Thank you for joining us for the EchoStar Earnings Conference Call for the First Quarter of 2020. I will now turn it over to our speaker for today, Mr. Terry Brown. Please proceed. Good morning, everybody, and welcome to our earnings call for the first quarter of 2020. I'm joined today by Mike Dugan, our CEO; Dave Rayner, COO and CFO; Pradman Kaul, President of Hughes; Anders Johnson, Chief Strategy Officer and President of EchoStar Satellite Services; and Dean Manson, General Counsel. As usual, we invite media to participate in a listen-only mode on the call and ask that you not identify participants or their firms in your report. We also do not allow audio recording, which we ask that you respect. Let me now turn this over to Dean for the safe harbor disclosure.

Thank you, Terry. All statements we make during this call, other than statements of historical facts, constitute forward-looking statements that involve known and unknown risks, uncertainties, and other factors that could cause our actual results to be materially different from historical results and from any future results expressed or implied by the forward-looking statements. For a list of those factors and risks, please refer to our annual report on Form 10-K and quarterly report on Form 10-Q filed with the SEC. All cautionary statements we make during the call should be understood as being applicable to any forward-looking statements we make wherever they appear. You should carefully consider the risks described in our reports and should not place any undue reliance on any forward-looking statements. We assume no responsibility for updating any forward-looking statements. I'll now turn the call over to Mike Dugan.

Thanks a lot, Dean. Good day, and thank you for joining our Q1 2020 earnings call. The COVID-19 pandemic has had a significant impact on national economies, financial markets, and business and consumer activities. All of us at EchoStar hope that you and your families are safe and healthy. Our operations are considered essential services and have continued uninterrupted. We have undertaken measures to protect the safety and health of our employees, including remote working for many of our employees and limiting access to and enhancing safety protocols at our physical facilities. We recognize the importance of our service in supporting the unprecedented volume of remote working arrangements and enabling personal connectivity while supporting social distancing. I am extremely proud of the way our team has stayed focused on connecting our customers around the world during this extraordinary time. Let me now turn it over to Pradman, who will talk about Hughes, then Anders will follow to discuss EchoStar global progress. And finally, Dave will provide an overview of our financials. Pradman?

Thank you, Mike. I'm pleased with our financial performance during this unprecedented time, and I echo Mike's pride in the entire team for continuing to deliver the connectivity our customers depend on during this pandemic. Hughes' Q1 revenue increased 3% year-over-year despite limited capacity in North America as well as foreign exchange headwinds that impacted our international operations. In the consumer Internet business, we ended Q1 of 2020 with approximately 1.5 million HughesNet subscribers, which includes net adds of approximately 39,000 this quarter. Let me note that to help support U.S. stay-at-home guidelines during the pandemic, we signed on to the FCC's Keeping America Connected pledge, and our subscriber numbers exclude subscribers whose service would have ordinarily been terminated in the absence of the pledge. Our consumer subscriber base in Latin America is now approximately 267,000. Since the start of the pandemic, traffic at our network has increased dramatically, and much of the network is operating at full capacity. We are diligently working to optimize broadband traffic and manage performance to accommodate this increase in network use and to prioritize remote learning and telecommuting for our subscribers. We continue to stay focused on managing churn and providing an outstanding customer experience. Due to our North American capacity constraints, we expect consumer growth primarily driven from our international markets, where we have available capacity. At this time, we have the ability to sell and service all of our domestic and international consumer markets as an essential service, except in Peru, where local regulations prevent sales and installation staff from working due to the pandemic. We continue to make progress on our Jupiter 3 satellite program. In the first quarter of 2020, Space Systems/Loral, the manufacturer of our satellite, notified us that due to regulations in Santa Clara County, ordering residents to stay home to slow the spread of the virus, Space Systems/Loral's ability to timely manufacture and deliver the satellite may be delayed due to the occurrence of a force majeure event. Based on this information provided by SSL, we expect the satellite to be launched no earlier than the second half of 2021. The integration of the Hughes Brazil and Yahsat Brazil operations is progressing well. The activation of a new Jupiter gateway system and associated OSS/BSS connections to the Al Yah satellite is almost complete and beams are now operational. The new distribution channel brought by Yahsat is being assimilated into our new organization as planned. Finally, the migration of the existing Yahsat subscribers to the HughesNet platform is expected to be completed soon. We continue to work on closing our joint venture with Bharti Airtel in India. This is still subject to regulatory approvals, which are not expected before late this year. We are continuing our expansion of the Hughes Express Wi-Fi service, which we offer through a partnership with Facebook Connectivity. We now serve more than 1,000 Express Wi-Fi hotspots in Brazil, Colombia, Mexico, and Peru. Through the rest of the year, we intend to continue the growth of this service and to expand the coverage to include Ecuador and Chile. Our North American enterprise business got off to a strong start in Q1, which included a significant extension with a long-time customer, OneMain Financial, and a large order from the Social Security Administration. Our franchise business, which primarily addresses the gas station and quick-service casual dining market, saw continued bookings in the first quarter from operators of BP, Phillips 66, and Chevron. We have been seeing a lot of activity in that market as retail petroleum customers prepared to accept credit cards with chip technology at the pump by October. Starting in March, a few active retail projects were paused due to COVID-19 and customer personnel preparing their company's infrastructure for work-from-home support and changes in retail operations. We're starting to see some customers reengage on these projects for completion in the second quarter. We've also seen a reduction in activity in the energy sector due to the dramatic drop in oil prices, where we expect our exploration customers to review equipment and networking requirements. Due to the significant reduction in air travel driven by the COVID-19 pandemic, there has been a corresponding pause in the deployment of ISP systems in airplanes that is expected to linger until flights resume on a fuller schedule. However, we are continuing our engineering activity associated with the next-generation system in support of SES and the SES-17 platform that we announced in the fourth quarter. One immediate impact of the disruption from the virus has been an increase in Internet and our digital media products for employee and customer engagement. As our customers adjust their business practices, they are seeking more efficient ways to stay connected to their employees through communications and training. We've also seen an increase in the SD-WAN for ensuring reliability of networks and supporting the increased user reliance on VoIP and video conferencing. In the international enterprise business, major operators around the world continue to expand their use of the Jupiter system for their own broadband services. This includes Eurona of Spain as well as a new operator in Russia, both of whom are using the Jupiter system to provide maritime mobility services. Hughes India, which was the first in the country to receive licenses for offering maritime and aero broadband services, added two additional maritime customers during this quarter. Like the domestic market, though, we have seen and expect to see some customers pause activity in light of the virus. Our government and defense business built on its success in 2019 and had a very strong quarter with new orders from General Atomics and the U.S. Coast Guard for satellite systems. Additionally, we have begun implementing new services to expand our long-tenured relationship with the national weather service through our contract with ERT, Inc., providing satellite and wireless services. We continue to address several opportunities under the GSA Enterprise Information Solutions contract with our managed broadband and SD-WAN capability. We are also extremely proud to be providing satellite Internet access to U.S. troops returning from overseas deployment and facing a 14-day quarantine. Despite the bankruptcy filed by OneWeb and the financial challenges they face, we still believe that LEO constellations will be an important part of the overall satellite ecosystem. LEOs will bring global coverage and lower latency services while geo satellites will bring density to support the growing demand for data. For now, while we wait to see what happens with OneWeb, we have paused work on the gateways and reassigned our engineering staff to other ongoing projects. Our consumer business continues to be very strong, and I'm extremely proud of how we responded during this critical time.

Thanks, Pradman. Good morning. In Q1 of 2020, ESS continuing operations revenue was $5 million, up slightly from the first quarter of last year. In the first quarter, the COVID-19 pandemic had minimal impact on our commercial FSS business. However, we could see some negative impact on existing or future business due to changing economic conditions and lengthened or delayed sales cycles. On the global S-band front, we have completed construction of our first pair of new satellites for our Echo global subsidiary, which obtained global NGSO spectrum rights. The launch of the satellites has been delayed due to the pandemic. And at this point in time, they have not been rescheduled, although we expect the launches to occur this year. We also continue to make progress in our various development initiatives supporting the EchoStar global mission. We are working with several strategic partners to develop a future system architecture to support high-quality service offerings expected to reduce the cost of satellite-delivered IoT services. We foresee emerging opportunities in global mobile satellite vertical markets, including energy, utility, aero UAV, automotive, marine machine-to-machine communications, public protection and disaster relief, health monitoring, and other end-to-end services. Regarding our European operation, EchoStar Mobile continues to see strong interest in the Hughes 4500 omnidirectional terminal and its variants, including the 4510 terminal, a hybrid MSS terrestrial version of the 4500 terminal. While the pandemic has temporarily slowed our rollout of these products through our distribution partners, we expect to be back on track within a few months. In the meantime, we are pushing forward with the development of our state-of-the-art service platform as well as plans to run proof-of-concept technologies that will help validate both the EchoStar global mission as well as enable EchoStar Mobile to offer devices that will greatly increase the potential addressable market for its European-focused satellite, M2M, and IoT services. Full integration of the S-band satellite services into 5G networks remains our longer-term strategic goal, and we continue to explore ways to integrate our complementary ground component authorizations into these and other developments. I'll now turn it over to Dave.

Thank you, Anders. Good morning, everyone. I'll be discussing our adjusted EBITDA measurement, which excludes certain nonrecurring items, investment gains and losses, and unrealized gains and losses on foreign exchange. More details can be found in the GAAP to non-GAAP reconciliation in our earnings release. We believe adjusted EBITDA better reflects our operating efficiency and financial performance. Now for the financial results. Consolidated revenue in the first quarter was $466 million, showing a growth of 2% compared to the same period last year, primarily driven by our Hughes segment. Consolidated adjusted EBITDA for the first quarter was $149 million, up from $140 million last year. Our net loss from continuing operations for Q1 was $58 million, an increase of $54 million from the previous year. This change was mainly due to higher net losses on investments of $54 million, which included the write-off of a strategic investment, along with higher depreciation and amortization of $13 million and higher unrealized losses on foreign currency of $10 million. These losses were partially offset by lower net income tax expenses of $10 million, higher equity earnings of $9 million, and lower net interest expenses of $8 million. Capital expenditures in the quarter totaled $105 million, down from $112 million last year. The decrease was mainly due to lower spending on satellite construction, partially offset by increased spending on consumer equipment. Free cash flow, calculated as adjusted EBITDA minus CapEx, was $44 million for the quarter. Looking at the segments, Hughes' revenue was $458 million, representing a 3% increase year-over-year despite a negative foreign exchange impact of about $6 million. This growth was driven mainly by sales in Hughes' consumer service and enterprise hardware, although it was partially offset by lower enterprise service revenue. Hughes' adjusted EBITDA for Q1 was $162 million, a slight increase from Q1 last year. The margin associated with the higher revenue was offset by increased sales, marketing, and general and administrative expenses primarily related to their expanding consumer business in Latin America. ESS revenue in Q1 was $5 million, showing a slight increase from last year, with adjusted EBITDA also at $2 million in Q1, a small rise. In the corporate and other segments, adjusted EBITDA for Q1 was a loss of $16 million compared to a loss of $24 million in Q1 last year. The segment recorded earnings and equity from affiliates of $4 million compared to losses of $5 million last year. As noted last quarter, we changed our accounting process for reporting equity method investments to a 3-month lag. However, these positive impacts were partially offset by the effect of certain real estate transferred to DISH in September 2019 during the BSS transaction, which was not classified as discontinued operations. We ended the quarter with $2.4 billion in cash and marketable securities. Although we did buy back a small number of shares, we believe it was wise to maximize our liquidity given the extreme uncertainty in current economic conditions. This approach provides us with the flexibility to explore investment opportunities that could promote both organic and inorganic growth. Lastly, I want to mention that Moody's recently reviewed HSSC's credit and did not change our bond ratings.

Thanks a lot, David. As mentioned in my other comments, I'm extremely proud of our organization in terms of how quickly we were able to adapt to the challenges of the pandemic, the teamwork that's been displayed, and the excellent service we continue to provide to both new and existing customers. While the ultimate impact of COVID-19 on our business will depend on future developments that are uncertain and cannot be predicted, the pandemic has made even more evident the worldwide need for connectivity and communications to facilitate the increasingly vital global community and workplace. As the global leader in satellite broadband networks and services, we continue to be very well positioned for the challenges from the pandemic as well as new opportunities for future growth. Let me now turn it over to the operator to start the Q&A session.

Your first question comes from the line of Rick Prentiss with Raymond James.

I hope you and your families and employees continue to stay well and go through these crazy times. A couple of questions. I appreciate the breakout of consumer versus enterprise being about 66% consumer, 34% enterprise. As we think about the enterprise side, can you kind of list off what your top segments are? I know you've got some in the retail gas side. But just trying to think through what your exposure is to different industries on the enterprise side.

Pradman, you want to take that?

When examining our enterprise business, it’s important to consider both North America and international markets. In North America, our main focus is on the retail sector, where we utilize technologies such as VSAT for satellite communication and SD-WAN for enhancing reliability and availability. The retail sector is clearly the leading area in the United States. Outside the U.S., particularly in India, we target significant opportunities in banking and finance, as well as gas stations. These traditional VSAT opportunities remain strong in countries like India and Brazil. Europe tends to follow the U.S. model, concentrating mainly on the retail sector, resulting in a combination of approaches depending on the region.

Okay. And when you say retail, what kind of example customers would that be?

Traditional retail encompasses sectors like energy, gas stations, and companies such as T.J. Maxx, along with department stores and more, including the energy sector as previously mentioned.

Okay. And as we think of the impact of COVID-19, are you noticing any issues with bad debt or collections? I assume the auditors this time around were being very diligent in looking at what kind of reserves you guys have and everybody.

Yes. Obviously, that's something we look at every quarter, and we did pay more attention to it this quarter. The quarter ended on March 31. The only customer that I'm specifically aware of that obviously declared bankruptcy was OneWeb in the first quarter. I think we'll see a fallout going forward of greater economic impact. But for the most part, we didn't have a big reserve impact across the broader customer base and it's something we certainly paid attention to. On the consumer side, as Pradman mentioned in his comments, we excluded from our reported subscribers those customers that we would have otherwise disconnected for non-payment. We also excluded, obviously, from the revenue charges that we continue to make for those customers that we don't expect to collect. I think the uncertainty on the economic environment and its impact on the retail community broadly, as I said, we haven't seen yet, and it's tough to predict what it will look like going forward.

I understand you do not provide guidance. As we reach mid-May, how does the business evolve?

I'll start with that and then Pradman, perhaps you can add some additional comments. We observed significant growth in the first quarter in the consumer business in North America, certainly more than we experienced in the previous couple of quarters. We anticipate that growth will slow down due to limited available capacity. In South America, we expect continued robust growth in the consumer sector. On the enterprise side, as Pradman mentioned, we will likely see a slowdown from certain customers who are reassessing their situations. He specifically noted customers in the IFC space. As you know, we do not provide direct IFC services, but we do support some of those customers. Unfortunately, those customers might face challenges without any planes in operation, leading to a slowdown. However, regarding the deployment of new equipment and services, I believe, and Pradman can expand on this, we are beginning to see customers interested in accelerating the installation of new services as they evaluate their future needs in this evolving environment.

I think, Dave, you addressed the major points. The consumer business in the first quarter was very strong both domestically and internationally. Going into the second quarter and third quarter, depending on what happens with the pandemic, we'll see what happens, but April was a strong month. So I think we continue in the consumer business to look good. The only limitation there, of course, is the lack of new capacity in the United States. So we are constantly working there to try to improve efficiencies and throughputs by technology improvements, and we'll try to see what happens as the year progresses. In the enterprise business, we did see a little slowdown in the beginning of the second quarter. But as we speak, many of these customers that were looking for delays are beginning to reengage. And I think we're optimistic, hopefully, that many of these will convert to contracts on the schedule that they had originally projected.

It's encouraging to see those changes. I have one last question regarding capacity. You referred to the force majeure clause from the manufacturer of the Jupiter 3 rocket, indicating that there won't be a launch before the second half of '21. How should we keep track of that? What do you anticipate regarding the service date and its potential impact?

I think that will depend on the launch date and the completion of the satellite. We are still being cautious in our predictions due to uncertainty regarding the delivery of subsystems from vendors outside of Maxar. Given the overall uncertainty of the environment, we are still being relatively cautious.

Your next question comes from the line of Chris Quilty with Quilty Analytics.

Just a follow-up on Rick's earlier question on the timing of the Jupiter launch. If you're looking at the second half of next year, presumably, you need to put in a launch order sometime soon? And are you, in fact, moving towards that decision? And any impact from the recent insurance increases? And along with that, Dave, can you give us an update on your thought on the 2020 CapEx outlook?

Let me address the CapEx, and then I'll ask Anders to address your other questions. CapEx, we're monitoring very closely. And part of that is where we're going to be on the schedule for both Jupiter 3 and the rocket in terms of the CapEx. I do expect some delays in spending from this year to be pushed from 2020 into 2021. We're evaluating all the projects and planning for contingencies. While both Pradman and I have said that we’re cautiously optimistic in terms of the condition of our customer base. But at the same time, we’re being prudent, making sure that we’re looking at all opportunities to defer our own costs, should we see our customers slowing down things more than we expect. With that, let me ask Anders to address the rocket issue.

Yes, Chris, we have been in talks with all the launch providers capable of launching a satellite like J3. As the J3 mission may face some delays, this puts us in a unique position regarding launch vehicles. Some of the launch vehicle providers are updating their product lines, leading to the phasing out of old vehicles and the introduction of new ones. These changes are experiencing their own delays, partly due to the pandemic and partly due to the complexity of these updates, which can create scheduling challenges. We are currently in discussions with these providers to align with our launch timeframe needs, but we have decided to postpone our order out of caution, as placing an order requires us to start making payments. We will wait for more clarity on the satellite's completion before we make that decision. Regarding the insurance market, we've been closely monitoring it as well. We have kept the insurance community informed about the J3 mission and our timing and needs. However, financial markets have been volatile, so our entry into the insurance market will depend on its stabilization. We do not anticipate needing insurance until late next year at the earliest, so we will delay decisions on that front for as long as we can.

Fair enough. Also, just a question on the enterprise business. I think it was down in the current quarter about $13 million, and it was also down in Q4. What part of the business, the enterprise business specifically, is down? Is that international or North America? And then is it a particular segment? Or are there different factors that impacted Q4 from Q1?

Pradman?

Yes, sure. Yes, generally, historically, we always find Q4 peaks and then Q1 is usually lower than Q4 because we've made all the shipments at the end of the year in Q4. So I don't think there's any dominant piece of our business that changed dramatically. There were slightly lower performance in almost across the board but nothing dramatic.

Okay. And specific to OneWeb, I didn't see any disclosures in the 10-Q relating to potential write-downs. There are a couple of public companies that have taken write-downs. Can you give us an update of where you stand in terms of gateway deliveries on that program and maybe size your exposure from where you sit with WIP or finished products sitting on the floor?

Yes, Chris. I mean in terms of our investment, our investment is now fully impaired from the strategic investment standpoint. Effective with the bankruptcy, we ceased all work on OneWeb. Although we, subsequent to the quarter, did sign a small deal or a small agreement with OneWeb that basically allows us to wrap up some of the development documentation associated with them that was approved by the court, but that's onetime and not certainly ongoing. In terms of the gateway delivery, yes, we've got gateways sitting in the warehouse that we're ready to ship. Those have been primarily paid for in advance. Our overall exposure to OneWeb is relatively minimal, certainly compared to some others that we've seen through the bankruptcy filing. And we do have some exposure to our vendors for a cancellation of certain future orders that were in the pipeline, but we don't expect that to be particularly material. Other than those potential liabilities to the vendors, we think we've recorded everything effectively in Q1 related to OneWeb.

Got you. And was there any impact on your backlog? Or is there potential impact depending on how things go? And just more broadly, I mean, equipment sales were up in Q1. Is it reasonable to assume that both the slowdown in consumer and difficulties with deploying to enterprise customers that we're likely to see negative numbers for at least the next quarter and perhaps more?

At the end of Q1, we removed all backlog related to OneWeb, so there is nothing left for OneWeb in our backlog. As for your question about future deliveries, aside from the restrictions we have on consumer work in Peru, we faced some temporary limitations in a few other South American countries. However, we do not anticipate that situation worsening going forward unless the pandemic significantly deteriorates globally. Therefore, if your question was about consumer activity, we do not expect a slowdown. We believe we will return to normalized levels, whatever that may mean now. We did notice a surge in North America and a slight increase in South America, which mostly aligned with our expectations. In North America, as Pradman mentioned, we are operating at maximum capacity, and I do not foresee growth in North American subscribers. I would advise against using Q1 North America consumer figures as a benchmark for the future.

Understand, and final question on the broadband protection program. I forget the name. I mean kudos on that. I would be in a terrible situation if I lost my broadband connectivity in the current environment. And clearly, it's a bit unprecedented. So difficult to think about how you’re going to migrate going forward once the, I think, June 30 extension happens. But are you seeing a sizable number of folks that could become future churn? And what are your expectations in terms of how you might migrate those customers or extend them on the back end?

Pradman, you want to try and address that. I mean, I would say, sort of from a numerical standpoint, Chris, in Q1, obviously, just given the timing of the end of the quarter and everything happening. The number of subs that were in that delinquent mode, as of March 31, were not overly significant. We do expect that naturally to grow going forward. But in terms of saving those customers and avoiding the churn as of June 30, I'll let Pradman try and address that.

Yes. In our estimates, we have not counted certain subscribers in our numbers because we can bill them, as Dave mentioned. When we reported 39,000 net adds in Q1, it included the subscribers we expected would normally have churned out. We don't anticipate a large number remaining in relation to the 1.5 million subscribers we have in service, so I don't expect that number to be significant. The estimated number is incorporated into our forecast, but it's not substantial.

This is Mike Dugan. I'd like to interject here. First of all, you're asking questions that require a crystal ball and ours is broken because a couple of times, we've tried to predict for the pledge. We tried to prepare ourselves and say we're going to have potentially higher numbers of subs in the non-PAC configuration. And the truth is it's been less than what we predicted. I think we weren't too good at predicting the huge demand we saw as the pandemic took place. Because a lot of people needed to get a connection for work from home or school from home. And then finally, we said a couple of times we're out of capacity in the U.S. that's not true, okay? There are areas of the country that are highly urbanized, where we've got extremely tight capacity capability to expand. There are large areas of Jupiter 2's coverage that still have significant capacity. And that's where we're focused, from a U.S. standpoint, to add customers. So just to clarify that.

Your final question comes from the line of Giles Thorne with Jefferies.

Just picking up on the OneWeb topic. Do you have any interest in NAV assets? Anything in there that you want?

Yes. We're looking at that as well as a lot of other things that are unfortunately starting to develop because of the change in the business the pandemic has brought forward. So are there things with OneWeb's overall business? There's things that are very attractive to us. And if somebody ends up acquiring OneWeb assets and then wants to reengage that entire service, we know we'll be a big part of that. So it would be unfair to say we don't have any interest because we watch that kind of stuff on a day-to-day basis.

But I don't mean interest in the situation. I mean do you have any specific assets, such as spectrum, satellites, or hardware? Is there anything that you would want to buy?

Well, again, do we have interest? Yes. Are we going to be totally involved in bidding on specific parts of the assets? I don't expect so at this point in time. But again, my crystal ball hasn't worked very well the last couple of months. So...

Thanks, everybody, for joining today. We're now ready to conclude the call. So everybody, have a great day. Thank you for participating in today's teleconference. You may now all disconnect.