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

Unless the context indicates otherwise, the terms “we,” “us,” “EchoStar,” the “Company” and “our” refer to EchoStar Corporation and its subsidiaries. The following Management’s Discussion and Analysis of our Financial Condition and Results of Operations (“Management’s Discussion and Analysis”) should be read in conjunction with our accompanying Consolidated Financial Statements and notes thereto (“Consolidated Financial Statements”) in Item 1 of this Quarterly Report on Form 10-Q (“Form 10-Q”). This Management’s Discussion and Analysis is intended to help provide an understanding of our financial condition, changes in our financial condition and our results of operations. Many of the statements in this Management’s Discussion and Analysis are forward-looking statements that involve assumptions and are subject to risks and uncertainties that are often difficult to predict and beyond our control. Actual results could differ materially from those expressed or implied by such forward-looking statements. Refer to the Disclosure Regarding Forward-Looking Statements in this Form 10-Q for further discussion. For a discussion of additional risks, uncertainties and other factors that could impact our results of operations or financial condition, refer to the Risk Factors in Part II, Item 1A of this Form 10-Q and in Part I, Item 1A of our most recent Annual Report on Form 10-K (“Form 10-K”) filed with the Securities and Exchange Commission (“SEC”). Further, such forward-looking statements speak only as of the date of this Form 10-Q and we undertake no obligation to update them.

EXECUTIVE SUMMARY

Overview

We currently operate in two business segments: our Hughes segment and our EchoStar Satellite Services segment (“ESS segment”). Our operations include various corporate functions 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.

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

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 offer broadband satellite technologies and broadband internet products and services to consumer customers. We offer broadband network technologies, managed services, equipment, hardware, satellite services and communications solutions to government and enterprise customers.

Our Hughes segment continues to focus its efforts on optimizing financial returns of our existing satellites while planning for new satellite capacity to be launched, leased or acquired. Our consumer revenue growth depends on our success in adding new and retaining existing subscribers, as well as increasing our Average Revenue Per User/subscriber (“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 our enterprise and consumer businesses relies heavily on global economic conditions and the competitive landscape for pricing relative to competitors and alternative technologies. In most areas of the U.S. we are nearing or have reached capacity, which has resulted in our consumer subscriber base becoming increasingly limited. Our Latin America consumer subscriber base in certain areas has also become capacity constrained. These constraints are expected to be addressed by the launch of the EchoStar XXIV satellite.

To date, we have not experienced a material adverse impact from the Russia-Ukraine conflict and the associated sanctions.

On January 4, 2022, our India JV was formed, which allows us to offer flexible and scalable enterprise networking solutions using satellite connectivity for primary transport, back-up and hybrid implementation in India.

The EchoStar XXIV satellite is currently expected to be shipped to the launch site in June and subsequently launched at the first window that Space Exploration Technologies Corp. (“SpaceX”) can allocate to it, which is subject to preemption by certain higher-priority government launches. 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. Following delays of over two years, in November 2022 we negotiated an amendment to our contract with the manufacturer to provide for additional compensation for past delays and a realignment of remedies. Delay in the availability of the EchoStar XXIV satellite could have a material adverse impact on our business operations, future revenues, financial position and prospects, and our planned expansion of satellite broadband services throughout North, South and Central America. 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
						March 31, 2023						December 31, 2022
United States						890,000						931,000
Latin America						287,000						297,000
Total broadband subscribers						1,177,000						1,228,000

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

						For the Three Months Ended
						March 31, 2023						December 31, 2022
United States						(41,000)						(43,000)
Latin America						(10,000)						(14,000)
Total net subscriber additions						(51,000)						(57,000)

Our ability to gain new customers and retain existing customers in the U.S. is being impacted by our capacity limitations, competitive pressure from satellite-based competitors and other technologies, and increased bandwidth usage on average by our existing customers. For the three months ended March 31, 2023, these factors resulted in lower total subscribers as compared to the three months ended December 31, 2022.

Our ability to gain new customers and retain existing customers in Latin America were tempered by our focus on more profitable consumer segments and our allocation of capacity to enterprise opportunities. In addition, capacity constraints in certain areas limit our ability to add new subscribers. For the three months ended March 31, 2023, the decline in net subscribers was primarily due to more selective customer screening as compared to the three months ended December 31, 2022.

We continued to execute our strategy of maximizing financial returns by utilizing capacity for higher economic value enterprise and government applications in Latin America. Continued success of this strategy will further reduce the available capacity for consumer subscribers.

As of March 31, 2023, our Hughes segment had $1.6 billion of contracted revenue backlog, an increase of 6.7% as compared to December 31, 2022, primarily due to increases in contracts from our domestic customers. We define Hughes segment contracted revenue backlog as our expected future revenue under enterprise customer contracts that are non-cancelable, including lease revenue.

ESS Segment

Our ESS segment provides satellite services on a full-time and/or occasional-use basis to U.S. government service providers, internet service providers, broadcast news organizations, content providers and private enterprise customers. We operate our ESS business using primarily the EchoStar IX satellite and the EchoStar 105/SES-11 satellite and related infrastructure. Revenue in our ESS segment depends largely on our ability to continuously make use of our available satellite capacity with existing customers and our ability to enter into commercial relationships with new customers. During the first quarter of 2023, we transitioned the EchoStar IX satellite into inclined operations to extend its usable life for our customers. With this inclined mode of operation, we are expecting to extend the life of the spacecraft into 2024.

As of March 31, 2023, our ESS segment had $18.2 million of contracted revenue backlog, a decrease of 18.4%, as compared to December 31, 2022, primarily due to the recognition of revenue of existing contracts. We define contracted revenue backlog for our ESS segment as contracted future satellite lease revenue.

Corporate and Other Segment

Satellite Anomalies and Impairments

During the first quarter of 2023, we lost contact with our third nano-satellite (“EG-3”), which was launched in the second quarter of 2021 and brought into use our Sirion-1 ITU filing in the third quarter of 2021. As of the end of the first quarter of 2023, we have discontinued attempts to reestablish contact with EG-3, and have notified the ITU to suspend the filing. Consequently, we canceled our contract with Tyvak Nano-Satellites Systems, Inc., who manufactured and operated our nano-satellites, and recorded an impairment charge of $3.1 million related to EG-3 and other related assets in the first quarter of 2023 in our Corporate and Other segment. We have three years from the date the filing was suspended to place a new S-band spacecraft at the altitude prescribed in our Australian ITU filing. We expect the first group of S-band satellites recently ordered from Astro Digital to be launched well in advance of the three-year replacement timeline. We are not aware of any other anomalies with respect to our owned or leased satellites as of the date of these Consolidated Financial Statements. There can be no assurance, however, that anomalies will not have a significant adverse effect in the future. In addition, there can be no assurance that we can recover critical transmission capacity in the event one or more of our satellites were to fail.

Cybersecurity

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 three months ended March 31, 2023 and through May 8, 2023. 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.

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 provided to customers in our consumer and enterprise markets. It also includes certain other costs associated with the deployment of equipment to our customers.

Selling, general and administrative expenses. Selling, general and administrative expenses primarily include selling and marketing costs and employee-related costs associated with administrative services (e.g., information systems, human resources and other services), including bad debt expense and stock-based compensation expense. It also includes professional fees (e.g. legal, information systems and accounting services) and other expenses associated with facilities and administrative services.

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

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

Interest income, net. Interest income, net primarily includes interest earned on our cash, cash equivalents and marketable investment securities, and other investments including premium amortization, discount accretion on debt securities and changes in allowance for estimated credit losses on investments.

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 Consolidated Financial Statements.

Earnings before interest, taxes, depreciation and amortization (“EBITDA”). EBITDA is defined as Net income (loss) excluding Interest income and expense, net, Income tax benefit (provision), net, Depreciation and amortization, and Net income (loss) attributable to non-controlling interests. EBITDA is not a measure determined in accordance with U.S. generally accepted accounting principles (“GAAP”). This non-GAAP measure is reconciled to Net income (loss) in our discussion of Results of Operations section below. EBITDA should not be considered in isolation or as a substitute for operating income, net income or any other measure determined in accordance with GAAP. EBITDA is used by our management as a measure of operating efficiency and overall financial performance for benchmarking against our peers and competitors. Management believes EBITDA provides meaningful supplemental information regarding the underlying operating performance of our business 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.

Highlights from our Financial Results

Consolidated Results of Operations for the Three Months Ended March 31, 2023:

• Revenue of $439.6 million

• Operating income of $28.2 million

• Net income of $27.8 million

• Net income attributable to EchoStar common stock of $29.0 million and basic and diluted earnings per share of common stock of $0.35

• EBITDA of $128.0 million (see reconciliation of this non-GAAP measure in Results of Operations)

Consolidated Financial Condition as of March 31, 2023:

• Total assets of $6.2 billion

• Total liabilities of $2.6 billion

• Total stockholders’ equity of $3.6 billion

• Cash and cash equivalents and marketable investment securities of $1.7 billion

RESULTS OF OPERATIONS

Three Months Ended March 31, 2023 Compared to the Three Months Ended March 31, 2022

The following table presents our consolidated results of operations for the three months ended March 31, 2023 compared to the three months ended March 31, 2022:

						For the three months ended March 31,												Variance
Statements of Operations Data (1)						2023						2022						Amount						%
Revenue:
Services and other revenue						$	377,527					$	418,811					$	(41,284)					(9.9)
Equipment revenue						62,070						82,723						(20,653)						(25.0)
Total revenue						439,597						501,534						(61,937)						(12.3)
Costs and expenses:
Cost of sales - services and other						135,372						141,129						(5,757)						(4.1)
% of total services and other revenue						35.9		%				33.7		%
Cost of sales - equipment						51,662						69,114						(17,452)						(25.3)
% of total equipment revenue						83.2		%				83.5		%
Selling, general and administrative expenses						110,061						118,170						(8,109)						(6.9)
% of total revenue						25.0		%				23.6		%
Research and development expenses						8,255						7,617						638						8.4
% of total revenue						1.9		%				1.5		%
Depreciation and amortization						102,858						120,436						(17,578)						(14.6)
Impairment of long-lived assets						3,142						—						3,142						*
Total costs and expenses						411,350						456,466						(45,116)						(9.9)
Operating income (loss)						28,247						45,068						(16,821)						(37.3)
Other income (expense):
Interest income, net						28,596						6,422						22,174						*
Interest expense, net of amounts capitalized						(13,286)						(14,973)						1,687						(11.3)
Gains (losses) on investments, net						(7,109)						80,686						(87,795)						(108.8)
Equity in earnings (losses) of unconsolidated affiliates, net						(551)						(1,714)						1,163						(67.9)
Foreign currency transaction gains (losses), net						3,313						6,394						(3,081)						(48.2)
Other, net						70						(156)						226						(144.9)
Total other income (expense), net						11,033						76,659						(65,626)						(85.6)
Income (loss) before income taxes						39,280						121,727						(82,447)						(67.7)
Income tax benefit (provision), net						(11,460)						(32,782)						21,322						(65.0)
Net income (loss)						27,820						88,945						(61,125)						(68.7)
Less: Net loss (income) attributable to non-controlling interests						1,221						2,488						(1,267)						(50.9)
Net income (loss) attributable to EchoStar Corporation common stock						$	29,041					$	91,433					$	(62,392)					(68.2)
Other data:
EBITDA (2)						$	128,049					$	253,202					$	(125,153)					(49.4)
Subscribers, end of period						1,177,000						1,406,000						(229,000)						(16.3)

• 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 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.

The following discussion relates to our results of operations for the three months ended March 31, 2023 compared to the three months ended March 31, 2022:

Services and other revenue. Services and other revenue totaled $377.5 million for the three months ended March 31, 2023, a decrease of $41.3 million, or 9.9%, as compared to 2022. The decrease was primarily attributable to our Hughes segment related to lower sales of broadband services to our consumer customers of $41.0 million, and lower sales of broadband services to our enterprise customers of $2.2 million, partially offset by increased sales of broadband services to our mobile satellite system and other customers of $1.0 million. Our ESS segment increased by $1.5 million. These variances reflect an estimated negative impact of exchange rate fluctuations of $1.7 million, primarily attributable to our enterprise customers.

Equipment revenue. Equipment revenue totaled $62.1 million for the three months ended March 31, 2023, a decrease of $20.7 million, or 25.0%, as compared to 2022. The decrease was primarily attributable to: i) decreases in hardware sales to our enterprise customers of $19.1 million mainly associated with a certain customer in North America and to international customers, and ii) decreases in hardware sales of $2.2 million to our consumer customers. These decreases were partially offset by increases on our hardware sales to our mobile satellite system customers of $0.6 million.

Cost of sales - services and other. Cost of sales - services and other totaled $135.4 million for the three months ended March 31, 2023, a decrease of $5.8 million, or 4.1%, as compared to 2022. The decrease was primarily attributable to lower sales of broadband services and corresponding decreases in cost of services provided to our consumer and enterprise customers of $4.8 million, mainly related to service delivery expenses, such as field services and customer care.

Cost of sales - equipment. Cost of sales - equipment totaled $51.7 million for the three months ended March 31, 2023, a decrease of $17.5 million, or 25.3%, as compared to 2022. The decrease was primarily attributable to the corresponding decrease in equipment revenue.

Selling, general and administrative expenses. Selling, general and administrative expenses totaled $110.1 million for the three months ended March 31, 2023, a decrease of $8.1 million, or 6.9%, as compared to 2022. The decrease was primarily attributable to decreases in sales and marketing expenses of $9.8 million offset by increases in bad debt expense of $1.1 million.

Depreciation and amortization. Depreciation and amortization expenses totaled $102.9 million for the three months ended March 31, 2023, a decrease of $17.6 million, or 14.6%, as compared to 2022. The decrease was primarily attributable to: i) decreases in other property and equipment depreciation expense of $14.6 million, ii) decreases in amortization of our capitalized software of $1.6 million, and iii) decreases in our satellite depreciation of $1.0 million.

Impairment of long-lived assets. Impairment of long-lived assets totaled $3.1 million for the three months ended March 31, 2023. This impairment charge was related to our EG-3 nano-satellite and other related assets abandoned during the first quarter of 2023 due to lost contact with EG-3.

Interest income, net. Interest income, net totaled $28.6 million for the three months ended March 31, 2023, an increase of $22.2 million as compared to 2022, primarily attributable to increases in the yield on our marketable investment securities.

Interest expense, net of amounts capitalized. Interest expense, net of amounts capitalized, totaled $13.3 million for the three months ended March 31, 2023, a decrease of $1.7 million, or 11.3%, as compared to 2022. The decrease was primarily attributable to an increase of $1.4 million in capitalized interest relating to the EchoStar XXIV satellite program.

Gains (losses) on investments, net. Gains (losses) on investments, net totaled $7.1 million in losses for the three months ended March 31, 2023, as compared to $80.7 million in gains for the three months ended March 31, 2022, a negative change of $87.8 million. The change was related to net decreased gains on marketable investment securities and other equity securities.

Foreign currency transaction gains (losses), net. Foreign currency transaction gains (losses), net totaled $3.3 million in gains for the three months ended March 31, 2023, as compared to $6.4 million in gains for the three months ended March 31, 2022, a negative change of $3.1 million. The change was due to the net impact of foreign exchange rate fluctuations of certain foreign currencies during the period, primarily related to the Mexican, Chilean and Colombian Pesos.

Income tax benefit (provision), net. Income tax benefit (provision), net was $(11.5) million for the three months ended March 31, 2023, as compared to $(32.8) million for the three months ended March 31, 2022. Our effective income tax rate was 29.2% and 26.9% for the three months ended March 31, 2023 and 2022, respectively. The variations in our effective tax rate from the U.S. federal statutory rate for the three months ended March 31, 2023 were primarily due to excluded foreign losses where the Company carries a full valuation allowance, and the research tax credit. The variations in our current year effective tax rate from the U.S. federal statutory rate for the three months ended March 31, 2022 were primarily due to excluded foreign losses where the Company carries a full valuation allowance, and the impact of state and local taxes.

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

						Amounts
Net income (loss) attributable to EchoStar Corporation for the three months ended March 31, 2022						$	91,433
Increase (decrease) in interest income, net						22,174
Decrease (increase) in income tax benefit (provision), net						21,322
Decrease (increase) in interest expense, net of amounts capitalized						1,687
Decrease (increase) in equity in earnings (losses) of unconsolidated affiliates, net						1,163
Increase (decrease) in other, net						226
Increase (decrease) in net income (loss) attributable to non-controlling interest						(1,267)
Increase (decrease) in foreign currency transaction gains (losses), net						(3,081)
Increase (decrease) in operating income (loss), including depreciation and amortization						(16,821)
Increase (decrease) in gains (losses) on investments, net						(87,795)
Net income (loss) attributable to EchoStar Corporation for the three months ended March 31, 2023						$	29,041

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

						For the three months ended March 31,												Variance
						2023						2022						Amount						%
Net income (loss)						$	27,820					$	88,945					$	(61,125)					(68.7)
Interest income, net						(28,596)						(6,422)						(22,174)						*
Interest expense, net of amounts capitalized						13,286						14,973						(1,687)						(11.3)
Income tax provision (benefit), net						11,460						32,782						(21,322)						(65.0)
Depreciation and amortization						102,858						120,436						(17,578)						(14.6)
Net loss (income) attributable to non-controlling interests						1,221						2,488						(1,267)						(50.9)
EBITDA						$	128,049					$	253,202					$	(125,153)					(49.4)

• Percentage is not meaningful

The following table reconciles the change in EBITDA:

						Amounts
EBITDA for the three months ended March 31, 2022						$	253,202
Decrease (increase) in equity in earnings (losses) of unconsolidated affiliates, net						1,163
Increase (decrease) in other, net						226
Decrease (increase) in net loss (income) attributable to non-controlling interests						(1,267)
Increase (decrease) in foreign currency transaction gains (losses), net						(3,081)
Increase (decrease) in operating income (loss), excluding depreciation and amortization						(34,399)
Increase (decrease) in gains (losses) on investments, net						(87,795)
EBITDA for the three months ended March 31, 2023						$	128,049

Segment Operating Results and Capital Expenditures

The following tables present our total revenue, capital expenditures and EBITDA by segment for the three months ended March 31, 2023, as compared to the three months ended March 31, 2022:

						Hughes						ESS						Corporate and Other						Consolidated Total
For the year ended March 31, 2023
Total revenue						$	431,195					$	5,997					$	2,405					$	439,597
Capital expenditures						47,025						—						(2,954)						44,071
EBITDA						157,234						4,655						(33,840)						128,049
For the year ended March 31, 2022
Total revenue						$	494,106					$	4,474					$	2,954					$	501,534
Capital expenditures						61,021						—						51,117						112,138
EBITDA						191,170						2,691						59,341						253,202

Capital expenditures are net of refunds and other receipts related to property and equipment.

Hughes Segment

						For the three months ended March 31,												Variance
						2023						2022						Amount						%
Total revenue						$	431,195					$	494,106					$	(62,911)					(12.7)
Capital expenditures						47,025						61,021						(13,996)						(22.9)
EBITDA						157,234						191,170						(33,936)						(17.8)

Total revenue was $431.2 million for the three months ended March 31, 2023, a decrease of $62.9 million, or 12.7%, as compared to 2022. Services and other revenue decreased primarily due to lower sales of broadband services to our consumer customers of $41.0 million, and lower sales of broadband services to our enterprise customers of $2.2 million, partially offset by increased sales of broadband services to our mobile satellite system and other customers of $1.0 million. Equipment revenue decreased primarily due to: i) decreases in hardware sales to our enterprise customers of $19.1 million mainly associated with a certain customer in North America and to international customers, and ii) decreases in hardware sales of $2.2 million to our consumer customers. These decreases were partially offset by increases on our hardware sales to our mobile satellite system customers of $0.6 million. These variances reflect an estimated negative impact of exchange rate fluctuations of $2.2 million, primarily attributable to our enterprise customers.

Capital expenditures were $47.0 million for the three months ended March 31, 2023, a decrease of $14.0 million, or 22.9%, as compared to 2022, primarily due to decreases in expenditures associated with our consumer business, and decreases in expenditures related to the construction of our satellite-related ground infrastructure.

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

						Amounts
EBITDA for the three months ended March 31, 2022						$	191,170
Decrease (increase) in equity in earnings (losses) of unconsolidated affiliates, net						792
Increase (decrease) in other, net						217
Decrease (increase) in net loss (income) attributable to non-controlling interests						(1,267)
Increase (decrease) in foreign currency transaction gains (losses), net						(3,581)
Increase (decrease) in operating income (loss), excluding depreciation and amortization						(30,097)
EBITDA for the three months ended March 31, 2023						$	157,234

ESS Segment

						For the three months ended March 31,												Variance
						2023						2022						Amount						%
Total revenue						$	5,997					$	4,474					$	1,523					34.0
EBITDA						4,655						2,691						1,964						73.0

Total revenue was $6.0 million for the three months ended March 31, 2023, an increase of $1.5 million, or 34.0%, compared to 2022, primarily due to an increase in transponder services provided to third parties.

EBITDA was $4.7 million for the three months ended March 31, 2023, an increase of $2.0 million, or 73.0%, as compared to 2022, primarily due to the increase in overall ESS segment revenue and lower expenses.

Corporate and Other Segment

						For the three months ended March 31,												Variance
						2023						2022						Amount						%
Total revenue						$	2,405					$	2,954					$	(549)					(18.6)
Capital expenditures						(2,954)						51,117						(54,071)						(105.8)
EBITDA						(33,840)						59,341						(93,181)						(157.0)

Total revenue was $2.4 million for the three months ended March 31, 2023, which is primarily flat compared to 2022.

Capital expenditures are net of refunds and other receipts related to property and equipment were $(3.0) million for the three months ended March 31, 2023, a decrease of $54.1 million, as compared to 2022, primarily due to decreases in expenditures, as well as refunds and other receipts, related to the EchoStar XXIV satellite program.

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

						Amounts
EBITDA for the three months ended March 31, 2022						$	59,341
Increase (decrease) in foreign currency transaction gains (losses), net						499
Decrease (increase) in equity in earnings (losses) of unconsolidated affiliates, net						371
Increase (decrease) in other, net						10
Increase (decrease) in operating income (loss), excluding depreciation and amortization						(6,266)
Increase (decrease) in gains (losses) on investments, net						(87,795)
EBITDA for the three months ended March 31, 2023						$	(33,840)

LIQUIDITY AND CAPITAL RESOURCES

Cash, Cash Equivalents and Marketable Investment Securities

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

As of March 31, 2023 our cash, cash equivalents and marketable investment securities totaled $1.7 billion, $0.8 billion of which we held as marketable investment securities, consisting of various debt and equity instruments including corporate bonds, corporate equity securities, government bonds and mutual funds.

Cash Flow Activities

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

						For the three months ended March 31,												Variance
						2023						2022
Operating activities						$	46,425					$	104,353					$	(57,928)
Investing activities						168,158						279,111						(110,953)
Financing activities						(736)						(32,469)						31,733
Effect of exchange rates on cash and cash equivalents						1,659						3,480						(1,821)
Net increase (decrease) in cash and cash equivalents						$	215,506					$	354,475					$	(138,969)

Cash flows provided by (used for) operating activities decreased by $57.9 million primarily attributable to changes in net income (loss) of $(61.1) million, changes in assets and liabilities, net of $(32.3) million, other, net, of $(21.6) million, deferred tax provision (benefit), net of $(19.0) million, depreciation and amortization of $(17.6) million, losses (gains) on investments, net of $87.8 million.

Cash flows provided by (used for) investing activities decreased by $111.0 million primarily attributable to our marketable investment securities net activity of $(185.0) million, an increase in expenditures in externally marketed software of $(1.9) million, partially offset by a decrease in expenditures for property and equipment of $68.1 million, and the India JV formation in 2022 for $7.9 million.

Cash flows provided by (used for) financing activities increased by $31.7 million primarily attributable to decreases in treasury share repurchases of $33.3 million.

Obligations and Future Capital Requirements

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.

Letters of Credit and Surety Bonds

The following table presents the components of our letters of credit and surety bonds as of March 31, 2023**:**

						Amounts
Letters of credit secured by restricted cash						$	11,385
Surety bonds						16,700
Credit arrangement available to our foreign subsidiaries						27,920
Total letters of credit and surety bonds						$	56,005

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

Satellites

As our satellite fleet ages, we will evaluate whether and to what extent to utilize 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 or satellite capacity in the future to provide satellite services at additional orbital locations, to improve the quality of our satellite services or to provide new satellites 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 our joint venture agreement with Yahsat, we are required to maintain insurance for the Al Yah 3 Brazilian payload during the commercial in-orbit service of such payload, subject to certain limitations on coverage. We have obtained certain insurance for our EchoStar XXIV satellite covering launch plus the first year of operations. 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 ARPU. 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. There can be no assurance that we will have positive cash flows from operations. Furthermore, if we experience negative cash flows, our existing cash and marketable investment securities balances may be reduced.

We have a significant amount of outstanding indebtedness. As of March 31, 2023, our total indebtedness was $1.5 billion. Our liquidity requirements will continue to be significant, primarily due to our remaining debt service requirements. 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 the future, we may require material capital expenditures to make significant acquisitions or 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 2023.

We anticipate that our existing cash and marketable investment securities are sufficient to fund the currently anticipated operations of our business through the next twelve months.

Stock Repurchases

On November 2, 2021, our Board of Directors authorized us to repurchase up to $500.0 million of our Class A common stock commencing January 1, 2022 through and including December 31, 2022. In addition, on October 20, 2022, our Board of Directors authorized us to repurchase up to $500.0 million of our Class A common stock commencing January 1, 2023 through and including December 31, 2023. Purchases under our repurchase authorizations 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 these authorizations and we may also enter into additional share repurchase programs authorized by our Board of Directors. During the three months ended March 31, 2023, we repurchased zero shares of our Class A common stock under this program.

CRITICAL ACCOUNTING POLICIES

Our critical accounting policies are described in Note 2. Summary of Significant Accounting Policies in our Consolidated Financial Statements in our Form 10-K. There have been no significant changes in our critical accounting policies from those presented in our Form 10-K.

CRITICAL ACCOUNTING ESTIMATES

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

NEW ACCOUNTING PRONOUNCEMENTS

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

SEASONALITY

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

Our ESS segment is not generally affected by seasonal impacts.

We cannot predict with any certainty whether these trends will continue in the near future.

INFLATION AND SUPPLY CHAIN

Inflation has impacted our operations as we have continued to experience increased costs in certain functional areas including field services and customer care. We are unable to predict the extent or nature of any future inflationary pressure at this time. Our ability to increase the prices charged for our products and services in future periods depends primarily on competitive pressures, contractual terms, and inflationary pressures.

The worldwide interruptions and delays in the supply of components, materials and parts, although not materially impacting our operations during the three months ended March 31, 2023, may impact our ability to timely provide equipment deliveries in the future. These interruptions and delays could also increase the cost of our equipment which we may not be able to pass onto our customers.