs of services provided to our enterprise customers, partially offset by an increase in costs of services to our consumer customers.

Cost of sales - equipment. Cost of sales - equipment totaled $226.0 million for the year ended December 31, 2019, a decrease of $49.4 million, or 28.0%, as compared to 2018. The increase was primarily attributable to our Hughes segment due to an increase in hardware sales to our enterprise customers and our mobile satellite systems customers.

Selling, general and administrative expenses. Selling, general and administrative expenses totaled $509.1 million for the year ended December 31, 2019, an increase of $73.1 million, or 16.8%, as compared to 2018. The increase was primarily attributable to increases in (i) expense of $32.5 million related to certain legal proceedings, (ii) marketing and promotional expenses of $22.5 million from our Hughes segment mainly associated with our consumer business, (iii) bad debt expense of $5.0 million and (iv) other general and administrative expenses of $13.1 million.

Depreciation and amortization. Depreciation and amortization expenses totaled $490.8 million for the year ended December 31, 2019, an increase of $33.6 million, or 7.4%, as compared to 2018. The increase was primarily from our Hughes segment and due to increases in depreciation expense of (i) $20.2 million relating to our customer premises equipment, (ii) $4.8 million relating the Telesat T19V satellite that was placed into service in the fourth quarter of 2018, (iii) $3.1 million relating to the decrease in depreciable life of the SPACEWAY 3 satellite and (iv) $2.0 million relating to the depreciation of assets acquired from Yahsat in Brazil.

Impairment of long-lived assets. There was no impairment of long-lived assets for the year ended December 31, 2019, compared to $65.2 million for the year ended December 31, 2018, which was primarily attributable to the determination that the fair value of our 45 degree west longitude regulatory authorization was de minimis and our recognition of a loss on the assets and in-substance liquidation of the business related to it.

Interest expense, net of amounts capitalized. Interest expense, net of amounts capitalized totaled $251.0 million for the year ended December 31, 2019, an increase of $31.7 million, or 14.5%, as compared to 2018. The increase was primarily due to an increase of $76.3 million in interest expense associated with certain legal proceedings. The increase was partially offset by a decrease of $39.1 million in interest expense and the amortization of deferred financing cost as a result of the repurchase and maturity of our 6 1/2% Senior Secured Notes due 2019 (the “2019 Senior Secured Notes”) and a net increase of $4.3 million in capitalized interest relating to the construction of the EchoStar XXIV satellite.

Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED

Gains (losses) on investments, net. Gains (losses) on investments, net totaled $28.9 million for the year ended December 31, 2019, as compared to $(12.6) million for the year ended December 31, 2018. The change was primarily attributable to an increase in gains on marketable investment securities of $78.2 million in 2019, partially offset by $36.7 million in losses on certain investments in 2019.

Equity in earnings (losses) of unconsolidated affiliates, net. Equity in losses of unconsolidated affiliates, net totaled $(14.7) million for the year ended December 31, 2019, as compared to $(6.0) million for the year ended December 31, 2018. The change was primarily related to an increase in loss from our equity method investments. Additionally, in the fourth quarter of 2019, we changed our accounting policy to record our share of net earnings or losses of investees on a three-month lag.

Foreign currency transaction gains (losses), net. Foreign currency transaction gains (losses), net totaled $(11.6) million for the year ended December 31, 2019, as compared to $(15.6) million for the year ended December 31, 2018. The change was primarily due to the net strengthening of the U.S. dollar against certain foreign currencies in 2019 compared to 2018.

Other, net. Other, net totaled $(0.2) million for the year ended December 31, 2019, as compared to $11.2 million for the year ended December 31, 2018. The decrease in income of $11.4 million was primarily due to a net gain of $9.6 million due to the one-time settlement of certain amounts due to and from a third party vendor in 2018 and a net decrease of $2.8 million in dividends received from certain marketable equity securities in 2019 compared to 2018.

Income tax benefit (provision), net. Income tax benefit (provision), net was $(20.5) million for the year ended December 31, 2019, as compared to $(6.6) million for the year ended December 31, 2018. Our effective income tax rate was (59.8)% and (5.5)% for the years ended December 31, 2019 and 2018, respectively. The variations in our current year effective tax rate from the U.S. federal statutory rate for the year ended December 31, 2019 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 valuation allowance related to net unrealized gains that are capital in nature and research and experimentation credits. For the year ended December 31, 2018, we recorded a tax provision of zero related to the tax on deemed mandatory repatriation of our unrepatriated foreign earnings. As a result of the release of new treasury regulations in June 2019, we have recorded additional tax expense of $1.5 million on deemed mandatory repatriation of certain deferred foreign earnings. The variations in our effective tax rate from the U.S. federal statutory rate for the year ended December 31, 2018 were primarily due to research and experimentation credits and the change in our valuation allowance associated with unrealized gains that are capital in nature, partially offset by the impact of state and local taxes and the increase in our valuation allowance associated with certain foreign losses.

Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED

Net income (loss) attributable to EchoStar Corporation common stock. Net income (loss) attributable to EchoStar Corporation common stock was a net loss of $(62.9) million for the year ended December 31, 2019, as compared to net income of $(40.5) million for the year ended December 31, 2018, as set forth in the following table:

						Amounts
Net income (loss) attributable to EchoStar Corporation for the year ended December 31, 2018						$	(40,475)
Increase (decrease) in gains (losses) on investments, net						41,534
Increase (decrease) in operating income (loss), including depreciation and amortization						36,940
Decrease (increase) in net loss (income) attributable to non-controlling interests						13,177
Increase (decrease) in foreign currency transaction gains (losses), net						3,993
Increase (decrease) in interest income, net						2,077
Decrease (increase) in equity in earnings (losses) of unconsolidated affiliates, net						(8,780)
Increase (decrease) in other, net						(11,415)
Decrease (increase) in income tax benefit (provision), net						(13,912)
Decrease (increase) in interest expense, net of amounts capitalized						(31,728)
Increase (decrease) in net income (loss) from discontinued operations						(54,328)
Net income (loss) attributable to EchoStar Corporation for the year ended December 31, 2019						$	(62,917)

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 Years Ended December 31,												Variance
						2019						2018						Amounts						%
Net income (loss)						$	(74,252)					$	(38,633)					$	(35,619)					92.2
Interest income, net						(82,352)						(80,275)						(2,077)						2.6
Interest expense, net of amounts capitalized						251,016						219,288						31,728						14.5
Income tax provision (benefit), net						20,488						6,576						13,912						*
Depreciation and amortization						490,765						457,116						33,649						7.4
Net loss (income) from discontinued operations						(39,401)						(93,729)						54,328						(58.0)
Net loss (income) attributable to non-controlling interests						11,335						(1,842)						13,177						*
EBITDA						$	577,599					$	468,501					$	109,098					23.3

• Percentage is not meaningful.

EBITDA was $577.6 million for the year ended December 31, 2019, an increase of $109.1 million, or 23.3%, as compared to 2018 as set forth in the following table:

						Amounts
EBITDA for the year ended EBITDA for the year ended December 31, 2018						$	468,501
Increase (decrease) in operating income (loss), excluding depreciation and amortization						70,589
Increase (decrease) in gains (losses) on investments, net						41,534
Decrease (increase) in net loss (income) attributable to non-controlling interests						13,177
Increase (decrease) in foreign currency transaction gains (losses), net						3,993
Decrease (increase) in equity in earnings (losses) of unconsolidated affiliates, net						(8,780)
Increase (decrease) in other, net						(11,415)
EBITDA for the year ended EBITDA for the year ended December 31, 2019						$	577,599

Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED

Segment Operating Results and Capital Expenditures

The following tables present our operating results, capital expenditures and EBITDA by segment for the year ended December 31, 2019 compared to the year ended December 31, 2018. Capital expenditures in the table below are net of refunds and other receipts related to property and equipment.

						Hughes						ESS						Corporate and Other						Consolidated Total
For the year ended December 31, 2019
Total revenue						$	1,852,742					$	16,257					$	17,082					$	1,886,081
Capital expenditures						308,781						—						109,293						418,074
EBITDA						625,660						6,994						(55,055)						577,599
For the year ended December 31, 2018
Total revenue						$	1,716,528					$	27,231					$	18,879					$	1,762,638
Capital expenditures						390,108						(76,757)						164,091						477,442
EBITDA						601,319						17,764						(150,582)						468,501

Hughes Segment

						For the years ended December 31,												Variance
						2019						2018						Amount						%
Total revenue						$	1,852,742					$	1,716,169					$	136,214					7.9
Capital expenditures						308,781						390,108						(81,327)						(20.8)
EBITDA						625,660						601,319						24,341						4.0

Total revenue was $1.9 billion for the year ended December 31, 2019, an increase of $136.2 million, or 7.9%, as compared to 2018. The increase was primarily due to an increase of $102.0 million in sales of broadband services to our consumer customers and net increases in hardware sales of $45.9 million to our enterprise customers and $15.5 million to our mobile satellite systems customers. The increase was partially offset by a decrease of $30.7 million in sales of services to our enterprise customers.

Capital expenditures were $308.8 million for the year ended December 31, 2019, a decrease of $81.3 million, or 20.8%, as compared to 2018, primarily due to net decreases in capital expenditures associated with the construction and infrastructure of our satellites and in our consumer and enterprise businesses.

EBITDA was $625.7 million for the year ended December 31, 2019, an increase of $24.3 million, or 4.0%, as compared to 2018, as set forth in the following table:

						Amounts
EBITDA for the year ended EBITDA for the year ended December 31, 2018						$	601,319
Increase (decrease) in operating income (loss), excluding depreciation and amortization						23,115
Decrease (increase) in net loss (income) attributable to non-controlling interests						13,177
Increase (decrease) in foreign currency transaction gains (losses), net						2,614
Increase (decrease) in other, net						(198)
Decrease (increase) in equity in earnings (losses) of unconsolidated affiliates, net						(5,477)
Increase (decrease) in gains (losses) on investments, net						(8,890)
EBITDA for the year ended EBITDA for the year ended December 31, 2019						$	625,660

Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED

ESS Segment

						For the Years Ended December 31,												Variance
						2019						2018						Amounts						%
Total Revenue						$	16,257					$	27,009					$	(10,974)					(40.3)
Capital Expenditures						—						(76,757)						76,757						(100.0)
EBITDA						6,994						17,764						(10,770)						(60.6)

Total revenue was $16.3 million for the year ended December 31, 2019, a decrease of $11.0 million, or 40.3%, as compared to 2018. The decrease was attributable to a net decrease of $9.2 million in transponder services provided to third parties and a decrease of $1.6 million in satellite capacity leased to DISH Network on the EchoStar IX satellite.

There were no capital expenditures for the year ended for the year ended December 31, 2019, as there were no new satellites under construction in our ESS segment during the year. The negative capital expenditure in 2018 for $76.8 million is primarily driven by a reimbursement of $77.5 million related to the EchoStar 105/SES-11 satellite received in the first quarter of 2018.

EBITDA was $7.0 million for the year ended December 31, 2019, a decrease of $10.8 million, or 60.6%, as compared to 2018, primarily due to the decrease in overall ESS revenue.

Corporate and Other

						For the Years Ended December 31,												Variance
						2019						2018						Amounts						%
Total revenue						$	17,082					$	19,460					$	(1,797)					(9.5)
Capital expenditures						109,293						164,091						(54,798)						(33.4)
EBITDA						(55,055)						(150,582)						95,527						(63.4)

Capital expenditures were $109.3 million for the year ended December 31, 2019, a decrease of $54.8 million, or 33.4%, as compared to 2018, primarily due to decreases in satellite expenditures on the EchoStar XXIV satellite.

EBITDA was $(55.1) million for the year ended December 31, 2019, an increase of $95.5 million, or 63.4%, as compared to 2018, as set forth in the following table:

						Amounts
EBITDA for the year ended December 31, 2018						$	(150,582)
Increase (decrease) in operating income (loss), excluding depreciation and amortization						58,246
Increase (decrease) in gains (losses) on investments, net						50,424
Increase (decrease) in foreign currency transaction gains (losses), net						1,379
Decrease (increase) in equity in earnings (losses) of unconsolidated affiliates, net						(3,303)
Increase (decrease) in other, net						(11,219)
EBITDA for the year ended December 31, 2019						$	(55,055)

Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED

LIQUIDITY AND CAPITAL RESOURCES

Cash, Cash Equivalents and Current Marketable Investment Securities

We consider all liquid investments purchased with an original maturity of 90 days or less to be cash equivalents. See Item 7A. Quantitative and Qualitative Disclosures about Market Risk in this Form 10-K for further discussion regarding our marketable investment securities.

As of December 31, 2020 and 2019, our cash, cash equivalents and marketable investment securities totaled $2.5 billion and $2.5 billion, respectively, of which $1.6 billion and $0.9 billion, respectively, we held as marketable investment securities, consisting of various debt and equity instruments including corporate bonds, corporate equity securities, government bonds and mutual funds.

The following discussion highlights our cash flow activities, which include results from continuing and discontinued operations, for the years ended December 31, 2020, 2019 and 2018*.*

Cash Flow Activities

Cash Flows from Operating Activities

We typically reinvest the cash flow from operating activities in our business. For the years ended December 31, 2020, 2019 and 2018, we reported net cash flows from operating activities of $534.4 million, $656.3 million and $734.5 million, respectively.

For the year ended December 31, 2020, we reported net cash flows from operating activities of $534.4 million, a decrease of $121.9 million, as compared to 2019. The decrease was primarily attributable to lower net income, as adjusted to exclude (i) Depreciation and amortization; (ii) Impairment of long-lived assets; (iii) Losses (gains) on investments, net; (iv) Equity in earnings of unconsolidated affiliates, net; (v) Foreign currency transaction (gains) losses, net; (vi) Deferred tax provision (benefit), net; (vii) Stock-based compensation; (viii) Amortization of debt issuance costs; and (ix) changes in Other, net, of $42.0 million. The decrease in cash flows was also attributable to a decrease of $80.0 million resulting from timing differences in operating assets and liabilities.

For the year ended December 31, 2019, we reported net cash flows from operating activities of $656.3 million, a decrease of $78.2 million, as compared to 2018. The decrease was primarily attributable to lower net income, as adjusted to exclude (i) Depreciation and amortization; (ii) Impairment of long-lived assets; (iii) Losses (gains) on investments, net; (iv) Equity in earnings of unconsolidated affiliates, net; (v) Foreign currency transaction (gains) losses, net; (vi) Dividends received from unconsolidated entity; and (viii) changes in Other, net, of $141.1 million. The decrease in cash flows was partially offset by an increase of $62.9 million resulting from timing differences in operating assets and liabilities.

Cash Flows from Investing Activities

Our investing activities generally include purchases and sales of marketable investment securities, capital expenditures, acquisitions and strategic investments. For the years ended December 31, 2020, 2019 and 2018, we reported net cash flows from investing activities of $(1.1) billion, $0.8 billion and $(2.1) billion, respectively.

For the year ended December 31, 2020, we had net sales and maturities of marketable investment securities of $2.1 billion, partially offset by net purchases of marketable investment securities of $2.8 billion, expenditures for property and equipment of $408.8 million, expenditures of externally marketed software of $38.7 million, and purchase of other investments of $5.5 million.

For the year ended December 31, 2019, we had net sales and maturities of marketable investment securities of $2.4 billion, partially offset by net purchases of marketable investment securities of $993.4 million, expenditures for property and equipment of $418.6 million, and purchase of other investments of $93.7 million.

Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED

For the year ended December 31, 2018, we had net purchases of marketable investment securities of $3.0 billion, expenditures for property and equipment of $555.1 million and investments in unconsolidated affiliates of $116.0 million, partially offset by net sales and maturities of marketable investment securities of $1.5 billion, and a reimbursement of $77.5 million related to the EchoStar 105/SES-11 satellite.

Cash Flows from Financing Activities

Our financing activities generally include proceeds related to the issuance of debt and cash used for the repurchase, redemption or payment of debt and finance lease obligations, payments relating to stock and debt repurchases and the proceeds from Class A common stock options exercised and stock issued under our stock incentive plans and employee stock purchase plan. For the years ended December 31, 2020, 2019 and 2018, we reported net cash flows from financing activities of $(15.6) million, $(885.3) million and $(136.6) million, respectively.

For the year ended December 31, 2020, we had cash outflows of $43.5 million for the repurchase of shares of our Class A common stock, partially offset by cash inflows of $18.2 million for the contribution by noncontrolling interest holder and $10.1 million in net proceeds received from Class A common stock issued under the Employee Stock Purchase Plan.

For the year ended December 31, 2019, we had cash outflows of $920.9 million for the repurchasing and maturity of debt, $29.3 million for the payment of finance lease obligations and $7.3 million for the purchase of non-controlling shareholder interests in a subsidiary of ours that were held by an unaffiliated third party, partially offset by $67.3 million in net proceeds received from the exercise of Class A common stock options.

For the year ended December 31, 2018, we had cash outflows of $70.2 million for the repurchasing and maturity of debt, $41.0 million for the payment of finance lease obligations and $33.3 million for the repurchase of shares of Class A common stock, partially offset by $9.4 million in net proceeds received from the exercise of Class A common stock options.

Obligations and Future Capital Requirements

Contractual Obligations

The following table summarizes our contractual obligations as of December 31, 2020:

						Payments Due in the Years Ending December 31,
						Total						2021						2022						2023						2024						2025						Thereafter
Long-term debt						$	2,400,000					$	900,000					$	—					$	—					$	—					$	—					$	1,500,000
Interest on long-term debt						568,711						123,396						89,063						89,063						89,063						89,063						89,063
Satellite-related commitments						487,665						223,528						73,412						22,778						20,743						21,487						125,717
Operating lease obligations						176,001						21,051						20,409						19,628						16,364						12,355						86,194
Finance lease obligations						608						472						136						—						—						—						—
Total						$	3,632,985					$	1,268,447					$	183,020					$	131,469					$	126,170					$	122,905					$	1,800,974

The table above does not include amounts related to deferred tax liabilities, unrecognized tax positions and certain other amounts recorded in our non-current liabilities as the timing of any payments is uncertain. The table also excludes long-term deferred revenue and other long-term liabilities that do not require future cash payments. Additionally, our satellite-related commitments 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.

Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED

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.

As of December 31, 2020, we had foreign currency forward contracts with a notional value of $12.1 million in place to partially mitigate foreign currency exchange risk. From time to time, we may enter into foreign currency forward contracts, or take other measures, to mitigate risks associated with foreign currency denominated assets, liabilities, commitments and anticipated foreign currency transactions.

Letters of Credit

The following table presents the components of our letters of credit as of December 31, 2020**:**

						Amounts
Restricted cash						$	9,159
Insurance bonds						19,251
Credit arrangement available to our foreign subsidiaries						31,210
Total letters of credit						$	59,620

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 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. Our cash flow could be adversely impacted as a result of the prolonged effect of the COVID-19 pandemic on global activity. Furthermore, if we experience negative cash flows, our existing cash and marketable investment securities balances may be reduced.

Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED

We have a significant amount of outstanding indebtedness. As of December 31, 2020, our total indebtedness was $2.4 billion. 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 $900.0 million mature and are due and payable in June 2021. 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. 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 year ended December 31, 2020, we repurchased 1,905,906 shares of our Class A common stock under this program. From January 1, 2021 through February 11, 2021, we repurchased 2,851,841 shares of our Class A common stock under this program.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of our Accompanying Consolidated Financial Statements in conformity with U.S. GAAP requires us to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities at the date of the balance sheets, the reported amounts of revenue and expenses for each reporting period, and certain information disclosed in our Accompanying Consolidated Financial Statements. We base our estimates, judgments and assumptions on historical experience and on various other factors that we believe to be relevant under the circumstances. Actual results may differ from previously estimated amounts, and such differences may be material to our Accompanying Consolidated Financial Statements. We review our estimates and assumptions periodically, and the effects of revisions are reflected in the period they occur or prospectively if the revised estimate affects future periods. The following represent what we believe are the critical accounting policies that may involve a high degree of estimation, judgment and complexity. For a summary of our significant accounting policies, including those discussed below, see Note 2 in our Accompanying Consolidated Financial Statements.

Contingent Liabilities

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. Legal fees and other costs of defending legal proceedings are charged to expense as incurred. A significant amount of management judgment is required in determining whether an accrual should be recorded for a loss contingency and the amount of such accrual. Estimates generally are developed in consultation with legal counsel and are based on an analysis of potential outcomes. Due to the inherent uncertainty in determining the likelihood of potential outcomes and the potential financial statement impact of such outcomes, it is possible that upon further development or resolution of a contingent matter, charges related to existing loss contingencies could be recorded in future periods, which could be material to our consolidated results of operations and financial position.

Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED

Revenue Recognition

Our Hughes segment enters into contracts to design, develop and deliver telecommunication networks to customers in our enterprise and mobile satellite systems markets. Those contracts require significant effort to develop and construct the network over an extended time period. Revenue from such contracts is recognized over time using an appropriate method to measure progress toward completion. Depending on the nature of the arrangement, we measure progress toward completion using the cost-to-cost input method or the units-of-delivery output method. Under the cost-to-cost method, revenue reflects the ratio of costs incurred to estimated total costs at completion. Under the units-of-delivery method, revenue and related costs are recognized as products are delivered based on the expected profit for the entire agreement. Profit margins on long-term contracts are based on estimates of total revenue and costs at completion. We review and revise our estimates periodically and recognize related adjustments in the period in which the revisions are made. Estimated losses on contracts are recorded in the period in which they are identified. Changes in our periodic estimates for these contracts could result in significant adjustments to our revenue or costs, which could be material to our consolidated results of operations.

In addition, some of our contracts with customers include leased equipment. These contracts are reviewed to assess whether they meet the definition of a lease, including determination of the proper revenue classification. Lease revenue is recognized either over time for operating leases or when the leased asset is de-recognized for sales-type leases.

Impairment of Assets

Impairment of long-lived assets

We evaluate our long-lived assets other than goodwill and intangible assets with indefinite lives for impairment whenever events and changes in circumstances indicate that their carrying amounts may not be recoverable. The carrying amount of a long-lived asset or asset group is considered to not be recoverable when the market value or estimated future undiscounted cash flows from such asset or asset group is less than its carrying amount. In that event, an impairment loss is recorded in the determination of operating income based on the amount by which the carrying amount exceeds the estimated fair value of the long-lived asset or asset group. The estimated fair value is determined primarily using market value or cash flow techniques reflecting the estimated cash flows and discount rate that would be assumed by a market participant for the asset or asset group under review. Our discounted cash flow estimates typically include assumptions based on unobservable inputs and may reflect probability-weighting of alternative scenarios. Estimated losses on long-lived assets to be disposed of by sale may be determined in a similar manner, except that fair value estimates are reduced for estimated selling costs. Changes in estimates of future cash flows, discount rates and other assumptions could result in recognition of additional impairment losses in future periods.

We evaluate goodwill and intangible assets with indefinite lives for impairment on an annual basis or whenever events and changes in circumstances indicate the carrying amounts may not be recoverable. Our impairment assessment typically begins with a qualitative assessment to determine whether it is more likely than not the fair value of the indefinite lived asset or reporting unit is less than its carrying amount. The qualitative assessment includes comparing the overall financial performance against the planned results. Additionally, fair value is assessed under certain events and circumstances, including macroeconomic conditions, industry and market considerations, cost factors, and other relevant entity-specific events which requires significant judgment. If we determine in the qualitative assessment that it is more likely than not that the fair value is less than its carrying value, then we estimate the fair value using discounted cash flows or market value and compare the estimated fair value to its carrying value. If the carrying value exceeds the fair value, then an impairment is recognized for the difference.

Impairment of investments

We periodically evaluate all of our investments to determine whether events or changes in circumstances have occurred that may have a significant adverse effect on the fair value of the investment and/or if there has been observable price changes in orderly transactions for identical or similar securities of the same issuer. We consider information if provided to us by our investees such as current financial statements, business plans, investment

Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED

documentation, capitalization tables, liquidation waterfalls, and board materials, and we may make additional inquiries of investee management.

Indicators of impairment may include, but are not limited to, unprofitable operations, material loss contingencies, changes in business strategy, changes in the investees’ enterprise value and changes in the investees’ investment pricing. When we determine that one of our other investments is impaired we reduce its carrying value to its estimated fair value and recognize the impairment loss. Additionally, when there has been an observable price change to a cost method investment, we adjust the carrying amount of the investment to its then estimated fair value and recognize the investment gain or loss.

NEW ACCOUNTING PRONOUNCEMENTS

For a discussion of new accounting pronouncements, see Note 2 in our Accompanying Consolidated Financial Statements. We are continuing to assess the impact of adopting certain recently issued accounting pronouncements on our Accompanying Consolidated Financial Statements and related disclosures.

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. However, like many communications infrastructure equipment vendors, a higher amount of our hardware revenue occurs in the second half of the year due to our customers’ annual procurement and budget cycles.

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.

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 includes 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

Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED

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 includes 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.

Net income (loss) from discontinued operations. Net income (loss) from discontinued operations includes the financial results of the BSS Business transferred in the BSS Transaction, except for certain real estate that transferred in the transaction.

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, Net income (loss) from discontinued operations 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.