Ladies and gentlemen, thank you for standing by. Welcome to the EchoStar Corporation Third Quarter 2023 Results Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. Please be advised that today’s conference is being recorded. I would now like to turn the conference over to Dean Manson, Chief Legal Officer. Please go ahead.

Thank you, Michelle. Hello, everyone. And welcome to our earnings call for the third quarter of 2023. I’m joined today by Hamid Akhavan, our CEO and President; Paul Gaske, our Chief Operating Officer; Jeffrey Boggs, Senior Vice President of Finance; and Veronika Takacs, our Chief Accounting Officer. 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. All statements we make during this call, other than statements of historical fact, constitute forward-looking statements made pursuant to the Safe Harbor provided by the Private Securities Litigation Reform Act of 1995. These forward-looking statements 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 for the year ended December 31, 2022, filed on February 23rd, and our subsequent filings made 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. We refer to adjusted EBITDA during this call, the comparable GAAP measure and a reconciliation there to are presented in our earnings release. I will now turn the call over to Hamid.

Thank you, Dean, and good day, everyone. Our agenda for the call today is as follows; first, I will provide a brief overview of financial activity from the third quarter; after that, we will discuss our business strategy, which includes the three parallel work streams that I call Horizons; and our progress on all three. We will then move to a question-and-answer session. But before we jump into the third quarter results, let me briefly highlight the announcement of our contract award with Delta Air Lines signed in the fourth quarter that will star among the leading in-flight connectivity providers. Delta is known to be an industry leader with in-flight connectivity service and for conducting extensive competitive procurements. We are thrilled to have earned their confidence in being selected as a new Delta partner. This new order is a major opportunity within the in-flight communications market that will increase our backlog and diversify our business. This is consistent with my statements in prior earnings calls regarding our continued focus on diversification and growth of our enterprise business. In addition, our Jupiter 3 Satellite is in its final stages of in-orbit testing and the satellite is on a schedule for service launch in December. Now let us turn to our financials. As we have anticipated nearing the end of Horizon 1, the third quarter marks a low point as we enter our historically strong fourth quarter. Our revenue in the third quarter of 2023 was $413 million, lower by $84 million compared to the same period of the prior year. The revenue decrease in the third quarter was partially driven by our consumer broadband business, which continues to be impacted by capacity constraints and other factors as we wait for our Jupiter 3 Satellite to be in service. We also had a decrease in our enterprise revenue primarily due to lower domestic and international deployments and shipments, which we expect to recognize in the fourth quarter and beyond. As I have shared before, most enterprise orders are recognized over several years, which can create some variation or irregularity in our revenue profile as we saw with the low point in the third quarter. We remain excited about opportunities within the enterprise market, a market that we believe will continue to allow us to better diversify our business both domestically and internationally and provide cash generation through low capital investment and scalable operating leverage. We are enthusiastic about our recent performance and a number of near-term prospects in the enterprise market and see that leading to an estimated enterprise backlog approaching $2 billion. Our adjusted EBITDA in the third quarter was $126 million, a decrease of 21% from last year, primarily driven by the lower revenue. We continue to focus on managing our costs to align with the change in the revenue mix to preserve our ability to generate cash. Capital expenditures net of receipt of refunds in the quarter was $79 million, compared to $61 million in Q3 of last year. The increase was primarily due to an increase in expenditures on the J3 Satellite program. Operating cash flow, defined as adjusted EBITDA minus CapEx, was $47 million during the quarter, $51 million lower than Q3 of last year. We ended the quarter with $2 billion of cash and marketable securities. I remain confident about our strategic direction and execution plan, and our ability to generate healthy returns and cash to execute on many opportunities that are ahead of us. Let me now turn the call over to Paul, who will provide some additional specifics on the quarter and our Horizon 1 and 2 activities.

Thank you, Hamid. Under our Horizon strategy that we have previously explained, dividing our strategic focus into three periods of time, near-term Horizon 1, mid-term Horizon 2, and transformational Horizon 3, we are about to enter our Horizon 2 as Jupiter 3 comes into service later this quarter. We will begin to focus on deploying the next-generation HughesNet service across the Americas and continue the expansion of our global enterprise business, including the government sector and our managed services portfolio. During this mid-term period, we also expect to be launching our hybrid LEO-GEO enterprise solutions, as well as leveraging our manufactured products to pursue growth and further diversification. Jupiter 3 reached its orbital slot earlier in Q3. The Maxar team has fully deployed all of its antennas, and Jupiter 3 is on track to begin transmission testing with our extensive ground system shortly and we expect the satellite to enter into service in December. Once in service, Jupiter 3 will deliver new broadband services in North and South America and will allow us to quickly address the continued demand for high-speed broadband service throughout the region. In preparation for the launch of Jupiter 3, our consumer team is finalizing the development of new service plans with higher speeds and extension of our HughesNet Fusion for the ultimate high-speed, low-latency satellite Internet experience. We believe the market is eager for these robust offerings, and we continue to compete with an attractive portfolio of service plans that will be simple to understand and aligned to our customer’s needs. The market has reacted well to our Fusion service offering. We continue to see a considerable percentage of our new subscribers select Fusion service, which is available on our highest ARPU plans. The HughesNet Fusion plans have been well received by existing and new subscribers, and we expect to expand the service to help attract new customers and improve our overall economics as we launch Jupiter 3 service. While preparing for the launch of Jupiter 3, we remain focused on operational efficiencies, yield optimization of our North America satellite capacity, and further optimization of our subscriber acquisition strategies. Additionally, we continue to improve our cost and performance through the deployment of AI and ML automation, improved processes, and supply efficiencies, without compromising the end user experience. Moving to our North America enterprise business, we are entering Horizon 2 with a very significant achievement. As Hamid mentioned, we are thrilled to have completed a contract with Delta Air Lines to deploy our Hughes in-flight connectivity solution to deliver WiFi and video services to passengers on more than 400 Boeing 717 and regional jets serving North America. Our solution utilizes the Jupiter Satellite assets in a very innovative way to provide outstanding in-cabin communication service. We have been working extensively with Delta Air Lines' team for a number of months and planned initial installations in mid-2024. This program marks a change in business strategy. After more than 20 years supporting numerous in-flight communications providers with our equipment support, we are now expanding to offer our unique in-flight communication solutions directly to commercial airlines. Regarding the Q3 North America enterprise results, we received several expansion and renewal orders from retailers and upgrade orders in the U.S. retail petroleum market. In addition, Explorer placed a significant order for the terminals that will support their broadband services in Canada using Jupiter 3. In our OneWeb program, during the third quarter, we continued deliveries of production gateways and systems to meet the OneWeb service implementation plan. We have shipped more than 23,000 satellite subscriber modules for inclusion in OneWeb modems. We are seeing significant interest in our previously announced electronically steered antennas or ESA, from resellers, distribution partners, and direct customers. We expect factory shipments to begin this quarter with initial units going to OneWeb for their customers, as well as to customers of our managed LEO service offering featuring OneWeb capacity. Our government and defense segment had a strong third quarter with follow-on orders from the U.S. Postal Service for broadband services in several of their rural offices, the State of Pennsylvania for broadband services and Boeing for their PTS program, along with add-ons to our DoD contracts supporting the Navy for 5G systems enhancements for the Whidbey Island Naval Air Station advanced flight line program, which we had previously delivered in the first half of the year. We also received an order from prime contractor SES Space and Defense in support of a new Air Force multi-orbit LEO and GEO program for our airborne-based communications with software-defined networking, opened a new era for our defense-based communications products. Now to our international operations, we expect opportunities in cell backhaul and digital inclusion projects to continue to expand Horizon 2 as companies and governments extend their reach to underserved communities. We believe our Jupiter system remains the de facto standard in broadband GEO satellite communications globally and our new LEO ESA for use on OneWeb allows us to strongly compete for these new opportunities going forward. In Latin America, the new Jupiter 3 capacity will allow us to expand our enterprise services for a number of upcoming projects. In Mexico, we have seen continued expansion of cell backhaul and digital inclusion projects with additional locations, as well as additional capacity. Throughout Latin America, we have added over 1,300 schools, leveraging our equipment and Jupiter capacity. In Asia, we also see similar opportunities for cell backhaul and digital inclusion projects. As an example, in the last quarter in India, we fulfilled the second order from Airtel for 4G backhaul supporting a significant USO project in Maharashtra. We are also upgrading the Indian Army’s Battlefield Surveillance System to Jupiter technology. While in Central Asia, we were awarded and have delivered a Jupiter system that will provide Internet services to remote communities. And in Southeast Asia, we have received an order for a Jupiter system for use on a high-throughput satellite. Lastly, in the Latin American consumer business, we look forward to the commencement of services on Jupiter 3, which is expected in the first quarter of next year. This will allow us to serve additional customers in areas with high demand as well as to enhance the user experience for both new and existing customers. Now let me turn the call back to Hamid.

Thank you, Paul, for the summary of our Horizon 1 and 2 activities from the third quarter of this year. Even though Jupiter 3 has launched successfully, we continue working on all our work streams, Horizon 1, 2, and 3 in parallel. As for Horizon 3, it is our longer term strategy to expand into new markets through organic innovation and potential acquisitions. To that end, earlier today, we filed an update to our S4 registration statement with the SEC in relation to our pending merger with DISH. We expect the S4 to go effective in the coming days and are on track to close the transaction this year. In addition, we continue evolving our S-band prospects, as we announced during the first quarter construction of our EchoStar Lyra LEO constellation is underway. We continue to be on track to launch the first LiDAR satellites in late 2024 or early 2025 to begin offering store-and-forward Internet of Things, machine-to-machine and other data services. At the same time, we are developing opportunities for our global S-band assets. For example, we continue to bring on new customers in Europe for our EchoStar Mobile LoRa-enabled IoT service and are investing in the development of 3GPP Release 17 to complement the existing LoRa technology. Let me now turn it over to the Operator to start the Q&A session.

Thank you. The first question comes from Ric Prentiss with Raymond James.

Good morning, everyone. This is Brent on for Rick. Thanks for the question. First one, on the DISH deal, what milestones are left for closing the deal? And Hamid, with you set to become DISH CEO next week as opposed to at the deal close, what should we read from that in terms of the merger timeline?

Brent, Hamid here. I will start the answer in the second part and I refer to Dean, who is on the call for the first part regarding the milestones. Look, there is nothing more to read regarding my taking a dual role here. I mean, candidly, we have very high confidence that the companies will merge and there are really no obstacles that we are aware of that would stand in our way of getting the companies together. Time is an opportunity to make sure that we get a good head start for 2024 ahead. As I mentioned, we just passed the lowest point of performance and we hope that a similar kind of situation develops here so we can bring the companies together and look for a much more effective and energetic performance into 2024. So I want to just get that head start; there is budgeting process going on, other things, that would allow me to be better positioned to run the business when the two companies merge. Really, there is not much more to it to read into this ability to at least get the runway started for 2024. Dean, I will pass it to you regarding the milestones left before the merger closes.

Sure. Yeah. Thanks, Hamid. Brent, yeah, it’s pretty straightforward from this point onward. We just need to mail the information statement to shareholders, wait the prescribed amount of time. There are a couple of small things that remain that should be done well within that time period, such as the pro forma FCC approval for transfer control of certain licenses. But as we said in our public statements, we fully expect this to be wrapped up by year-end.

Okay. And then you announced an unusual move flipping the structure for the merger for EchoStar to be the surviving company now. Can you give us some more detail on the rationale for that?

Yeah. Brent, I am happy to talk…

Look, this was the no. Dean, go ahead. No. Go ahead, Dean. Go ahead, please.

Sure. No. I was just going to add that this really was the result of looking at what are the optimal way to structure the companies that are ultimately going to be merged and operated as one company. So it really wasn’t thought of as one company acquiring the other, although, as a strict legal matter, that is the way these things get structured. As we said in the statements we made when we announced the modified structure, this gives us greater flexibility in terms of capital allocation and some of the contractual and debt-related restrictions that are in place at the different companies. This creates incrementally more flexibility. So it was just seen as somewhat better, somewhat more flexible structure, but really the same combined company in the end in terms of how we operated and managed.

Okay. And then, lastly, you talked about the in-flight connectivity deal with Delta. What drove the decision to enter IFC that is in a competitive market historically and can you also update us on the progress of the Galileo project with Gogo?

Yes. Let me say something about the in-flight business, and certainly, we will ask Paul to embellish and add to that. Look, we have been in the in-flight business since 2012. We just have not been taking the lead position and we have provided solutions through other parties that have served that market. We have been serving a numerous number of airlines globally around the world and so this was just an opportunity for us to step up and become a direct supplier, an integrated supplier that can provide end-to-end all aspects of the service. So this is not a new area for us. We understand the market very well. We have been, through third parties, a supplier to Southwest Airlines, Air France, KLM, Turkish Airlines, Spirit Airlines, and other airlines. And here now, the opportunities are significant. We look at the market, a market that is today $1.3 billion but is expected to be more than $4 billion in 2032. So this is one of the big growth opportunities in the enterprise business. We find ourselves in a very prime position, both from a capacity perspective because of Jupiter 3 arrival and also because of all the great technologies that the Hughes team has developed to equip the planes and provide excellent service. Paul, is there anything else you would like to add with respect to our decision to move to this area?

No. I think those are the main points. I think underneath that decision, of course, is we have ideally situated assets with the Jupiter fleet, which allows us to provide a good service in the regions that we are discussing right now and also because of our extensive activities in the LEO space with OneWeb and our antenna technology there, we think that there are some seriously good opportunities coming up in the near future.

Okay. And related to that, could you give an update on where you are in the Gogo project and the timeline there?

I can say that things are progressing well, but I will leave it to Gogo to provide an update on their timeline. Overall, it is going well.

Please standby for the next question. The next question comes from Michael Rollins with Citi. Your line is open.

Thanks, and good morning. A couple of questions, if I could. First, the broadband market has evolved significantly since you first started talking about the J3 opportunity. Can you remind us how we should be thinking about how the push to commercial service later this year and into 2024 can influence subscriber and cash flow results and how much of a possible boost to subscriber performance should be in the back of our minds? And then just separately, in the SEC filing today for EchoStar, there was a reference that EchoStar may operate DISH Network's business in a different manner from how DISH Network has operated in the past. I am just curious if you could unpack that a little bit and share some of your thoughts on how you may want to run it differently? Thank you.

I will share some insights about EchoStar’s performance expected for next year. I may not have much to add beyond what has already been placed in the market regarding S4. In terms of EchoStar, we anticipate growth next year in our consumer base, but I am even more enthusiastic about the considerable opportunities presented by the enterprise sector. We believe there are areas in the consumer market where we can effectively compete with differentiated pricing and offerings compared to Starlink. The market appears poised for the segment we are targeting. We no longer see ourselves as primarily reliant on our consumer business as we did in previous years. We are increasingly recognizing substantial opportunities in the enterprise area. As I mentioned earlier, we expect our enterprise backlog to reach nearly $2 billion by the end of this year, which is quite significant. This indicates a shift in our business focus toward enterprise. Although enterprise has lower gross margins, it requires considerably less capital expenditure and experiences lower churn, while the backlog extends over several years. Once you enter the enterprise sector, you typically remain in it for a long time, making it a very sustainable business with a long-term perspective. Therefore, we see our business evolving in that direction. We clearly view 2024 as a more favorable year than 2023, and in fact, the current quarter of 2023 has been the lowest point we anticipated; moving forward, you should expect to see improvements in all our metrics in Q4, even before the impact of J3 on revenue. We will experience significant growth across all key indicators, particularly in revenue, consistent with our historical performance. Regarding DISH, the merger of the two companies will provide numerous opportunities, especially in the enterprise sector, private 5G, and enterprise 5G, which will be greatly enhanced by combining EchoStar’s enterprise capabilities with those of DISH. These prospects will become more concrete and achievable. I can’t elaborate much further on what we’ve shared in the S4 today, but I will conclude here and will be glad to address any specific questions you may have.

Thanks for the follow-up. You mentioned that we may approach $2 billion in backlog by the end of this year. The reference to $1 billion to $1.5 billion in contracted revenue in the backlog as of September 30th seems relevant for comparison. To bridge the gap between $1.5 billion and $2 billion, is that related to the Delta agreement you mentioned, or are there other new agreements or opportunities we should consider in this context?

We are exploring several deals and opportunities. Our enterprise business is experiencing strong demand from various sources, including the in-flight segment, where we have multiple opportunities in progress, as well as other unrelated sectors. We are seeing significant deals emerging from the Far East and elsewhere. It’s important to view this as a collective potential rather than focusing on any single deal. We are optimistic that we will reach approximately $2 billion in backlog by the end of the year. What’s crucial to understand is the sustainability of our business; this backlog has greatly expanded and may even increase further as we move into the first couple of quarters of next year. We are actively pursuing opportunities that we believe will come to fruition in that time frame. This marks a gradual transition of our business towards enterprise, with a long-term outlook for revenues and cash flows.

Thanks. That is helpful.

Please standby for the next question. The next question comes from Chris Quilty with Quilty Space. Your line is open.

Thanks, guys. Congratulations on the Delta RJ deal that was a surprise given your past business practices of staying indirect, and it sounds like you are going to make a bigger commercial aviation push. And that opens up the question, your satellite assets are North American based. Do you intend to build out a global service infrastructure, and obviously, that would involve partnering for global capacity, or is there a desire to build out that capacity? And then the secondary question to that commercial aviation market is which band? Again, you are Ka-band but you are dealing with Ku on your LEO strategy, and there are no Ka-LEOs that exist today. So that is a lot, but if you can sort of unpack what you are thinking?

Yeah. Chris, remember that we are not purely a connectivity provider as it comes to our enterprise services. We provide a significant amount of technical products, antennas, or electrically steered antennas, or software that goes into that; there are many satellite operations around the world that use our software and services. So without disclosing too much information that could potentially harm us in a competitive way, I would like to say that we, while we have direct connectivity of our own satellites in the Americas, we can work with others around the world to provide service and other products to them to have a bigger play in the in-flight business. So I will just stop there, but we are definitely a global company. Our footprint, whether connectivity may be one aspect of it, the footprint of our products and services is global and that is how we think that in the in-flight business, we can have a play that is bigger than just the Americas.

Good. Speaking of the Americas, Jupiter 3 and correct me if I’m wrong, when you guys architected that thing back in 2014, 2015. I mean, that was five years before LEO broadband ever existed, and I think at the time, the plumbing was sort of optimized for consumer. Does that create any issues for serving enterprise markets? Clearly, you found a way to operate it in aviation, and I think you made mention of the fact that you did something special in terms of the design. So how flexible is Jupiter 3 if you find the need to pivot more towards some of these enterprise applications?

Paul, perhaps you want to comment on that?

Yeah. Certainly. So Jupiter 3, first off, while we had a mission of serving consumers, we also had a major portion of our plan anticipated aeronautical services, as well as other enterprise services. So it is not a new area. Additionally, the way we designed it was to get as much capacity as possible in key areas across the region, and so it does that very effectively. If you look at the typical in-flight service, probably the biggest obstacle that operations have is serving the hub area cities, and that is where the Jupiter 3 capacity, in particular, comes in quite handy for serving them. And if you look at our architecture, we actually utilize all three Jupiter satellites, so we have a fabric of capability. Depending on where we are and how much capacity we need to draw on any one of the three. And so that is how we generally build the system, and at the same time, we do have capacity available from some other business partners to help us fill that out in the few areas that we are not covering. So we think we are in pretty good shape with that.

Speaking of all three Jupiter satellites, is Spaceway now past its design life? How is that holding up?

Well, it is within days of being completely decommissioned in the graveyard orbit. So, yeah, it has been moving quietly across the arc here over the last month.

Okay. But clearly not creating any capacity issues given the availability of Jupiter 3.

No. No. We drained off all of our subscribers early to make sure they had the continuity of service, and so while the Spaceway served us really well, we wanted to make sure customers got the newer services and we moved them.

Got you. A quick reference, I think, in the transcript, you had mentioned you were excited about some defense programs. And I missed it; was one tied in with SES? Can you maybe give a little bit more color on that particular program? Was it press released? I don’t recall seeing it.

Yeah. There was a release for it. Yeah. That program is very interesting because the SES defense group has, obviously, their Empower services, which are MEOs, and they obviously have plenty of GEOs. And so we have a modem technology that is accepted by DoD that we have blended in with some requirements they had to provide this multi-orbit solution. I think they have previously announced this, probably, I don’t know, a month or two ago; I can probably give you a reference at some point. But, yeah, it is announced, and very interesting, very exciting. It is a sample of what is going to be happening as we go forward in the defense space.

Great. And final question here, and you may have already mentioned it in the call, but what is the current timing on both of the antennas for delivery, both the OneWeb and Gogo, any change in sort of the development and production there?

I mentioned earlier that this quarter we are shipping the OneWeb antennas, and they are performing well. They will be leaving the factory soon. These fixed antennas will be used in various locations, including those where OneWeb will deploy them. Regarding the Gogo antennas, we will let Gogo handle the schedule updates. Overall, the program is progressing well, and the system appears to be performing better than we expected, which makes us very pleased.

Please standby for the next question. The next question comes from David Barden with Bank of America. Your line is open.

Hey. Thanks so much for taking the questions. I really appreciate it. I guess my questions are for you, Hamid, given that you will be the new CEO of DISH in a week. I’m going to bring up the three things that people really want to know what your perspective is on. Issue number one is, DISH is paying $100 million to extend the time of the option that they have to buy spectrum from T-Mobile in the 800 megahertz band and that is $3.6 billion and really no one could figure out how that is going to happen from a funding perspective. So if you could have an input on that, that would be great. The second question is from the S4. DISH just put up a quarter with less than $100 million of EBITDA but is now projecting more than $2 billion of EBITDA for 2024. How do you plan to make that happen? And then the third question is, DISH was ideally going to be the fourth facility-based mobile player in America, it has been struggling. How are you going to fix it? That would be great? Thank you.

Thank you. Unfortunately, I can’t address those questions today. I don’t currently have enough detailed information to provide meaningful answers. I understand that liquidity and cash are crucial for the business and are concerns for our lenders and equity holders. My focus will certainly be on maximizing our capital use and avoiding a deeper cash need before addressing our challenges. During the merger evaluation, we identified several potential solutions that I have seen in the merger documents, which gives us some flexibility. So, while I can’t provide more detail at this time, there are options available to us. When it comes to competing in the market, entering the mobile business anywhere in the world, especially in a sophisticated and expensive market like the U.S., requires significant upfront investment before acquiring the first customer. From my 35 years of experience in the mobile industry, I can attest that establishing a presence requires extensive nationwide coverage and purchasing ample spectrum to be seen as a viable participant. You also incur considerable operating expenses related to leases, backhaul circuits, energy, maintenance, and licensing fees long before reaching your first customer. I recall when I was a young engineer in the AMS business, we had only a few sales in a local area, and we considered ourselves operational as we launched our 2G service in 13 markets, all primarily urban. Today, you would need to spend approximately $30 billion to sell your first mobile phone on your own network. Therefore, it's not surprising that in many regions, new mobile entrants may never appear. DISH might be the last significant new entrant in a major market; I doubt we’ll see a new 6G participant anytime soon. The window for new mobile entrants is closing due to the high costs and capital expenditure necessary to begin operations. DISH has accomplished this, and I am committed to making it work. We have several assets that are not yet available for consumers, including the 5G infrastructure, which may be more pertinent to enterprise and vertical markets. This is an opportunity for differentiation, alongside the global relevance that EchoStar brings when we integrate everything. I hope to share our strategy and updates on our progress with you as we piece everything together. I am optimistic about our future despite the substantial costs and challenges we've faced thus far; revenues will eventually follow, as is typical for new market entrants. I hope this provides some perspective, but I can’t give specifics on your three areas now; just know that I am fully aware of them and will not overlook any of it.

Thank you so much, Hamid, for your perspective. I really appreciate it and good luck and thank you so much for the time.

Thank you.

I show no further questions at this time. I would now like to turn the call back to Dean Manson for closing remarks.

Thank you, Michelle. We are now ready to conclude the meeting and I thank everyone for calling in.

This concludes today’s conference call. Thank you for participating. You may now disconnect.