filings.toolsItem 6. [RESERVED]
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Item 6. [RESERVED]
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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 Consolidated Financial Statements. 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. See Disclosure Regarding Forward-Looking Statements in this Form 10-K for further discussion. For a discussion of additional risks, uncertainties and other factors that could impact our results of operations or financial condition, see Item 1A. Risk Factors of this Form 10-K. Further, such forward-looking statements speak only as of the date of this Form 10-K and we undertake no obligation to update them.
EXECUTIVE SUMMARY
We are an industry leader in both networking technologies and services, innovating to deliver the global solutions that power a connected future for people, enterprises and things everywhere. We provide broadband satellite technologies, broadband internet services for consumer customers, which include home and small to medium-sized businesses, satellite services and solutions for enterprise customers, which include aeronautical and government enterprises.
We currently operate in two business segments: Hughes segment and ESS segment. 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 CODM, who is the Company’s Chief Executive Officer.
Our operations 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 our Corporate and Other segment in our segment reporting.
In September 2019, pursuant to the Master Transaction Agreement with DISH and the Merger Sub, we completed the BSS Transaction.
In connection with the BSS Transaction, we and DISH Network agreed to indemnify each other against certain losses with respect to breaches of certain representations and covenants and certain retained and assumed liabilities, respectively. Refer to Note 19 in our Consolidated Financial Statements for further details on certain customary agreements entered into with DISH in relation to the BSS Transaction.
The BSS Transaction was structured in a manner intended to be tax-free to us and our stockholders for U.S. federal income tax purposes and was accounted for as a spin-off to our shareholders as we did not receive any consideration. Following the consummation of the BSS Transaction, we no longer operate the BSS Business, which was a substantial portion of our ESS segment. As a result of the BSS Transaction, the financial results of the BSS Business, except for certain real estate that transferred in the transaction, are presented as discontinued operations and, as such, excluded from continuing operations and segment results for the year ended December 31, 2019 in our Consolidated Financial Statements. See Note 5 in our Consolidated Financial Statements for further discussion of our discontinued operations.
Highlights from our financial results are as follows:
Consolidated Results of Operations for the Year Ended December 31, 2021:
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Revenue of $2.0 billion
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Operating income of $217.0 million
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Net income of $62.7 million
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED
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Net income attributable to EchoStar common stock of $72.9 million and basic and diluted earnings per share of common stock of $0.81
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Earnings before interest, taxes, depreciation and amortization, net income (loss) from discontinued operations and net income (loss) attributable to non-controlling interests (“EBITDA”) of $702.5 million (see reconciliation of this non-GAAP measure in Results of Operations)
Consolidated Financial Condition as of December 31, 2021:
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Total assets of $6.0 billion
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Total liabilities of $2.6 billion
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Total stockholders’ equity of $3.4 billion
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Cash and cash equivalents and marketable investment securities of $1.5 billion
Hughes Segment
Our Hughes segment is an industry leader in both networking technologies and services, innovating to deliver the global solutions that power a connected future for people, enterprises and things everywhere. We provide broadband satellite technologies and broadband internet products and services to consumer customers. We provide broadband network technologies, managed services, equipment, hardware, satellite services and communications solutions to government and enterprise customers. We also design, provide and install gateway and terminal equipment to customers for other satellite systems. In addition, we design, develop, construct and provide telecommunication networks comprising satellite ground segment systems and terminals to mobile system operators and our enterprise customers.
Our Hughes segment incorporates 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.
Our Hughes segment continues to focus our efforts on optimizing financial returns of our existing satellites while planning for new satellite capacity to be launched, leased or acquired. In addition, we are also pursuing wireline and wireless capacity to utilize in markets that include residential, community WiFi, backhaul, and other enterprise broadband and multi-transport services. Our consumer revenue growth depends on our success in adding new and retaining existing subscribers, as well as increasing our ARPU. Service and acquisition costs related to ongoing support for our direct and indirect customers and partners are typically impacted most significantly by our growth. The growth of both our enterprise and consumer businesses rely heavily on global economic conditions and the competitive landscape for pricing relative to competitors and alternative technologies.
Our Hughes segment currently uses capacity from our owned and leased satellites, including additional satellite capacity leased from third-party providers to provide services to our customers. We also use other multi-transport capacity that includes cable, fiber, 5G, and 4G/LTE. 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. Our Latin America consumer subscriber base in certain areas has also become capacity constrained. These constraints are not expected to be resolved until we acquire additional capacity.
In May 2019, we entered into an agreement with Yahsat pursuant to which, in November 2019, Yahsat contributed its satellite communications services business in Brazil to one of our Brazilian subsidiaries in exchange for a 20% ownership interest in that subsidiary. The combined business provides broadband internet services and enterprise solutions in Brazil using the Telesat T19V satellite, the Eutelsat 65W satellite and Yahsat’s Al Yah 3 satellite. Under the terms of the agreement, Yahsat may also acquire, for further cash investments, additional minority ownership interests in the business in the future provided certain conditions are met.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED
In May 2019, we entered into an agreement with Bharti, pursuant to which Bharti will contribute its VSAT telecommunications services and hardware business in India to our two existing Indian subsidiaries that conduct our VSAT services and hardware business. On January 4, 2022, the formation of this joint venture was announced, with Bharti obtaining a 33% ownership interest in the combined business. The joint venture combines the VSAT businesses of both companies to offer flexible and scalable enterprise networking solutions using satellite connectivity for primary transport, back-up and hybrid implementation.
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 service in North, Central and South America as well as enterprise broadband services. The EchoStar XXIV satellite is expected to be launched in the fourth quarter 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 our Corporate and Other segment in our segment reporting.
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 December 31, | ||||||||||||||||||||
| 2021 | 2020 | 2019 | ||||||||||||||||||
| United States | 1,090,000 | 1,189,000 | 1,239,000 | |||||||||||||||||
| Latin America | 372,000 | 375,000 | 238,000 | |||||||||||||||||
| Total broadband subscribers | 1,462,000 | 1,564,000 | 1,477,000 |
The following table presents the approximate number of net subscriber additions for each quarter in 2021:
| For the Three Months Ended | ||||||||||||||||||||||||||
| December 31 | September 30 | June 30 | March 31 | |||||||||||||||||||||||
| United States | (30,000) | (24,000) | (20,000) | (25,000) | ||||||||||||||||||||||
| Latin America | (18,000) | (8,000) | 9,000 | 14,000 | ||||||||||||||||||||||
| Total net subscriber additions | (48,000) | (32,000) | (11,000) | (11,000) |
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. Balancing of total subscribers relative to capacity utilization in the fourth quarter resulted in lower total subscribers. During the fourth quarter, the lower net subscribers were due to both lower gross additions and higher churn as compared to the third quarter.
Our Latin America consumer subscriber base in certain areas, similar to the U.S., has also become capacity constrained. Continued high bandwidth demand in certain areas has resulted in managing subscriber growth, and similar to the U.S. we are balancing capacity utilization with subscriber levels in the impacted areas which resulted in lower total subscribers. During the fourth quarter, the lower net subscribers were due to both lower gross additions and higher churn as compared to the third quarter.
As of December 31, 2021 and 2020, our Hughes segment had $1.4 billion and $1.3 billion of contracted revenue backlog, respectively. We define Hughes segment contracted revenue backlog as our expected future revenue under enterprise customer contracts that are non-cancelable, including lease revenue. Our contracted revenue backlog as of December 31, 2021 changed primarily due to an increase in contracts from our international customers. Of the total Hughes segment contracted revenue backlog as of December 31, 2021, we expect to recognize $506.1 million of revenue in 2022.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED
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.
As of December 31, 2021 and 2020, our ESS segment had contracted revenue backlog of $10.4 million and $6.7 million, respectively. We define contracted revenue backlog for our ESS segment as contracted future satellite lease revenue. Our contracted revenue backlog as of December 31, 2021, changed due to an increase in satellite service contracts with existing and new customers. Of the total ESS segment contracted revenue backlog as of December 31, 2021, we expect to recognize $5.9 million of revenue in 2022.
Other Business Opportunities
Our industry continues to evolve with the increasing worldwide demand for broadband internet access for information, entertainment and commerce. The ongoing 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, LEO networks, MEO systems and multi-transport networks using combinations of technologies 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 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 develop a hybrid MSS and CGC network in the E.U., the U.K. and other European countries, including through the use of 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. In the second quarter of 2021, we launched our third nano-satellite. The nano-satellite was successfully commissioned
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED
and placed at the altitude prescribed in our license for the S-band frequency. We have completed the process of fulfilling the remaining requirements under the ITU Radio Regulations of bringing the Australian filing into use. The nano-satellite will now be used to develop and test a wide range of potential S-band applications and services. We also hold licenses for S-band MSS and terrestrial services in Mexico.
Cybersecurity
We and the third parties whom we work with face a constantly evolving landscape of cybersecurity threats in which hackers and other parties use complex assortments of techniques and methods to execute cyberattacks. Cybersecurity incidents have increased significantly in quantity and severity and are expected to continue to increase. In addition to our efforts to mitigate cyber-attacks, we are making investments to alleviate the potential impact to our products. As a result of these efforts, we could discover new vulnerabilities within our products and systems. We may not discover all such vulnerabilities due to the scale of activities on our platforms, or due to other factors, including but not limited to issues outside of our control. In addition, our IT systems and infrastructure are vulnerable to damage from a variety of sources, including telecommunications or network failures, malicious acts, human errors and natural disasters. Moreover, despite network security and backup measures, some of our servers are potentially vulnerable to physical or electronic break-ins, computer viruses and similar disruptive problems.
We are not aware of any 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 year ended December 31, 2021 and through February 24, 2022. 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.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED
RESULTS OF OPERATIONS
Year Ended December 31, 2021 Compared to the Year Ended December 31, 2020
The following table presents our consolidated results of operations for the year ended December 31, 2021 compared to the year ended December 31, 2020:
| For the years ended December 31, | Variance | |||||||||||||||||||||||||
| Statements of Operations Data (1) | 2021 | 2020 | Amount | % | ||||||||||||||||||||||
| Revenue: | ||||||||||||||||||||||||||
| Services and other revenue | $ | 1,715,287 | $ | 1,682,304 | $ | 32,983 | 2.0 | |||||||||||||||||||
| Equipment revenue | 270,433 | 205,603 | 64,830 | 31.5 | ||||||||||||||||||||||
| Total revenue | 1,985,720 | 1,887,907 | 97,813 | 5.2 | ||||||||||||||||||||||
| Costs and expenses: | ||||||||||||||||||||||||||
| Cost of sales - services and other | 551,679 | 577,943 | (26,264) | (4.5) | ||||||||||||||||||||||
| % of total services and other revenue | 32.2 | % | 34.4 | % | ||||||||||||||||||||||
| Cost of sales - equipment | 231,975 | 166,435 | 65,540 | 39.4 | ||||||||||||||||||||||
| % of total equipment revenue | 85.8 | % | 80.9 | % | ||||||||||||||||||||||
| Selling, general and administrative expenses | 461,705 | 474,912 | (13,207) | (2.8) | ||||||||||||||||||||||
| % of total revenue | 23.3 | % | 25.2 | % | ||||||||||||||||||||||
| Research and development expenses | 31,777 | 29,448 | 2,329 | 7.9 | ||||||||||||||||||||||
| % of total revenue | 1.6 | % | 1.6 | % | ||||||||||||||||||||||
| Depreciation and amortization | 491,329 | 525,011 | (33,682) | (6.4) | ||||||||||||||||||||||
| Impairment of long-lived assets | 245 | 1,685 | (1,440) | (85.5) | ||||||||||||||||||||||
| Total costs and expenses | 1,768,710 | 1,775,434 | (6,724) | (0.4) | ||||||||||||||||||||||
| Operating income (loss) | 217,010 | 112,473 | 104,537 | 92.9 | ||||||||||||||||||||||
| Other income (expense): | ||||||||||||||||||||||||||
| Interest income, net | 22,801 | 39,982 | (17,181) | (43.0) | ||||||||||||||||||||||
| Interest expense, net of amounts capitalized | (95,512) | (147,927) | 52,415 | (35.4) | ||||||||||||||||||||||
| Gains (losses) on investments, net | 69,531 | (31,306) | 100,837 | * | ||||||||||||||||||||||
| Equity in earnings (losses) of unconsolidated affiliates, net | (5,170) | (7,267) | 2,097 | (28.9) | ||||||||||||||||||||||
| Foreign currency transaction gains (losses), net | (12,613) | 6,015 | (18,628) | * | ||||||||||||||||||||||
| Other-than-temporary impairment losses on equity method investments | (55,266) | — | (55,266) | * | ||||||||||||||||||||||
| Other, net | (12,434) | 195 | (12,629) | * | ||||||||||||||||||||||
| Total other income (expense), net | (88,663) | (140,308) | 51,645 | (36.8) | ||||||||||||||||||||||
| Income (loss) before income taxes | 128,347 | (27,835) | 156,182 | * | ||||||||||||||||||||||
| Income tax benefit (provision), net | (65,626) | (24,069) | (41,557) | * | ||||||||||||||||||||||
| Net income (loss) | 62,721 | (51,904) | 114,625 | * | ||||||||||||||||||||||
| Less: Net loss (income) attributable to non-controlling interests | 10,154 | 11,754 | (1,600) | (13.6) | ||||||||||||||||||||||
| Net income (loss) attributable to EchoStar Corporation common stock | $ | 72,875 | $ | (40,150) | $ | 113,025 | * | |||||||||||||||||||
| Other data: | ||||||||||||||||||||||||||
| EBITDA (2) | $ | 702,541 | $ | 616,875 | $ | 85,666 | 13.9 | |||||||||||||||||||
| Subscribers, end of period | 1,462,000 | 1,564,000 | (102,000) | (6.5) |
- 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 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 results of operations for the years ended December 31, 2021 and 2020.
Services and other revenue. Services and other revenue totaled $1.7 billion for the year ended December 31, 2021, an increase of $33.0 million, or 2.0%, as compared to 2020. The increase was primarily attributable to our Hughes segment related to higher sales of broadband services to our consumer customers of $27.8 million and to our mobile satellite system customers of $1.4 million. Sales of broadband services to our enterprise customers remained flat compared to 2020. Our Corporate and Other segment increased by $2.1 million. These variances reflect the negative impact of exchange rate fluctuations of $4.6 million, primarily attributable to our consumer customers.
Equipment revenue. Equipment revenue totaled $270.4 million for the year ended December 31, 2021, an increase of $64.8 million, or 31.5%, as compared to 2020. The increase was primarily attributable to increases in hardware sales of $76.7 million to our enterprise customers, partially offset by decreases in hardware sales to our mobile satellite system customers of $8.0 million and to our consumer customers of $3.9 million.
Cost of sales - services and other. Cost of sales - services and other totaled $551.7 million for the year ended December 31, 2021, a decrease of $26.3 million, or 4.5%, as compared to 2020. The decrease was attributable to lower costs of services provided to our consumer customers associated with customer care and field services 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 $232.0 million for the year ended December 31, 2021, an increase of $65.5 million, or 39.4%, as compared to 2020. The increase was primarily attributable to the corresponding increase in equipment revenue and product mix.
Selling, general and administrative expenses. Selling, general and administrative expenses totaled $461.7 million for the year ended December 31, 2021, a decrease of $13.2 million, or 2.8%, as compared to 2020. The decrease was primarily attributable to decreases in bad debt expense of $4.7 million and decreases in other selling, general and administrative expenses of $7.1 million.
Depreciation and amortization. Depreciation and amortization expenses totaled $491.3 million for the year ended December 31, 2021, a decrease of $33.7 million, or 6.4%, as compared to 2020. The decrease was primarily attributable to (i) decreases in our satellite depreciation of $27.1 million, mainly related to our SPACEWAY 3 satellite which was fully depreciated at the end of the first quarter of 2021, (ii) decreases in amortization of intangibles of $6.5 million, and (iii) decreases in other property and equipment depreciation expense of $2.9 million.
Impairment of long-lived assets. Impairment of long-lived assets totaled $0.2 million for the year ended December 31, 2021, a decrease of $1.4 million, or 85.5%, as compared to 2020. The decrease was primarily attributable to an impairment loss related to our nano-satellites which experienced technical anomalies following launch in 2020.
Interest income, net. Interest income, net totaled $22.8 million for the year ended December 31, 2021, a decrease of $17.2 million, or 43.0%, as compared to 2020, primarily attributable to decreases in the yield on our marketable investment securities and a decrease in our marketable investment securities average balance.
Interest expense, net of amounts capitalized. Interest expense, net of amounts capitalized, totaled $95.5 million for the year ended December 31, 2021, a decrease of $52.4 million, or 35.4%, as compared to 2020. The decrease was primarily attributable to a decrease of $41.4 million in interest expense and the amortization of deferred financing cost as a result of the repurchases and maturity of our 7 5/8% Senior Unsecured Notes due 2021 and an increase of $9.8 million in capitalized interest relating to the EchoStar XXIV satellite program.
Gains (losses) on investments, net. Gains (losses) on investments, net totaled $69.5 million in gains for the year ended December 31, 2021, an increase of $100.8 million, as compared to 2020. The change was primarily attributable to increased gains on marketable investment securities of $ 63.7 million in 2021 as compared to 2020, gains on other equity securities of $7.1 million in 2021 and a $29.8 million impairment loss in 2020.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED
Equity in earnings (losses) of unconsolidated affiliates, net. Equity in earnings (losses) of unconsolidated affiliates, net totaled $5.2 million in losses for the year ended December 31, 2021, a decrease in losses of $2.1 million, or 28.9%, as compared to 2020. The decrease was related to net increased earnings from our investments in our equity method investees.
Foreign currency transaction gains (losses), net. Foreign currency transaction gains (losses), net totaled $12.6 million in losses for the year ended December 31, 2021, as compared to $6.0 million in gains for the year ended December 31, 2020, a negative change of $18.6 million. The change was due to the net impact of foreign exchange rate fluctuations of certain foreign currencies during the year.
Other-than-temporary impairment losses on equity method investments. Other-than-temporary impairment losses on equity method investments was $55.3 million for the year ended December 31, 2021, related to the impairment of our investment in Dish Mexico. Given changing market trends, conditions, and company-specific events, we concluded that our investment in Dish Mexico was not recoverable.
Other, net. Other, net totaled $12.4 million in losses for the year ended December 31, 2021, as compared to $0.2 million in gains for the year ended December 31, 2020, an increase in losses of $12.6 million. The increase was primarily attributable to a litigation expense of $16.8 million and losses from debt repurchases on our 7 5/8% Senior Unsecured Notes due 2021 of $1.9 million, partially offset by dividends received from certain marketable equity securities of $2.5 million.
Income tax benefit (provision), net. Income tax benefit (provision), net was $(65.6) million for the year ended December 31, 2021, as compared to $(24.1) million for the year ended December 31, 2020. Our effective income tax rate was 51.1% and (86.5)% for the years ended December 31, 2021 and 2020, respectively. The variations in our effective tax rate from the U.S. federal statutory rate for the year ended December 31, 2021 were primarily due to certain foreign losses and impairments where the Company carries a full valuation allowance, and the impact of state and local taxes. The variations in our current year 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 by 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.
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 year ended December 31, 2020 | $ | (40,150) | ||||||
| Decrease (increase) in other-than-temporary impairment losses on equity method investments | (55,266) | |||||||
| Decrease (increase) in income tax benefit (provision), net | (41,557) | |||||||
| Increase (decrease) in foreign currency transaction gains (losses), net | (18,628) | |||||||
| Increase (decrease) in interest income, net | (17,181) | |||||||
| Increase (decrease) in other, net | (12,629) | |||||||
| Increase (decrease) in net income (loss) attributable to non-controlling interest | (1,600) | |||||||
| Decrease (increase) in equity in earnings (losses) of unconsolidated affiliates, net | 2,097 | |||||||
| Decrease (increase) in interest expense, net of amounts capitalized | 52,415 | |||||||
| Increase (decrease) in gains (losses) on investments, net | 100,837 | |||||||
| Increase (decrease) in operating income (loss), including depreciation and amortization | 104,537 | |||||||
| Net income (loss) attributable to EchoStar Corporation for the year ended December 31, 2021 | $ | 72,875 |
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED
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 Consolidated Financial Statements:
| For the years ended December 31, | Variance | |||||||||||||||||||||||||
| 2021 | 2020 | Amount | % | |||||||||||||||||||||||
| Net income (loss) | $ | 62,721 | $ | (51,904) | $ | 114,625 | * | |||||||||||||||||||
| Interest income, net | (22,801) | (39,982) | 17,181 | (43.0) | ||||||||||||||||||||||
| Interest expense, net of amounts capitalized | 95,512 | 147,927 | (52,415) | (35.4) | ||||||||||||||||||||||
| Income tax provision (benefit), net | 65,626 | 24,069 | 41,557 | * | ||||||||||||||||||||||
| Depreciation and amortization | 491,329 | 525,011 | (33,682) | (6.4) | ||||||||||||||||||||||
| Net loss (income) attributable to non-controlling interests | 10,154 | 11,754 | (1,600) | (13.6) | ||||||||||||||||||||||
| EBITDA | $ | 702,541 | $ | 616,875 | $ | 85,666 | 13.9 |
- Percentage is not meaningful
The following table reconciles the change in EBITDA:
| Amounts | ||||||||
| EBITDA for the year ended December 31, 2020 | $ | 616,875 | ||||||
| Increase (decrease) in gains (losses) on investments, net | 100,837 | |||||||
| Increase (decrease) in operating income (loss), excluding depreciation and amortization | 70,855 | |||||||
| Decrease (increase) in equity in earnings (losses) of unconsolidated affiliates, net | 2,097 | |||||||
| Decrease (increase) in net loss (income) attributable to non-controlling interests | (1,600) | |||||||
| Increase (decrease) in other, net | (12,629) | |||||||
| Increase (decrease) in foreign currency transaction gains (losses), net | (18,628) | |||||||
| Decrease (increase) in other-than-temporary impairment losses on equity method investments | (55,266) | |||||||
| EBITDA for the year ended December 31, 2021 | $ | 702,541 |
Segment Operating Results and Capital Expenditures
The following tables present our total revenue, capital expenditures and EBITDA by segment for the year ended December 31, 2021, as compared to the year ended December 31, 2020:
| Hughes | ESS | Corporate and Other | Consolidated Total | |||||||||||||||||||||||
| For the year ended December 31, 2021 | ||||||||||||||||||||||||||
| Total revenue | $ | 1,956,226 | $ | 17,679 | $ | 11,815 | $ | 1,985,720 | ||||||||||||||||||
| Capital expenditures | 296,303 | — | 142,127 | 438,430 | ||||||||||||||||||||||
| EBITDA | 781,824 | 9,185 | (88,468) | 702,541 | ||||||||||||||||||||||
| 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 |
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED
Hughes Segment
| For the years ended December 31, | Variance | |||||||||||||||||||||||||
| 2021 | 2020 | Amount | % | |||||||||||||||||||||||
| Total revenue | $ | 1,956,226 | $ | 1,860,834 | $ | 95,392 | 5.1 | |||||||||||||||||||
| Capital expenditures | 296,303 | 355,197 | (58,894) | (16.6) | ||||||||||||||||||||||
| EBITDA | 781,824 | 727,608 | 54,216 | 7.5 |
Total revenue was $2.0 billion for the year ended December 31, 2021, an increase of $95.4 million, or 5.1%, as compared to 2020. Services and other revenue increased primarily due to increases in sales of broadband services to our consumer customers of $27.8 million and to our mobile satellite system customers of $1.4 million. Sales of broadband services to our enterprise customers remained flat compared to 2020. Equipment revenue increased primarily due to increases in hardware sales of $76.7 million to our enterprise customers, partially offset by decreases in hardware sales to our mobile satellite system customers of $8.0 million and to our consumer customers of $ 3.9 million. These variances reflect the negative impact of exchange rate fluctuations of $4.7 million.
Capital expenditures were $296.3 million for the year ended December 31, 2021, a decrease of $58.9 million, or 16.6%, as compared to 2020, primarily due to decreases in expenditures associated with our consumer business, partially offset by increased expenditures related to our enterprise business and construction of our satellite-related ground infrastructure in preparation of the launch of EchoStar XXIV.
The following table reconciles the change in the Hughes Segment EBITDA:
| Amounts | ||||||||
| EBITDA for the year ended December 31, 2020 | $ | 727,608 | ||||||
| Increase (decrease) in operating income (loss), excluding depreciation and amortization | 65,216 | |||||||
| Increase (decrease) in other, net | 3,658 | |||||||
| Increase (decrease) in gains (losses) on investments, net | 2,249 | |||||||
| Decrease (increase) in equity in earnings (losses) of unconsolidated affiliates, net | (229) | |||||||
| Decrease (increase) in net loss (income) attributable to non-controlling interests | (1,600) | |||||||
| Increase (decrease) in foreign currency transaction gains (losses), net | (15,078) | |||||||
| EBITDA for the year ended December 31, 2021 | $ | 781,824 |
ESS Segment
| For the years ended December 31, | Variance | |||||||||||||||||||||||||
| 2021 | 2020 | Amount | % | |||||||||||||||||||||||
| Total revenue | $ | 17,679 | $ | 17,398 | $ | 281 | 1.6 | |||||||||||||||||||
| Capital expenditures | — | 41 | (41) | (100.0) | ||||||||||||||||||||||
| EBITDA | 9,185 | 7,873 | 1,312 | 16.7 |
Total revenue was $17.7 million for the year ended December 31, 2021, which is primarily flat compared to 2020.
EBITDA was $9.2 million for the year ended December 31, 2021, an increase of $1.3 million, or 16.7%, as compared to 2020, primarily due to the recovery of a bad debt reserve.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED
Corporate and Other Segment
| For the years ended December 31, | Variance | |||||||||||||||||||||||||
| 2021 | 2020 | Amount | % | |||||||||||||||||||||||
| Total revenue | $ | 11,815 | $ | 9,675 | $ | 2,140 | 22.1 | |||||||||||||||||||
| Capital expenditures | 142,127 | 53,560 | 88,567 | * | ||||||||||||||||||||||
| EBITDA | (88,468) | (118,606) | 30,138 | (25.4) |
- Percentage is not meaningful.
Total revenue was $11.8 million for the year ended December 31, 2021, an increase of $2.1 million, or 22.1%, as compared to 2020, primarily due to increased services and other revenue from DISH Network.
Capital expenditures were $142.1 million for the year ended December 31, 2021, an increase of $88.6 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 year ended December 31, 2020 | $ | (118,606) | ||||||
| Increase (decrease) in gains (losses) on investments, net | 98,588 | |||||||
| Increase (decrease) in operating income (loss), excluding depreciation and amortization | 4,353 | |||||||
| Decrease (increase) in equity in earnings (losses) of unconsolidated affiliates, net | 2,326 | |||||||
| Increase (decrease) in foreign currency transaction gains (losses), net | (3,672) | |||||||
| Increase (decrease) in other, net | (16,191) | |||||||
| Decrease (increase) in other-than-temporary impairment losses on equity method investments | (55,266) | |||||||
| EBITDA for the year ended December 31, 2021 | $ | (88,468) |
Previous: Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES · Next: Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED