Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.  20549
FORM 10-Q
(Mark One)

☒    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2020.
MARCH 31, 2021.

OR

☐    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM               TO                    .

Commission File Number: 333-179121
hssc-20210331_g1.jpg
Hughes Satellite Systems Corporation
(Exact name of registrant as specified in its charter)
Colorado 45-0897865
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
100 Inverness Terrace East,Englewood,Colorado 80112-5308
(Address of principal executive offices) (Zip Code)
(303)706-4000Not Applicable
(Registrant’s telephone number, including area code)(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes ☐ No ☒
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.  (Check one):
Large accelerated filer☐Accelerated filer ☐Emerging growth company☐
Non-accelerated filer☒Smaller reporting company☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes ☐ No ☒
As of OctoberApril 29, 2020,2021, the registrant’s outstanding common stock consisted of 1,078 shares of common stock, $0.01 par value per share.
 
The registrantRegistrant meets the conditions set forth in General Instructions (H)(1)(a) and (b) of Form 10-Q and is therefore filing this Quarterly Report on Form 10-Q with the reduced disclosure format.
 
* The registrantRegistrant currently is not subject to the filing requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934 and is filing this Quarterly Report on Form 10-Q on a voluntary basis. The registrantRegistrant has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months as if it were subject to such filing requirements during the entirety of such period.

Table of Contents

TABLE OF CONTENTS
 
i
   
PART I - FINANCIAL INFORMATION
1
1
3
4
5
6
7
8
5441
Item 3.Quantitative and Qualitative Disclosures about Market Risk*
6651
   
PART II - OTHER INFORMATION
6752
6752
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds*
Item 3.Defaults Upon SeniorMajor Securities*
6852
6952
6952
7053

*This item has been omitted pursuant to the reduced disclosure format as set forth in General Instructions (H)(2) of Form 10-Q.


Table of Contents

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
 
This Quarterly Report on Form 10-Q (“Form 10-Q”) contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including but not limited to statements about our estimates, expectations, future developments, plans, objectives, strategies, financial condition, expected impact of regulatory developments and legal proceedings, opportunities in our industries and businesses and other trends and projections for the next fiscal quarter and beyond. All statements, other than statements of historical facts, may be forward-looking statements. Forward-looking statements may also be identified by words such as “anticipate,” “intend,” “plan,” “goal,” “seek,” “believe,” “estimate,” “expect,” “predict,” ”project,” “continue,” “future,” “will,” “would,” “could,” “can,” “may” and similar terms. These forward-looking statements are based on information available to us as of the date of this Form 10-Q and represent management’s current views and assumptions.assumptions based on past experience and trends, current economic and industry conditions, expected future developments and other relevant factors. Forward-looking statements are not guarantees of future performance, events or results and involve potential known and unknown risks, uncertainties, including the impact of the coronavirus pandemic (COVID-19), and other factors, many of which may be beyond our control and may pose a risk to our operating and financial condition.condition both the near- and long-term. Accordingly, actual performance, events or results could differ materially from those expressed or implied in the forward-looking statements due to a number of factors including, but not limited to:

•significant risks related to the constructionour ability to operate and operation ofcontrol our satellites, such as the risk of not being ableoperational and environmental risks related to timely complete the construction, or a material malfunction on one or more, ofour owned and leased satellites, and risks related to our satellites and our general lack of commercial insurance coverage on our satellites;under construction;
•our ability and the ability of third parties with whom we engage in order to operate our business including customers, suppliers, vendors, financing sources, governmental entities and others, to successfully or fully operate as a result of outbreaks of viruses or widespread illness, including existing, continuing and future impacts and consequences of the COVID-19 pandemic, caused by the novel coronavirus;including regulatory and competitive considerations;
•our ability to implement and/or realize benefits of our domestic and/or international investments commercial alliances, partnerships, joint ventures, acquisitions, dispositions and other strategic initiatives and transactions;initiatives;
•legal proceedings relating to the BSS Transaction or AGR (each as defined herein) matter, whichother matters that could result in substantial costs and material adverse effects onto our business, results of operations, financial condition and prospects;
•our ability to realize the anticipated benefits of our current satellites and any future satellite we may construct or acquire;business;
•risks related to our foreign operations and other uncertainties associated with doing business internationally, including changes in foreign exchange rates between foreign currencies and the United States (“U.S.”) dollar, economic instability, political disturbances and the consequences of being subject to foreign regulation and foreign legal proceedings, including increased operations costs and potential fines and penalties for violations, which may be substantial;internationally;
•the failure ofrisks related to our dependency upon third-party providers of components, manufacturing, installation services and customer support services to appropriately deliver the contracted goods or services;providers; and
•risks related to our ability to bring advanced technologies to market to keep pace with our customers and competitors.human capital resources.

Other factors that could cause or contribute to such differences include, but are not limited to, those discussed under the caption 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”), those discussed in Management’s Narrative Analysis of Results of Operations in Part I, Item 2 of this Form 10-Q and in Part II, Item 7 of our Form 10-K and those discussed in other documents we file with the SEC.
 
All cautionary statements made herein should be read as being applicable to all forward-looking statements wherever they appear. Investors should consider the risks and uncertainties described herein and should not place undue reliance on any forward-looking statements. We do not undertake, and specifically disclaim, any obligation to publicly release the results of any revisions that may be made to any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

Although we believe that the expectations reflected in any forward-looking statements are reasonable, we cannot guarantee future results, events, levels of activity, performance or achievements. We do not assume responsibility
i
Table of Contents
for the accuracy and completeness of any forward-looking statements. We assume no responsibility for updating forward-looking information contained or incorporated by reference herein or in any documents we file with the SEC, except as required by law.

Should one or more of the risks or uncertainties described herein or in any documents we file with the SEC occur, or should underlying assumptions prove incorrect, our actual results and plans could differ materially from those expressed in any forward-looking statements.

ii
i
Table of Contents

PART I — FINANCIAL INFORMATION

ITEM 1.    FINANCIAL STATEMENTS

HUGHES SATELLITE SYSTEMS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share and per share amounts)
(Unaudited)
As of
September 30,
2020		December 31, 2019
Assets
Current assets:
Cash and cash equivalents$443,727 $1,139,435 
Marketable investment securities1,418,436 652,835 
Trade accounts receivable and contract assets, net190,902 196,520 
Other current assets, net293,379 301,652 
Total current assets2,346,444 2,290,442 
Non-current assets:
Property and equipment, net1,688,324 1,857,581 
Operating lease right-of-use assets129,021 113,399 
Goodwill508,660 506,953 
Regulatory authorizations, net410,558 412,363 
Other intangible assets, net20,433 29,321 
Other investments, net105,161 110,040 
Other non-current assets, net296,633 251,936 
Total non-current assets3,158,790 3,281,593 
Total assets$5,505,234 $5,572,035 
Liabilities and Shareholder's Equity
Current liabilities:
Trade accounts payable$108,918 $121,552 
Current portion of long-term debt, net897,303 0 
Contract liabilities89,622 101,060 
Accrued expenses and other current liabilities267,805 258,417 
Total current liabilities1,363,648 481,029 
Non-current liabilities:
Long-term debt, net1,495,078 2,389,168 
Deferred tax liabilities, net398,579 380,316 
Operating lease liabilities115,366 96,879 
Other non-current liabilities90,704 90,480 
Total non-current liabilities2,099,727 2,956,843 
Total liabilities3,463,375 3,437,872 
Commitments and contingencies

1
Table of Contents
Shareholder's equity:
Preferred stock, $0.001 par value, 1,000,000 shares authorized, NaN issued and outstanding at both September 30, 2020 and December 31, 20190 0 
Common stock, $0.01 par value, 1,000,000 shares authorized, 1,078 shares issued and outstanding at both September 30, 2020 and December 31, 20190 0 
Additional paid-in capital1,485,225 1,478,636 
Accumulated other comprehensive income (loss)(167,169)(84,636)
Accumulated earnings (losses)665,229 664,415 
Total Hughes Satellite Systems Corporation shareholder's equity1,983,285 2,058,415 
Non-controlling interests58,574 75,748 
Total shareholder's equity2,041,859 2,134,163 
Total liabilities and shareholder's equity$5,505,234 $5,572,035 
As of
March 31, 2021December 31, 2020
Assets
Current assets:
Cash and cash equivalents$1,403,926 $740,490 
Marketable investment securities515,306 1,203,296 
Trade accounts receivable and contract assets, net187,272 183,988 
Other current assets, net286,689 291,815 
Total current assets2,393,193 2,419,589 
Non-current assets:
Property and equipment, net1,631,221 1,691,523 
Operating lease right-of-use assets131,452 128,266 
Goodwill510,945 511,597 
Regulatory authorizations, net409,960 410,451 
Other intangible assets, net16,246 18,340 
Other investments, net102,163 103,924 
Other non-current assets, net302,416 307,677 
Total non-current assets3,104,403 3,171,778 
Total assets$5,497,596 $5,591,367 
Liabilities and Shareholder's Equity
Current liabilities:
Trade accounts payable$104,683 $118,568 
Current portion of long-term debt, net808,758 898,237 
Contract liabilities112,507 104,569 
Accrued expenses and other current liabilities328,316 325,587 
Total current liabilities1,354,264 1,446,961 
Non-current liabilities:
Long-term debt, net1,495,436 1,495,256 
Deferred tax liabilities, net376,366 369,940 
Operating lease liabilities118,452 114,877 
Other non-current liabilities86,642 87,957 
Total non-current liabilities2,076,896 2,068,030 
Total liabilities3,431,160 3,514,991 
Commitments and contingencies00

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
21
Table of Contents

HUGHES SATELLITE SYSTEMS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONSBALANCE SHEETS
(Amounts in thousands)thousands, except share and per share amounts)
(Unaudited)
For the three months ended September 30,For the nine months ended September 30,
2020201920202019
Revenue:  
Services and other revenue$428,890 $407,396 $1,258,350 $1,214,476 
Equipment revenue46,970 65,725 146,702 175,084 
Total revenue475,860 473,121 1,405,052 1,389,560 
Costs and expenses:  
Cost of sales - services and other (exclusive of depreciation and amortization)145,408 142,429 429,246 425,896 
Cost of sales - equipment (exclusive of depreciation and amortization)37,074 51,188 115,524 142,744 
Selling, general and administrative expenses105,309 111,987 324,400 353,559 
Research and development expenses7,676 6,136 21,378 19,411 
Depreciation and amortization123,145 115,948 372,588 342,086 
Total costs and expenses418,612 427,688 1,263,136 1,283,696 
Operating income (loss)57,248 45,433 141,916 105,864 
Other income (expense):  
Interest income, net2,839 12,300 16,935 47,341 
Interest expense, net of amounts capitalized(44,177)(55,608)(130,644)(172,502)
Gains (losses) on investments, net(74)70 (222)(290)
Equity in earnings (losses) of unconsolidated affiliates, net(2,422)(894)(4,878)(2,882)
Foreign currency transaction gains (losses), net3,072 (11,638)(4,596)(10,349)
Other, net195 (1,559)(470)(1,780)
Total other income (expense), net(40,567)(57,329)(123,875)(140,462)
Income (loss) from continuing operations before income taxes16,681 (11,896)18,041 (34,598)
Income tax benefit (provision), net(5,199)(5,176)(24,098)(1,185)
Net income (loss) from continuing operations11,482 (17,072)(6,057)(35,783)
Net income (loss) from discontinued operations0 14,382 0 57,734 
Net income (loss)11,482 (2,690)(6,057)21,951 
Less: Net loss (income) attributable to non-controlling interests2,167 2,797 9,040 1,359 
Net income (loss) attributable to HSSC$13,649 $107 $2,983 $23,310 

Shareholder's equity:
Preferred stock, $0.001 par value,1,000,000 shares authorized, NaN issued and outstanding at both March 31, 2021 and December 31, 20200 0 
Common stock, $0.01 par value, 1,000,000 shares authorized, 1,078 shares issued and outstanding at both March 31, 2021 and December 31, 20200 0 
Additional paid-in capital1,487,590 1,486,730 
Accumulated other comprehensive income (loss)(175,060)(146,840)
Accumulated earnings (losses)690,147 671,570 
Total Hughes Satellite Systems Corporation shareholder's equity2,002,677 2,011,460 
Non-controlling interests63,759 64,916 
Total shareholder's equity2,066,436 2,076,376 
Total liabilities and shareholder's equity$5,497,596 $5,591,367 







































The accompanying notes are an integral part of these CondensedConsolidated Financial Statements.
2
Table of Contents



HUGHES SATELLITE SYSTEMS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands)
(Unaudited)
For the three months ended March 31,
20212020
Revenue:
Services and other revenue$432,991 $410,238 
Equipment revenue52,239 57,309 
Total revenue485,230 467,547 
Costs and expenses:
Cost of sales - services and other (exclusive of depreciation and amortization)131,412 143,885 
Cost of sales - equipment (exclusive of depreciation and amortization)45,140 45,908 
Selling, general and administrative expenses104,370 115,860 
Research and development expenses7,545 6,254 
Depreciation and amortization122,664 125,965 
Impairment of long-lived assets210 0 
Total costs and expenses411,341 437,872 
Operating income (loss)73,889 29,675 
Other income (expense):
Interest income2,394 8,892 
Interest expense, net of amounts capitalized(41,922)(42,192)
Gains (losses) on investments, net0 (164)
Equity in earnings (losses) of unconsolidated affiliates, net(1,761)(1,087)
Foreign currency transaction gains (losses), net(3,360)(7,528)
Other, net(973)(278)
Total other income (expense), net(45,622)(42,357)
Income (loss) before income taxes28,267 (12,682)
Income tax benefit (provision), net(10,637)(5,231)
Net income (loss)17,630 (17,913)
Less: Net loss (income) attributable to non-controlling interests947 3,442 
Net income (loss) attributable to HSSC$18,577 $(14,471)








The accompanying notes are an integral part of these Consolidated Financial Statements.
3
Table of Contents

HUGHES SATELLITE SYSTEMS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Amounts in thousands)
(Unaudited)
For the three months ended September 30,For the nine months ended September 30,For the three months ended March 31,
2020201920202019 20212020
Net income (loss)Net income (loss)$11,482 $(2,690)$(6,057)$21,951 Net income (loss)$17,630 $(17,913)
Other comprehensive income (loss), net of tax:Other comprehensive income (loss), net of tax:Other comprehensive income (loss), net of tax:  
Foreign currency translation(10,170)(16,247)(103,351)(13,927)
Unrealized gains (losses) on available-for-sale debt securities20 (130)(189)2,188 
Foreign currency translation adjustmentsForeign currency translation adjustments(33,742)(82,836)
Unrealized gains (losses) on available-for-sale securitiesUnrealized gains (losses) on available-for-sale securities(88)(2,479)
OtherOther500 13 380 0 Other0 (405)
Amounts reclassified to net income (loss):
Realized losses (gains) on available-for-sale debt securities0 0 0 (400)
Total other comprehensive income (loss), net of taxTotal other comprehensive income (loss), net of tax(9,650)(16,364)(103,160)(12,139)Total other comprehensive income (loss), net of tax(33,830)(85,720)
Comprehensive income (loss)Comprehensive income (loss)1,832 (19,054)(109,217)9,812 Comprehensive income (loss)(16,200)(103,633)
Less: Comprehensive loss (income) attributable to non-controlling interestsLess: Comprehensive loss (income) attributable to non-controlling interests4,098 2,797 29,667 1,359 Less: Comprehensive loss (income) attributable to non-controlling interests6,557 19,765 
Comprehensive income (loss) attributable to HSSCComprehensive income (loss) attributable to HSSC$5,930 $(16,257)$(79,550)$11,171 Comprehensive income (loss) attributable to HSSC$(9,643)$(83,868)































The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
4
Table of Contents

HUGHES SATELLITE SYSTEMS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDER’S EQUITY
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019
(Amounts in thousands)
(Unaudited)
Additional
Paid-In
Capital		Accumulated
Other
Comprehensive Income (Loss)		Accumulated
Earnings (Losses)		Non-controlling
Interests		Total
Additional
Paid-In
Capital
Accumulated
Other
Comprehensive
Income (Loss)
Accumulated
Earnings (Losses)
Non-controlling
Interests
Total
Balance, June 30, 2019$1,766,642 $(79,549)$717,160 $12,066 $2,416,319 
Balance, December 31, 2019Balance, December 31, 2019$1,478,636 $(84,636)$664,415 $75,748 $2,134,163 
Cumulative effect of accounting changesCumulative effect of accounting changes— — (2,169)(240)(2,409)
Balance, January 1, 2020Balance, January 1, 20201,478,636 (84,636)662,246 75,508 2,131,754 
Stock-based compensationStock-based compensation1,260 — — — 1,260 Stock-based compensation1,457 — — — 1,457 
BSS Transaction (Note 5)(342,823)(342,823)
Purchase of non-controlling interest1,833 — — (1,833)0 
Other comprehensive income (loss)— (16,364)— — (16,364)
Net income (loss)— — 107 (2,797)(2,690)
Other, net66 — — 1,758 1,824 
Balance, September 30, 2019$1,426,978 $(95,913)$717,267 $9,194 $2,057,526 
Balance, June 30, 20201,484,359 (159,450)651,580 58,425 2,034,914 
Stock-based compensation983 — — — 983 
Issuance of equity and contribution of assets pursuant to the Yahsat JV formationIssuance of equity and contribution of assets pursuant to the Yahsat JV formation4,338 — — (1,514)2,824 
Contribution by non-controlling interest holderContribution by non-controlling interest holder— — — 4,268 4,268 Contribution by non-controlling interest holder— — — 4,000 4,000 
Other comprehensive income (loss)Other comprehensive income (loss)— (7,719)— (1,931)(9,650)Other comprehensive income (loss)— (69,397)— (16,323)(85,720)
Net income (loss)Net income (loss)— — 13,649 (2,167)11,482 Net income (loss)— — (14,471)(3,442)(17,913)
Other, netOther, net(117)— — (21)(138)Other, net(684)— — — (684)
Balance, September 30, 2020$1,485,225 $(167,169)$665,229 $58,574 $2,041,859 
Balance, March 31, 2020Balance, March 31, 2020$1,483,747 $(154,033)$647,775 $58,229 $2,035,718 
Balance, December 31, 2020Balance, December 31, 2020$1,486,730 $(146,840)$671,570 $64,916 $2,076,376 
Stock-based compensationStock-based compensation860 — — — 860 
Contribution by non-controlling interest holderContribution by non-controlling interest holder— — — 5,400 5,400 
Other comprehensive income (loss)Other comprehensive income (loss)— (28,220)— (5,610)(33,830)
Net income (loss)Net income (loss)— — 18,577 (947)17,630 
Balance, March 31, 2021Balance, March 31, 2021$1,487,590 $(175,060)$690,147 $63,759 $2,066,436 













The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
5
Table of Contents

HUGHES SATELLITE SYSTEMS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDER’S EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019CASH FLOWS
(Amounts in thousands)
(Unaudited)
Additional
Paid-In
Capital		Accumulated
Other
Comprehensive Income (Loss)		Accumulated
Earnings (Losses)		Non-controlling
Interests		Total
Balance, December 31, 2018$1,767,037 $(83,774)$693,957 $15,275 $2,392,495 
Stock-based compensation4,116 — — — 4,116 
BSS Transaction (Note 5)(342,823)(342,823)
Purchase of non-controlling interest(833)— — (6,480)(7,313)
Other comprehensive income (loss)— (12,139)— 0 (12,139)
Net income (loss)— — 23,310 (1,359)21,951 
Other, net(519)— — 1,758 1,239 
Balance, September 30, 2019$1,426,978 $(95,913)$717,267 $9,194 $2,057,526 
Balance, December 31, 2019$1,478,636 $(84,636)$664,415 $75,748 $2,134,163 
Cumulative effect of accounting changes— — (2,169)(240)(2,409)
Balance, January 1, 20201,478,636 (84,636)662,246 75,508 2,131,754 
Stock-based compensation2,919 — — — 2,919 
Issuance of equity and contribution of assets pursuant to the Yahsat JV formation4,338 — — (1,514)2,824 
Contribution by non-controlling interest holder— — 14,268 14,268 
Other comprehensive income (loss)— (82,533)— (20,627)(103,160)
Net income (loss)— — 2,983 (9,040)(6,057)
Other, net(668)— — (21)(689)
Balance, September 30, 2020$1,485,225 $(167,169)$665,229 $58,574 $2,041,859 
For the three months ended March 31,
20212020
Cash flows from operating activities:  
Net income (loss)$17,630 $(17,913)
Adjustments to reconcile net income (loss) to cash flows provided by (used for) operating activities:  
Depreciation and amortization122,664 125,965 
Impairment of long-lived assets210 0 
Losses (gains) on investments, net0 164 
Equity in losses (earnings) of unconsolidated affiliates, net1,761 1,087 
Foreign currency transaction losses (gains), net3,360 7,528 
Deferred tax provision (benefit), net6,584 1,526 
Stock-based compensation860 1,457 
Amortization of debt issuance costs1,118 1,050 
Other, net10,981 (810)
Changes in assets and liabilities, net:
Trade accounts receivable and contract assets, net(6,078)(8,162)
Other current assets, net1,826 (21,268)
Trade accounts payable(15,484)(10,984)
Contract liabilities7,938 (3,213)
Accrued expenses and other current liabilities(33,091)(5,007)
Non-current assets and non-current liabilities, net1,170 (6,196)
Net cash provided by (used for) operating activities121,449 65,224 
Cash flows from investing activities:  
Purchases of marketable investment securities(310,528)(365,877)
Sales and maturities of marketable investment securities1,003,198 490,020 
Expenditures for property and equipment(82,196)(91,517)
Expenditures for externally marketed software(7,846)(8,638)
Net cash provided by (used for) investing activities602,628 23,988 
Cash flows from financing activities:
Repurchase of the 2021 Senior Unsecured Notes(62,588)0 
Payment of finance lease obligations(329)(215)
Payment of in-orbit incentive obligations(1,104)(203)
Contribution by non-controlling interest holder5,400 4,000 
Other, net(292)979 
Net cash provided by (used for) financing activities(58,913)4,561 
Effect of exchange rates on cash and cash equivalents(1,700)(4,618)
Net increase (decrease) in cash and cash equivalents663,464 89,155 
Cash and cash equivalents, including restricted amounts, beginning of period741,297 1,140,322 
Cash and cash equivalents, including restricted amounts, end of period$1,404,761 $1,229,477 

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
6
Table of Contents
HUGHES SATELLITE SYSTEMS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited) 
For the nine months ended
September 30,
20202019
Cash flows from operating activities:
Net income (loss)$(6,057)$21,951 
Adjustments to reconcile net income (loss) to net cash flows from operating activities:
Depreciation and amortization372,588 428,012 
Losses (gains) on investments, net222 290 
Equity in losses (earnings) of unconsolidated affiliates, net4,878 2,882 
Foreign currency transaction losses (gains), net4,596 10,349 
Deferred tax provision (benefit), net16,608 (34,092)
Stock-based compensation4,203 4,116 
Amortization of debt issuance costs3,212 4,882 
Other, net376 2,188 
Changes in assets and liabilities, net:
Trade accounts receivable and contract assets, net(14,097)(5,435)
Other current assets, net(363)(19,067)
Trade accounts payable(11,557)15,192 
Contract liabilities(11,438)37,308 
Accrued expenses and other current liabilities25,300 46,535 
Non-current assets and non-current liabilities, net(33,652)6,129 
Net cash flows from operating activities354,819 521,240 
Cash flows from investing activities:
Purchases of marketable investment securities(1,611,870)(462,625)
Sales and maturities of marketable investment securities843,294 1,375,242 
Expenditures for property and equipment(263,884)(224,994)
Expenditures for externally marketed software(27,824)(21,364)
Dividend received from unconsolidated affiliate0 2,284 
Net cash flows from investing activities(1,060,284)668,543 
Cash flows from financing activities:
Repurchase and maturity of the 2019 Senior Secured Notes0 (920,923)
Payment of finance lease obligations(606)(29,135)
Payment of in-orbit incentive obligations(1,268)(5,269)
Contribution by non-controlling interest holder14,268 0 
Purchase of non-controlling interest0 (7,313)
Other, net998 1,172 
Net cash flows from financing activities13,392 (961,468)
Effect of exchange rates on cash and cash equivalents(3,727)310 
Net increase (decrease) in cash and cash equivalents(695,800)228,625 
Cash and cash equivalents, including restricted amounts, beginning of period1,140,322 848,619 
Cash and cash equivalents, including restricted amounts, end of period$444,522 $1,077,244 
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
7
Table of Contents
HUGHES SATELLITE SYSTEMS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

NOTE 1.ORGANIZATION AND BUSINESS ACTIVITIES

Principal Business

Hughes Satellite Systems Corporation (which, together with its subsidiaries, is referred to as “HSSC,” the “Company,” “we,” “us” and “our”) is a holding company and a subsidiary of EchoStar Corporation (“EchoStar”). We are a global provider of broadband satellite technologies, broadband internet services for consumer customers, which include home and small to medium-sized businesses, and satellite services. We also deliver innovative network technologies, managed services and communications solutions for enterprise customers, which include aeronautical and government enterprises. We operate in the following 2 business segments:
 
•Hughes — which provides broadband satellite technologies and broadband internet services to domestic and international consumer customers and broadband network technologies, managed services, equipment, hardware, satellite services and communication solutions to service providers and enterprise customers. The Hughes segment also designs, provides and installs gateway and terminal equipment to customers for other satellite systems. In addition, our Hughes segment designs, develops, constructs and provides telecommunication networks comprising satellite ground segment systems and terminals to mobile system operators and our enterprise customers.
•ESS — which uses certain of our owned and leased in-orbit satellites and related licenses to provide satellite services on a full-time and/or occasional-use basis to United States (“U.S.”) government service providers, internet service providers, broadcast news organizations, content providers and private enterprise customers.

Our operations also include various corporate departments (primarily Executive, Treasury, Strategic Development, Human Resources, IT,Information Technology, Finance, Accounting, Real Estate and Legal) and other activities, such as costs incurred in certain satellite development programs and other business development activities, and gains or losses from certain of our investments, that have not been assigned to our business segments. These activities, costs and income, as well as eliminations of intersegment transactions, are accounted for in Corporate and Other. in our segment reporting. We also divide our operations by primary geographic market as follows: (i) North America (the U.S. and its territories, Mexico, and Canada); (ii) South and Central America;America and (iii) Other (Asia, Africa, Australia, Europe, India, and the Middle East). Refer to to Note 13.14. Segment Reporting for further detail.

In September 2019, pursuant to a master transaction agreement (the “Master Transaction Agreement”) with DISH Network Corporation (“DISH”) and a wholly-owned subsidiary of DISH (“Merger Sub”), (i) we and EchoStar and its other subsidiaries transferred certain real property and the various businesses, products, licenses, technology, revenues, billings, operating activities, assets and liabilities primarily related to the former portion of our ESS segment that managed, marketed and provided (1) broadcast satellite services primarily to DISH and its subsidiaries (together with DISH, “DISH Network”) and EchoStar’s joint venture Dish Mexico, S. de R.L. de C.V. (“Dish Mexico”) and its subsidiaries, and (2) telemetry, tracking and control (“TT&C”) services for satellites owned by DISH Network and a portion of EchoStar’s and our other businesses (collectively, the “BSS Business”) to one of our former subsidiaries, EchoStar BSS Corporation (“BSS Corp.”), (ii) EchoStar distributed to each holder of shares of EchoStar’s Class A or Class B common stock entitled to receive consideration in the transaction an amount of shares of common stock of BSS Corp., par value $0.001 per share (“BSS Common Stock”), equal to 1 share of BSS Common Stock for each share of EchoStar’s Class A or Class B common stock owned by such EchoStar stockholder (the “Distribution”); and (iii) immediately after the Distribution, (1) Merger Sub merged with and into BSS Corp. (the “Merger”), such that BSS Corp. became a wholly-owned subsidiary of DISH and with DISH then owning and operating the BSS Business, and (2) each issued and outstanding share of BSS Common Stock owned by EchoStar stockholders was converted into the right to receive 0.23523769 shares of DISH Class A common stock, par value $0.001 per share (“DISH Common Stock”) ((i) - (iii) collectively, the “BSS Transaction”).

Following the consummation of the BSS Transaction, we no longer operate the BSS Business, which was a substantial portion of our ESS segment. As a result of the BSS Transaction, the financial results of the BSS Business, except for certain real estate that transferred in the transaction, are presented as discontinued operations and, as such, excluded from continuing operations and segment results for the three and nine months ended September 30, 2019, as presented in these unaudited Condensed Consolidated Financial Statements and the accompanying notes (collectively, the “Condensed Consolidated Financial Statements”).

8
Table of Contents
HUGHES SATELLITE SYSTEMS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
All amounts in the following footnotes reference results from continuing operations unless otherwise noted. Refer to Note 4. Discontinued Operations for further detail.

NOTE 2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation
 
These Condensedunaudited Consolidated Financial Statements and the accompanying notes (collectively, the “Consolidated Financial Statements”) are prepared in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) and the instructions to Form 10-Q and Article 10 of Regulation S-X for interim financial information. Accordingly, they do not include all of the information and notes required for complete financial statements prepared in conformity with U.S. GAAP. In our opinion, all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation have been included. However, our results of operations for the interim periods presented are not necessarily indicative of the results that may be expected for the full year.

All amounts presented in these Condensed Consolidated Financial Statements are expressed in thousands of U.S. dollars, except share and per share amounts and unless otherwise noted.

Refer to Note 2. Summary of Significant Accounting Policies to the consolidated financial statements in our Form 10-K for a summary and discussion of our significant accounting policies, except as updated below.

Use of Estimates

We are required to make certain estimates and assumptions that affect the amounts reported in these Condensed Consolidated Financial Statements. The most significant estimates and assumptions are used in determining: (i) inputs used to recognize revenue over time, including amortization periods for deferred contract acquisition costs; (ii) allowances
7
Table of Contents
HUGHES SATELLITE SYSTEMS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)



for doubtful accounts; (iii) deferred taxes and related valuation allowances, including uncertain tax positions; (iv) loss contingencies; (v) fair value of financial instruments; (vi) fair value of assets and liabilities acquired in business combinations; and (vii) asset impairment testing.

We base our estimates and assumptions on historical experience, observable market inputs and on various other factors that we believe to be relevant under the circumstances. Due to the inherent uncertainty involved in making estimates, actual results may differ from previously estimated amounts and such differences may be material to our consolidated financial statements. Additionally, changing economic and other conditions may increase the inherent uncertainty in the estimates and assumptions indicated above. We review our estimates and assumptions periodically and the effects of revisions thereto are reflected in the period they occur or prospectively if the revised estimates or assumptions affectestimate affects future periods.

Principles of Consolidation

We consolidate all entities in which we have a controlling financial interest. We are deemed to have a controlling financial interest in variable interest entities in which we are the primary beneficiary and in other entities in which we own more than 50% of the outstanding voting shares and other shareholders do not have substantive rights to participate in management. For entities we control but do not wholly own, we record a non-controlling interest within shareholder’s equity for the portion of the entity’s equity attributed to the non-controlling ownership interests. All significant intercompany balances and transactions have been eliminated in consolidation.

Reclassification

Certain prior period amounts have been reclassified to conform with the current period presentation.

9
Table of Contents
HUGHES SATELLITE SYSTEMS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
Recently Adopted Accounting Pronouncements

Credit Losses

On January 1, 2020,2021, we adopted Accounting StandardsStandard Update (“ASU”) No. 2016-13 - Financial Instruments - Credit Losses (Topic 326), as amended, and codified in Accounting Standards Codification Topic 326 (“ASC 326”). ASC 326 introduces a new approach to the periodic estimation of credit losses for certain financial assets based on expected losses instead of incurred losses. It also modifies the impairment model for available-for-sale debt securities and provides a simplified accounting model for purchased financial assets that have experienced credit deterioration since their original purchase. We have elected to apply the requirements of the new standard prospectively and we recognized a cumulative effect of adoption of $2.2 million to Accumulated earnings (losses) as of January 1, 2020. Based on this election, we did not restate our comparative Condensed Consolidated Financial Statements and they continue to be reported under the accounting standards in effect for the periods before January 1, 2020.

The following describes the accounting impacts, by major balance sheet line item, of our adoption of this new standard based on the relevant types of losses that we and our equity method investees may be subject to:

•Trade Accounts Receivable and Contract Assets, Net —Our trade accounts receivables and contract assets consist of amounts due from both our consumer and enterprise customers. Our receivables and related credit losses for our consumer customers are limited due to policies that require advance payment for services, predominant use of credit card and ACH payment processes, and our ability to promptly terminate service when timely payments are not received. However, for our enterprise customers, we estimate expected credit losses on a collective basis based on our historical loss experience, as adjusted to reflect changes in relevant factors, such as macroeconomic conditions and customer mix, that can significantly impact collectability.

We apply our collective estimation processes separately to several pools of receivables that share common risk characteristics, generally based on the customers’ geographical location. Customers with significant past-due balances or other atypical characteristics are excluded from our collective analysis and evaluated on a case-by-case basis. Our estimates of expected credit losses for such receivables reflect significant judgments that consider customer-specific matters such as the customer’s financial condition, payment history, and recent developments in the customer’s business and industry. Due to the short-term nature of our trade receivables and contract assets, forecasts about the future have limited relevance to our expected credit loss estimates.

We record our customer related estimated credit losses as a component of our bad debt expense as reported in Selling, general and administrative expenses.

•Other Current Assets, Net, and Other Non-current Assets, Net —We estimate expected credit losses for receivables with payment terms longer than one year separately by borrower, due to the unique risk characteristics of such receivables. We generally use discounted cash flow techniques to estimate such credit losses. In applying such techniques, we may estimate principal and interest cash flows under probability-weighted scenarios that consider entity-specific matters and forecasted economic conditions. The majority of our other non-current receivables are from entities in the telecommunications industry. The collection of contractual principal and interest on these receivables is highly dependent on the future business operations of those entities. Our estimation of expected credit losses for such receivables requires significant judgment about matters specific to the borrower and their industry. Accordingly, our actual collection experience may differ from the assumptions reflected in our expected credit loss estimates.

We record our estimated credit losses as a component of our bad debt expense as reported in Selling, general and administrative expenses.

10
Table of Contents
HUGHES SATELLITE SYSTEMS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
Financial Impact of Adoption. Our adoption of this new standard resulted in the following adjustments to our Condensed Consolidated Balance Sheet:
Balance at December 31, 2019Adoption of
ASC 326 Increase (Decrease)		Balance at
January 1, 2020
Trade accounts receivable and contract assets, net$196,520 $(13,672)$182,848 
Other current assets, net$301,652 $6,723 $308,375 
Other non-current assets, net$251,936 $4,050 $255,986 
Total assets$5,572,035 $(2,899)$5,569,136 
Deferred tax liabilities, net$380,316 $(490)$379,826 
Accumulated earnings (losses)$664,415 $(2,169)$662,246 
Non-controlling interests$75,748 $(240)$75,508 
Total shareholder's equity$2,134,163 $(2,409)$2,131,754 
Total liabilities and shareholder's equity$5,572,035 $(2,899)$5,569,136 
The application of ASC 326 requirements did not materially affect our Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2020.

Recently Issued Accounting Pronouncements Not Yet Adopted

In December 2019, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2019-12 - Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”). ASU 2019-12 is part of the FASB’sFinancial Accounting Standards Board (“FASB”) overall simplification initiative and seeks to simplify the accounting for income taxes by updating certain guidance and removing certain exceptions. The updated guidance is effective for fiscal years beginning after December 15, 2020 and interim periods within those fiscal years. EarlyOur adoption is permitted. We have assessed the impact of adopting this new guidance and doASU did not expect it to have a material impact on our consolidated financial statements.Consolidated Financial Statements.

Recently Issued Accounting Pronouncements Not Yet Adopted

In March 2020, the FASB issued ASU No. 2020-04 - Reference Rate Reform (Topic 848), codified as ASC 848 (“ASC 848”). The purpose of ASC 848 is to provide optional guidance to ease the potential effects on financial reporting of the market-wide migration away from Interbank Offered Rates to alternative reference rates. ASC 848 applies only to contracts, hedging relationships, and other transactions that reference a reference rate expected to be discontinued because of reference rate reform. The guidance may be applied upon issuance of ASC 848 through December 31, 2022. We expect to utilize the optional expedients provided by the guidance for contracts amended solely to use an alternative reference rate. We have evaluated the impact of adopting this new guidance and do not expect it to have a material impact on our consolidated financial statements.Consolidated Financial Statements.

118
Table of Contents
HUGHES SATELLITE SYSTEMS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)



NOTE 3.     REVENUE RECOGNITION

Contract Balances

The following table presents the components of our contract balances:
As of As of
September 30,
2020		December 31, 2019March 31, 2021December 31, 2020
Trade accounts receivable and contract assets, net:Trade accounts receivable and contract assets, net:Trade accounts receivable and contract assets, net:
Sales and servicesSales and services$162,390 $152,632 Sales and services$150,021 $149,513 
LeasingLeasing4,017 4,016 Leasing4,648 4,553 
Total trade accounts receivableTotal trade accounts receivable166,407 156,648 Total trade accounts receivable154,669 154,066 
Contract assetsContract assets43,896 63,649 Contract assets46,267 45,308 
Allowance for doubtful accountsAllowance for doubtful accounts(19,401)(23,777)Allowance for doubtful accounts(13,664)(15,386)
Total trade accounts receivable and contract assets, netTotal trade accounts receivable and contract assets, net$190,902 $196,520 Total trade accounts receivable and contract assets, net$187,272 $183,988 
Contract liabilities:Contract liabilities:Contract liabilities:
CurrentCurrent$89,622 $101,060 Current$112,507 $104,569 
Non-currentNon-current11,663 10,572 Non-current10,357 10,519 
Total contract liabilitiesTotal contract liabilities$101,285 $111,632 Total contract liabilities$122,864 $115,088 

The following table presents the revenue recognized in the Condensed Consolidated StatementsStatement of Operations that was previously included within contract liabilities:
For the three months ended September 30,For the nine months ended September 30,
2020201920202019
Revenue$3,794 $19,490 $63,581 $67,263 

For the three months ended March 31,
20212020
Revenue$63,081 $52,172 

The following table presents the activity in our allowance for doubtful accounts:
For the nine months ended September 30,
20202019
Balance at beginning of period$23,777 $16,604 
Credit losses (1)
12,253 22,031 
Deductions(15,367)(13,979)
Foreign currency translation(1,262)596 
Balance at end of period$19,401 $25,252 
(1)The impact of adopting ASC 326 on January 1, 2020 was a net decrease to our allowance for doubtful accounts largely driven by a $13.4 million reclassification to Other current assets, net and Other non-current assets, net, offset by a $2.9 million adjustment to Accumulated earnings (losses).

12
Table of Contents
HUGHES SATELLITE SYSTEMS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
Contract Acquisition Costs

The following table presents the activity in our contract acquisition costs, net:

For the nine months ended September 30,
20202019
Balance at beginning of period$113,592 $114,306 
Additions68,589 71,651 
Amortization expense(75,429)(72,412)
Foreign currency translation(2,984)(1,012)
Balance at end of period$103,768 $112,533 

We recognized amortization expenses related to contract acquisition costs of $25.7 million and $24.7 million for the three months ended September 30, 2020 and 2019, respectively.
For the three months ended March 31,
20212020
Balance at beginning of period$99,837 $113,592 
Additions18,400 26,474 
Amortization expense(22,769)(25,675)
Foreign currency translation(875)(3,994)
Balance at end of period$94,593 $110,397 

Transaction Price Allocated to Remaining Performance Obligations

As of September 30, 2020,March 31, 2021, the remaining performance obligations for our customer contracts with original expected durations of more than one year was $677.9$939.7 million. We expectPerformance obligations expected to recognize 38.9% of our remaining performance obligations of these contracts as revenue in the next twelve months.be satisfied within one year and greater than one year are 37% and 63%, respectively. This amount excludesand percentages exclude agreements with consumer customers in our Hughes segment, our leasing arrangements and agreements with certain customers under which collectability of all amounts due through the term of contracts is uncertain.

139
Table of Contents
HUGHES SATELLITE SYSTEMS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)




Disaggregation of Revenue

Geographic Information

The following table presents our revenue from customer contracts disaggregated by primary geographic market and by segment:
HughesESSCorporate and OtherConsolidated
Total		HughesESSCorporate and OtherConsolidated
Total
For the three months ended September 30, 2020
For the three months ended March 31, 2021For the three months ended March 31, 2021
North AmericaNorth America$392,950 $4,402 $(281)$397,071 North America$398,759 $4,089 $(88)$402,760 
South and Central AmericaSouth and Central America38,578 0 0 38,578 South and Central America43,030 0 0 43,030 
OtherOther35,234 0 4,977 40,211 Other34,070 0 5,370 39,440 
Total revenueTotal revenue$466,762 $4,402 $4,696 $475,860 Total revenue$475,859 $4,089 $5,282 $485,230 
For the three months ended September 30, 2019
For the three months ended March 31, 2020For the three months ended March 31, 2020
North AmericaNorth America$389,264 $4,098 $571 $393,933 North America$382,715 $4,652 $(285)$387,082 
South and Central AmericaSouth and Central America31,747 0 0 31,747 South and Central America33,956 0 0 33,956 
OtherOther42,724 0 4,717 47,441 Other41,811 0 4,698 46,509 
Total revenueTotal revenue$463,735 $4,098 $5,288 $473,121 Total revenue$458,482 $4,652 $4,413 $467,547 
For the nine months ended September 30, 2020
North America$1,160,288 $13,233 $(959)$1,172,562 
South and Central America106,495 0 0 106,495 
Other111,633 0 14,362 125,995 
Total revenue$1,378,416 $13,233 $13,403 $1,405,052 
For the nine months ended September 30, 2019
North America$1,129,491 $11,873 $2,454 $1,143,818 
South and Central America89,005 0 0 89,005 
Other142,423 0 14,314 156,737 
Total revenue$1,360,919 $11,873 $16,768 $1,389,560 

1410
Table of Contents
HUGHES SATELLITE SYSTEMS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)



Nature of Products and Services

The following tablestable presents our revenue disaggregated by the nature of products and services and by segment for the three and nine months ended September 30, 2020 and 2019:segment:
HughesESSCorporate and OtherConsolidated
Total
For the three months ended September 30, 2020
Services and other revenue:
Services$409,119 $2,804 $0 $411,923 
Lease revenue10,673 1,598 4,696 16,967 
Total services and other revenue419,792 4,402 4,696 428,890 
Equipment revenue:
Equipment29,387 0 0 29,387 
Design, development and construction services16,375 0 0 16,375 
Lease revenue1,208 0 0 1,208 
Total equipment revenue46,970 0 0 46,970 
Total revenue$466,762 $4,402 $4,696 $475,860 
For the three months ended September 30, 2019
Services and other revenue:
Services$385,477 $2,736 $233 $388,446 
Lease revenue12,533 1,362 5,055 18,950 
Total services and other revenue398,010 4,098 5,288 407,396 
Equipment revenue:
Equipment21,106 0 0 21,106 
Design, development and construction services42,328 0 0 42,328 
Lease revenue2,291 0 0 2,291 
Total equipment revenue65,725 0 0 65,725 
Total revenue$463,735 $4,098 $5,288 $473,121 

15
Table of Contents
HUGHES SATELLITE SYSTEMS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
HughesESSCorporate and OtherConsolidated
Total		HughesESSCorporate and OtherConsolidated
Total
For the nine months ended September 30, 2020
For the three months ended March 31, 2021For the three months ended March 31, 2021
Services and other revenue:Services and other revenue:Services and other revenue:
ServicesServices$1,198,816 $8,133 $0 $1,206,949 Services$413,519 $2,690 $0 $416,209 
Lease revenueLease revenue32,898 5,100 13,403 51,401 Lease revenue10,101 1,399 5,282 16,782 
Total services and other revenueTotal services and other revenue1,231,714 13,233 13,403 1,258,350 Total services and other revenue423,620 4,089 5,282 432,991 
Equipment revenue:Equipment revenue:Equipment revenue:
EquipmentEquipment72,744 0 0 72,744 Equipment28,521 0 0 28,521 
Design, development and construction servicesDesign, development and construction services70,600 0 0 70,600 Design, development and construction services21,636 0 0 21,636 
Lease revenueLease revenue3,358 0 0 3,358 Lease revenue2,082 0 0 2,082 
Total equipment revenueTotal equipment revenue146,702 0 0 146,702 Total equipment revenue52,239 0 0 52,239 
Total revenueTotal revenue$1,378,416 $13,233 $13,403 $1,405,052 Total revenue$475,859 $4,089 $5,282 $485,230 
For the nine months ended September 30, 2019
For the three months ended March 31, 2020For the three months ended March 31, 2020
Services and other revenue:Services and other revenue:Services and other revenue:
ServicesServices$1,147,868 $7,953 $878 $1,156,699 Services$390,000 $2,765 $0 $392,765 
Lease revenueLease revenue37,967 3,920 15,890 57,777 Lease revenue11,173 1,887 4,413 17,473 
Total services and other revenueTotal services and other revenue1,185,835 11,873 16,768 1,214,476 Total services and other revenue401,173 4,652 4,413 410,238 
Equipment revenue:Equipment revenue:Equipment revenue:
EquipmentEquipment77,663 0 0 77,663 Equipment24,839 0 0 24,839 
Design, development and construction servicesDesign, development and construction services93,254 0 0 93,254 Design, development and construction services31,557 0 0 31,557 
Lease revenueLease revenue4,167 0 0 4,167 Lease revenue913 0 0 913 
Total equipment revenueTotal equipment revenue175,084 0 0 175,084 Total equipment revenue57,309 0 0 57,309 
Total revenueTotal revenue$1,360,919 $11,873 $16,768 $1,389,560 Total revenue$458,482 $4,652 $4,413 $467,547 

Lease Revenue

The following table presents our lease revenue by type of lease:
For the three months ended September 30,For the nine months ended September 30,
2020201920202019
Sales-type lease revenue:
Revenue at lease commencement$1,208 $2,291 $3,358 $4,167 
Interest income14 206 178 716 
Total sales-type lease revenue1,222 2,497 3,536 4,883 
Operating lease revenue16,953 18,744 51,223 57,061 
Total lease revenue$18,175 $21,241 $54,759 $61,944 

For the three months ended March 31,
20212020
Sales-type lease revenue:
Revenue at lease commencement$2,082 $913 
Interest income73 69 
Total sales-type lease revenue2,155 982 
Operating lease revenue16,709 17,404 
Total lease revenue$18,864 $18,386 

Substantially all of our net investment in sales-type leases consisted of lease receivables totaling $10.6$13.4 million and $6.5$13.0 million as of September 30, 2020March 31, 2021 and December 31, 2019,2020, respectively.

1611
Table of Contents
HUGHES SATELLITE SYSTEMS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)




The following table presents future operating lease payments to be received as of September 30, 2020:March 31, 2021:
AmountsAmounts
Year ending December 31,Year ending December 31,Year ending December 31,
2020 (remainder)$10,067 
202137,729 
2021 (remainder)2021 (remainder)$30,433 
2022202234,207 202234,082 
2023202332,100 202332,000 
2024202429,771 202429,740 
2025 and beyond127,485 
2025202528,482 
2026 and beyond2026 and beyond47,562 
Total lease paymentsTotal lease payments$271,359 Total lease payments$202,299 

The following table presents amounts for assets subject to operating leases, which are included in Property and equipment, net:net:
As ofAs of
September 30, 2020December 31, 2019March 31, 2021December 31, 2020
CostAccumulated DepreciationNetCostAccumulated DepreciationNetCostAccumulated DepreciationNetCostAccumulated DepreciationNet
Customer premises equipmentCustomer premises equipment$1,622,142 $(1,243,586)$378,556 $1,458,298 $(1,074,968)$383,330 Customer premises equipment$1,737,049 $(1,370,538)$366,511 $1,706,328 $(1,317,210)$389,118 
SatellitesSatellites104,620 (36,591)68,029 104,620 (31,360)73,260 Satellites104,620 (40,078)64,542 104,620 (38,335)66,285 
TotalTotal$1,726,762 $(1,280,177)$446,585 $1,562,918 $(1,106,328)$456,590 Total$1,841,669 $(1,410,616)$431,053 $1,810,948 $(1,355,545)$455,403 

The following table presents depreciation expense for assets subject to operating leases, which is included in Depreciation and amortization:
For the three months ended September 30,For the nine months ended September 30,
2020201920202019
Customer premises equipment$58,332 $49,314 $165,953 $149,724 
Satellites1,744 1,802 5,231 5,277 
Real estate0 0 0 0 
Total$60,076 $51,116 $171,184 $155,001 

17
Table of Contents
HUGHES SATELLITE SYSTEMS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
NOTE 4.    DISCONTINUED OPERATIONS

BSS Business

The following table presents the financial results of our discontinued operations for the BSS Business:
For the three months ended September 30, 2019For the nine months ended September 30, 2019
Revenue:
Services and other revenue - DISH Network$54,297 $195,942 
Services and other revenue - other4,915 17,715 
Total revenue59,212 213,657 
Costs and expenses:
Cost of sales - services and other (exclusive of depreciation and amortization)7,307 28,033 
Selling, general and administrative expenses4,107 6,749 
Depreciation and amortization23,788 85,926 
Total costs and expenses35,202 120,708 
Operating income (loss)24,010 92,949 
Other income (expense):
Interest expense(4,632)(17,365)
Total other income (expense), net(4,632)(17,365)
Income (loss) from discontinued operations before income taxes19,378 75,584 
Income tax benefit (provision), net(4,996)(17,850)
Net income (loss) from discontinued operations$14,382 $57,734 

No assets or liabilities attributable to our discontinued operations of the BSS Business were held by us as of September 30, 2020 or December 31, 2019.

The following table presents the significant supplemental cash flow information and adjustments to reconcile net income to net cash flow from operating activities for discontinued operations of the BSS Business for the nine months ended September 30, 2019:
Amounts
Operating activities:
Net income (loss) from discontinued operations$14,382 
Depreciation and amortization$23,788 
Investing activities:
Expenditures for property and equipment$510 
Financing activities:
Payment of finance lease obligations$27,203 
Payment of in-orbit incentive obligations$3,887 

18
Table of Contents
HUGHES SATELLITE SYSTEMS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
Terminated or Transferred Related Party Agreements

Effective September 10, 2019, the following agreements were terminated or transferred to DISH Network as part of the BSS Transaction. Unless noted differently below, we have no further obligations and have neither earned additional revenue nor incurred additional expense, as applicable, under or in connection with these agreements after the consummation of the BSS Transaction.

DBS Transponder Lease. EchoStar leased satellite capacity from us on 8 direct broadcast satellite (“DBS”) transponders on the QuetzSat-1 satellite through November 2021, after which EchoStar had certain options to renew the agreement on a year-to year basis through the end of life of the QuetzSat-1 satellite.

EchoStar XXIII Launch Facilitation and Operational Control Agreement.  As part of applying for the launch license for the EchoStar XXIII satellite through the UK Space Agency, we and a subsidiary of EchoStar, EchoStar Operating L.L.C. (“EOC”), entered into an agreement in March 2016 to transfer to us EOC’s launch service contracts for the EchoStar XXIII satellite and to grant us certain rights to control its in-orbit operations.  EOC retained ownership of the satellite and agreed to make additional payments to us for amounts that we were required to pay under the launch service contract.  In 2016, we recorded additions to Other non-current assets, net and corresponding increases in Additional paid-in capital in the Condensed Consolidated Balance Sheet to reflect EOC’s cumulative payments under the launch service contract prior to the transfer date and to reflect EOC’s funding of additional cash payments to the launch service provider. The EchoStar XXIII satellite was successfully launched in March 2017. We recorded decreases in Other non-current assets, net and Additional paid-in capital of $62.0 million, representing the carrying amount of the launch service contract at the time of launch to reflect the consumption of the contract’s economic benefits by EOC.

Satellite Capacity Leased to DISH Network. We entered into certain agreements to lease satellite capacity pursuant to which we provided satellite services to DISH Network on certain satellites, as listed below, owned or leased by us. The fees for the services provided under these agreements depended, among other things, upon the orbital location of the applicable satellite, the number of transponders that provided services on the applicable satellite and the length of the service arrangements. The terms of each of the agreements are set forth below:

•EchoStar VII, EchoStar X, EchoStar XI and EchoStar XIV — In March 2014, we began leasing certain satellite capacity to DISH Network on the EchoStar VII satellite, the EchoStar X satellite, the EchoStar XI satellite and the EchoStar XIV satellite.

•EchoStar XII — DISH Network leased satellite capacity from us on the EchoStar XII satellite.

•EchoStar XVI — In December 2009, we entered into an agreement to lease satellite capacity to DISH Network, pursuant to which DISH Network leased satellite capacity from us on the EchoStar XVI satellite beginning in January 2013.

•Nimiq 5 Agreement— In September 2009, we entered into an agreement with Telesat Canada to lease satellite capacity from Telesat Canada on all 32 DBS transponders on the Nimiq 5 satellite at the 72.7 degree west longitude orbital location (the “Telesat Transponder Agreement”). In September 2009, we entered into an agreement with DISH Network, pursuant to which DISH Network leased satellite capacity from us on all 32 of the DBS transponders covered by the Telesat Transponder Agreement (the “DISH Nimiq 5 Agreement”). Under the terms of the DISH Nimiq 5 Agreement, DISH Network made certain monthly payments to us that commenced in September 2009, when the Nimiq 5 satellite was placed into service. Following the consummation of the BSS Transaction, we retained certain obligations related to DISH Network’s performance under the Telesat Transponder Agreement.

•QuetzSat-1 Agreement — In November 2008, we entered into an agreement to lease satellite capacity from SES Latin America, which provided, among other things, for the provision by SES Latin America to us of leased satellite capacity on 32 DBS transponders on the QuetzSat-1 satellite. Concurrently, in 2008, we entered into an agreement pursuant to which DISH Network leased from us satellite capacity on 24 of the DBS transponders on the QuetzSat-1 satellite. The QuetzSat-1 satellite was launched in September 2011
19
Table of Contents
HUGHES SATELLITE SYSTEMS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
and was placed into service in November 2011 at the 67.1 degree west longitude orbital location. In January 2013, the QuetzSat-1 satellite was moved to the 77 degree west longitude orbital location. In February 2013, we and DISH Network entered into an agreement pursuant to which we leased back from DISH Network certain satellite capacity on 5 DBS transponders on the QuetzSat-1 satellite.

TT&C Agreement. Effective January 2012, we entered into a TT&C agreement pursuant to which we provided TT&C services to DISH Network, which we subsequently amended (the “2012 TT&C Agreement”). The fees for services provided under the 2012 TT&C Agreement were calculated at either: (i) a fixed fee or (ii) cost plus a fixed margin, which varied depending on the nature of the services provided.

Real Estate Lease.  During 2017, EchoStar and certain of its and our subsidiaries entered into a share exchange agreement (the “Share Exchange Agreement”) with DISH and certain of its subsidiaries whereby EchoStar and certain of its and our subsidiaries received all the shares of preferred tracking stock previously issued by EchoStar and Hughes Satellite Systems Corporation (the “Tracking Stock”) in exchange for 100% of the equity interests of certain of EchoStar’s subsidiaries that held substantially all of the former EchoStar Technologies businesses and certain other assets (collectively, the “Share Exchange”). Prior to the Share Exchange, a subsidiary of EchoStar leased to DISH Network certain space at 530 EchoStar Drive, Cheyenne, Wyoming. In connection with the Share Exchange, EchoStar transferred ownership of a portion of this property to DISH Network and contributed a portion to us and we and DISH Network amended this agreement to, among other things, provide for a continued lease to DISH Network of the portion of the property we retained (the “Cheyenne Data Center”). The rent on a per square foot basis for the lease was comparable to per square foot rental rates of similar commercial property in the same geographic area at the time of the lease or subsequent amendments, and DISH Network was responsible for its portion of the taxes, insurance, utilities and maintenance of the premises. In connection with the BSS Transaction, we transferred the Cheyenne Data Center to DISH Network. This lease does not qualify for discontinued operations treatment, and therefore the revenue from it has not been treated as discontinued operations.
For the three months ended March 31,
20212020
Customer premises equipment$60,967 $49,504 
Satellites1,744 1,744 
Total$62,711 $51,248 

NOTE5.    BUSINESS COMBINATIONS

In May 2019, we entered into an agreement with Al Yah Satellite Communications Company PrJSC (“Yahsat”) pursuant to which, in November 2019, Yahsat contributed its satellite communications services business in Brazil to one of our Brazilian subsidiaries in exchange for a 20% equity ownership interest in that subsidiary (the “Yahsat Brazil JV Transaction”). The combined business provides broadband internet services and enterprise solutions in Brazil using the Telesat T19V satellite, the Eutelsat 65W satellite and Yahsat’s Al Yah 3 satellite. The results of operations related to the business we acquired from Yahsat have been included in these Condensed Consolidated Financial Statements from the date of acquisition. Through September 30, 2020, we have incurred $1.6 million of costs associated with the closing of the Yahsat Brazil JV Transaction.

20
Table of Contents
HUGHES SATELLITE SYSTEMS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
All assets and liabilities acquired from Yahsat have been recorded at fair value. The following table presents our updated preliminary allocation of the purchase price:
Amounts
Assets:
Cash and cash equivalents$8,110 
Other current assets, net7,106 
Property and equipment86,983 
Regulatory authorization4,498 
Goodwill6,076 
Other non-current assets, net1,502 
Total assets$114,275 
Liabilities:
Trade accounts payable$3,879 
Accrued expenses and other current liabilities4,796 
Total liabilities$8,675 
Total purchase price (1)
$105,600 
(1)    Based on the value determined for the equity ownership interest issued by our Brazilian subsidiary as consideration for the business acquired by us in the Yahsat Brazil JV Transaction.

The following preliminary valuation of the acquired assets was derived using primarily unobservable Level 3 inputs, which require significant management judgment and estimation:
Amounts
Satellite payload$49,363 
Regulatory authorization4,498 
Total$53,861 

The satellite payload and regulatory authorization were valued using an income approach and are being amortized over seven and 11 years, respectively.

The goodwill we recognized was allocated entirely to our Hughes segment and attributed to expected synergies, projected long-term business growth in current and new markets and an assembled workforce.

21
Table of Contents
HUGHES SATELLITE SYSTEMS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
NOTE 6.4.    MARKETABLE INVESTMENT SECURITIES

The following table presents our Marketable investment securities:
As ofAs of
September 30,
2020		December 31, 2019March 31, 2021December 31, 2020
Marketable investment securities:Marketable investment securities:Marketable investment securities:
Debt securities:
Available-for-sale:
Available-for-sale debt securities:Available-for-sale debt securities:
Corporate bondsCorporate bonds$212,990 $411,706 Corporate bonds$109,598 $276,361 
Commercial paperCommercial paper1,007,650 236,874 Commercial paper327,648 823,173 
Other debt securitiesOther debt securities197,779 4,014 Other debt securities78,054 103,756 
Total available-for-sale debt securitiesTotal available-for-sale debt securities1,418,419 652,594 Total available-for-sale debt securities515,300 1,203,290 
Equity securitiesEquity securities17 241 Equity securities6 6 
Total marketable investment securitiesTotal marketable investment securities$1,418,436 $652,835 Total marketable investment securities$515,306 $1,203,296 
12
Table of Contents
HUGHES SATELLITE SYSTEMS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)





Debt Securities

Our corporate bond portfolio includes debt instruments issued by individual corporations, primarily in the industrial and financial services industries. Our commercial paper portfolio includes instruments issued by individual corporations, primarily in the industrial, financial services and utilities industries. Our other debt securities portfolio includes investments in various debt instruments, including U.S. government bonds and mutual funds. We consider all liquid investments purchased with an original maturity of 90 days or less to be cash equivalents.
Available-for-Sale

The following table presents the components of our available-for-sale debt securities:
AmortizedUnrealizedEstimatedAmortizedUnrealizedEstimated
CostGainsLossesFair ValueCostGainsLossesFair Value
As of September 30, 2020
As of March 31, 2021As of March 31, 2021
Corporate bondsCorporate bonds$212,880 $113 $(3)$212,990 Corporate bonds$109,600 $10 $(12)$109,598 
Commercial paperCommercial paper1,007,650 0 0 1,007,650 Commercial paper327,648 0 0 327,648 
Other debt securitiesOther debt securities197,771 8 0 197,779 Other debt securities78,108 2 (56)78,054 
Total available-for-sale debt securitiesTotal available-for-sale debt securities$1,418,301 $121 $(3)$1,418,419 Total available-for-sale debt securities$515,356 $12 $(68)$515,300 
As of December 31, 2019
As of December 31, 2020As of December 31, 2020
Corporate bondsCorporate bonds$411,312 $395 $(1)$411,706 Corporate bonds$276,327 $59 $(25)$276,361 
Commercial paperCommercial paper236,873 1 0 236,874 Commercial paper823,173 0 0 823,173 
Other debt securitiesOther debt securities4,014 0 0 4,014 Other debt securities103,758 3 (5)103,756 
Total available-for-sale debt securitiesTotal available-for-sale debt securities$652,199 $396 $(1)$652,594 Total available-for-sale debt securities$1,203,258 $62 $(30)$1,203,290 

The following table presents the activity on our available-for-sale debt securities:
 For the three months ended September 30,For the nine months ended September 30,
 2020201920202019
Proceeds from sales$0 $0 $10,000 $311,822 
Gains (losses) on sales, net$0 $0 $0 $385 

For the three months ended March 31,
20212020
Proceeds from sales$95,765 $10,000 

As of March 31, 2021, we have $491.2 million of available-for-sale debt securities with contractual maturities of one year or less and $24.1 million with contractual maturities greater than one year. 

Equity Securities

The following table presents the activity of our equity securities:

For the three months ended March 31,
20212020
Gains (losses) on investments, net$0 $(164)
2213
Table of Contents
HUGHES SATELLITE SYSTEMS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)


As of September 30, 2020, all $1.4 billion of our available-for-sale debt securities had contractual maturities of one year or less. 

Equity Securities
The following table presents the activity of our equity securities:
 For the three months ended September 30,For the nine months ended September 30,
 2020201920202019
Gains (losses) on investments, net$(75)$0 $(224)$(700)

For the three and nine months ended September 30, 2020 and 2019, we did not have any sales of equity securities.

Fair Value Measurements

The following table presents our marketable investment securities categorized by the fair value hierarchy, certain of which have historically experienced volatility:
As ofLevel 1Level 2Total
September 30, 2020December 31, 2019
Level 1Level 2TotalLevel 1Level 2Total
As of March 31, 2021As of March 31, 2021
Cash equivalents (including restricted)Cash equivalents (including restricted)$17,752 $350,040 $367,792 $6,682 $1,056,518 $1,063,200 Cash equivalents (including restricted)$508 $1,317,529 $1,318,037 
Debt securities:
Available-for-sale:
Available-for-sale debt securities:Available-for-sale debt securities:
Corporate bondsCorporate bonds$0 $212,990 $212,990 $0 $411,706 $411,706 Corporate bonds$0 $109,598 $109,598 
Commercial paperCommercial paper0 1,007,650 1,007,650 0 236,874 236,874 Commercial paper0 327,648 327,648 
Other debt securitiesOther debt securities197,081 698 197,779 0 4,014 4,014 Other debt securities32,498 45,556 78,054 
Total available-for-sale debt securitiesTotal available-for-sale debt securities197,081 1,221,338 1,418,419 0 652,594 652,594 Total available-for-sale debt securities32,498 482,802 515,300 
Equity securitiesEquity securities17 0 17 241 0 241 Equity securities6 0 6 
Total marketable investment securitiesTotal marketable investment securities$197,098 $1,221,338 $1,418,436 $241 $652,594 $652,835 Total marketable investment securities$32,504 $482,802 $515,306 
As of December 31, 2020As of December 31, 2020
Cash equivalents (including restricted)Cash equivalents (including restricted)$128 $654,853 $654,981 
Available-for-sale debt securities:Available-for-sale debt securities:
Corporate bondsCorporate bonds$0 $276,361 $276,361 
Commercial paperCommercial paper0 823,173 823,173 
Other debt securitiesOther debt securities95,497 8,259 103,756 
Total available-for-sale debt securitiesTotal available-for-sale debt securities95,497 1,107,793 1,203,290 
Equity securitiesEquity securities6 0 6 
Total marketable investment securitiesTotal marketable investment securities$95,503 $1,107,793 $1,203,296 

As of September 30, 2020March 31, 2021 and December 31, 2019,2020, we did not have any investments that were categorized within Level 3 of the fair value hierarchy.

NOTE 7.    5.PROPERTY AND EQUIPMENT
 
The following tablestable presents the components of Property and equipment, net:
As ofAs of
September 30,
2020		December 31, 2019March 31, 2021December 31, 2020
Property and equipment, net:Property and equipment, net:Property and equipment, net:
Satellites, netSatellites, net$980,270 $1,127,521 Satellites, net$919,813 $954,559 
Other property and equipment, netOther property and equipment, net708,054 730,060 Other property and equipment, net711,408 736,964 
Total property and equipment, netTotal property and equipment, net$1,688,324 $1,857,581 Total property and equipment, net$1,631,221 $1,691,523 

23
Table of Contents
HUGHES SATELLITE SYSTEMS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
Satellites
 
As of September 30, 2020,March 31, 2021, our operating satellite fleet consisted of 8 satellites, 5 of which are owned and 3 of which are leased. They are all in geosynchronous orbit, approximately 22,300 miles above the equator.

14
Table of Contents
HUGHES SATELLITE SYSTEMS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)




The following table presents our operating satellite fleet as of September 30, 2020March 31, 2021 which consists of both owned and leased satellites:
SatelliteSegmentLaunch DateNominal Degree Orbital Location (Longitude)Depreciable Life (In Years)
Owned:    
SPACEWAY 3 (1)
HughesAugust 200795 W10
EchoStar XVIIHughesJuly 2012107 W15
EchoStar XIXHughesDecember 201697.1 W15
Al Yah 3 (2)
HughesJanuary 201820 W7
EchoStar IX (3)
ESSAugust 2003121 W12
     
Finance leases:    
Eutelsat 65 West AHughesMarch 201665 W15
Telesat T19VHughesJuly 201863 W15
EchoStar 105/SES-11ESSOctober 2017105 W15
(1)    Depreciable life represents the remaining useful life as of June 8, 2011, the date EchoStar completed its acquisition of Hughes Communications, Inc. and its subsidiaries (the “Hughes Acquisition”).
(2) Upon consummation of our joint venture with Yahsat in Brazil in November 2019, we acquired the Brazilian Ka-band payload on this satellite. Depreciable life represents the remaining useful life as of November 2019.
(3)    We own the Ka-band and Ku-band payloads on this satellite.

The following table presents the components of our satellites, net:
Depreciable Life
(In Years)		As of Depreciable Life (In Years)As of
September 30,
2020		December 31, 2019 March 31, 2021December 31, 2020
Satellites, net:Satellites, net: Satellites, net: 
Satellites - ownedSatellites - owned7 to 15$1,500,438 $1,516,006 Satellites - owned7 to 15$1,500,070 $1,503,596 
Satellites - acquired under finance leasesSatellites - acquired under finance leases15344,376 381,162 Satellites - acquired under finance leases15352,261 352,245 
Total satellitesTotal satellites1,844,814 1,897,168 Total satellites 1,852,331 1,855,841 
Accumulated depreciation:Accumulated depreciation:Accumulated depreciation:
Satellites - ownedSatellites - owned(798,397)(713,259)Satellites - owned(855,104)(827,274)
Satellites - acquired under finance leasesSatellites - acquired under finance leases(66,147)(56,388)Satellites - acquired under finance leases(77,414)(74,008)
Total accumulated depreciationTotal accumulated depreciation(864,544)(769,647)Total accumulated depreciation (932,518)(901,282)
Total satellites, netTotal satellites, net$980,270 $1,127,521 Total satellites, net $919,813 $954,559 

The following table presents the depreciation expense associated with our satellites, net:
 For the three months ended March 31,
 20212020
Depreciation expense:
Satellites - owned$27,068 $27,068 
Satellites - acquired under finance leases7,201 6,013 
Total depreciation expense$34,269 $33,081 



2415
Table of Contents
HUGHES SATELLITE SYSTEMS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)




The following table presents the depreciation expense and capitalized interest associated with our satellites net:
 For the three months ended September 30,For the nine months ended September 30,
 2020201920202019
Depreciation expense:
Satellites - owned$27,068 $27,616 $81,205 $81,635 
Satellites acquired under finance leases7,203 6,377 20,421 19,269 
Total depreciation expense$34,271 $33,993 $101,626 $100,904 
Capitalized interest$977 $283 $2,401 $625 
and satellite-related ground infrastructure:

For the three months ended March 31,
20212020
Capitalized interest$1,246 $637 
Satellite
Satellite-Related Commitments
 
As of September 30, 2020March 31, 2021 and December 31, 2019,2020 our satellite-related obligationscommitments were $233.7$215.1 million and $256.9$224.4 million, respectively. These primarily include payments pursuant to regulatory authorizations, non-lease costs associated with our finance lease satellites, in-orbit incentives relating to certain satellites and commitments for satellite service arrangements.

In certain circumstances, the dates on which we are obligated to pay our contractual obligations could change.

Satellite Anomalies and Impairments
 
We are not aware of any anomalies with respect to our owned or leased satellites or payloads that have had any significant adverse effect on their remaining useful lives, the commercial operation of the satellites or payloads or our operating results or financial position as of and for the three and nine months ended September 30, 2020.

Satellite Insurance

We generally do not carry in-orbit insurance on our satellites or payloads because we have assessed that the cost of insurance is not economical relative to the risk of failures. Therefore, we generally bear the risk of any in-orbit failures. Pursuant to the terms of the agreements governing certain portions of our long-term debt and our joint venture agreements with Yahsat, we are required, subject to certain limitations on coverage, to maintain only for the SPACEWAY 3 satellite, the EchoStar XVII satellite and the Al Yah 3 Brazilian payload, insurance or other contractual arrangements during the commercial in-orbit service of such satellite or payload. Our other satellites and payloads, either in orbit or under construction, are not covered by launch or in-orbit insurance or other contractual arrangements. We will continue to assess circumstances going forward and make insurance-related decisions on a case-by-case basis.March 31, 2021.

Fair Value of In-Orbit Incentives

As of September 30, 2020March 31, 2021 and December 31, 2019,2020, the fair values of our in-orbit incentive obligations from our continuing operations approximated their carrying amounts of $55.7$54.3 million and $57.0$55.4 million, respectively.

25
Table of Contents
HUGHES SATELLITE SYSTEMS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
NOTE 8.6.    REGULATORY AUTHORIZATIONS

The following table presents the components of our Regulatory authorizations, net:
Finite lived
CostAccumulated AmortizationTotalIndefinite livedTotal
Balance, December 31, 2018$0 $0 $0 $400,043 $400,043 
Disposals— — — (43)(43)
Balance, September 30, 2019$0 $0 $0 $400,000 $400,000 
Balance, December 31, 2019$12,524 $(161)$12,363 $400,000 $412,363 
Amortization expense— (536)(536)— (536)
Foreign currency translation(1,303)34 (1,269)— (1,269)
Balance, September 30, 2020$11,221 $(663)$10,558 $400,000 $410,558 
Weighted average useful life (in years)14
Finite lived
CostAccumulated AmortizationTotalIndefinite livedTotal
Balance, December 31, 2019$12,524 $(161)$12,363 $400,000 $412,363 
Amortization expense— (100)(100)— (100)
Currency translation adjustments(1,020)0 (1,020)0 (1,020)
Balance, March 31, 2020$11,504 $(261)$11,243 $400,000 $411,243 
Balance, December 31, 2020$11,505 $(1,054)$10,451 $400,000 $410,451 
Amortization expense— (208)(208)— (208)
Currency translation adjustments(321)38 (283)0 (283)
Balance, March 31, 2021$11,184 $(1,224)$9,960 $400,000 $409,960 
Weighted-average useful life (in years)14

16
Finite Lived Assets
Table of Contents
HUGHES SATELLITE SYSTEMS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)

In November 2019, we were granted an S-Band spectrum license for terrestrial rights in Mexico for $7.9 million. The acquired asset is subject to amortization over a period of 15 years.

In November 2019, we also acquired Ka-band spectrum rights for $4.5 million, upon consummation of the Yahsat Brazil JV Transaction, which are subject to amortization over a period of 11 years.

NOTE 9.7.    OTHER INVESTMENTS

The following table presents the components ofour Other investments, net:
As ofAs of
September 30,
2020		December 31, 2019March 31, 2021December 31, 2020
Other investments, net:Other investments, net:  Other investments, net:
Equity method investmentsEquity method investments$97,810 $102,689 Equity method investments$94,812 $96,573 
Other equity investmentsOther equity investments7,351 7,351 Other equity investments7,351 7,351 
Total other investments, netTotal other investments, net$105,161 $110,040 Total other investments, net$102,163 $103,924 

Equity Method Investments

Deluxe/EchoStar LLC

We own 50% of Deluxe/EchoStar LLC (“Deluxe”), a joint venture that we entered into in 2010 to build an advanced digital cinema satellite distribution network targeting delivery to digitally equipped theaters in the U.S. and Canada.

Broadband Connectivity Solutions (Restricted) Limited

In August 2018, we entered into an agreement with Yahsat to establish a new entity, Broadband Connectivity Solutions (Restricted) Limited (together with its subsidiaries, “BCS”), to provide commercial Ka-band satellite broadband services across Africa, the Middle East and southwest Asia operating over Yahsat’sYahsat's Al Yah 2 and Al Yah 3 Ka-band satellites. The transaction was consummated in December 2018 when we invested $100.0 million in cash in exchange for a 20% interest in BCS. Under the terms of the agreement, we may also acquire, for further
26
Table of Contents
HUGHES SATELLITE SYSTEMS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
cash investments, additional ownership interests in BCS in the future provided certain conditions are met. We supply network operations and management services and equipment to BCS.

Financial Information for Our Equity Method Investments

The following table presents revenue recognized:
For the three months ended September 30,For the nine months ended September 30,
2020201920202019
Deluxe$1,067 $878 $3,340 $2,632 
BCS$2,190 $1,690 $6,643 $6,236 

For the three months ended March 31,
20212020
Deluxe$1,631 $1,255 
BCS$1,348 $1,669 


The following table presents trade accounts receivable:
As ofAs of
September 30,
2020		December 31,
2019		March 31, 2021December 31, 2020
DeluxeDeluxe$750 $631 Deluxe$1,318 $716 
BCSBCS$6,981 $5,171 BCS$5,043 $9,347 

Other Equity Investments

During the three and nine months ended September 30,March 31, 2021 and 2020, and 2019, we did 0tnot identify any observable price changes requiring an adjustment to our investments.

17
Table of Contents
HUGHES SATELLITE SYSTEMS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)



NOTE 10.8.    LONG-TERM DEBT

The following table presents the carrying amountsamount and fair values of our Current portion of long-term debt, net and Long-term debt, net:net:
Effective interest ratesAs ofEffective Interest RateAs of
September 30, 2020December 31, 2019March 31, 2021December 31, 2020
Carrying
Amount		Fair
Value		Carrying
Amount		Fair
Value
Carrying
Amount
Fair
Value
Carrying
Amount
Fair
Value
Senior Secured Notes:Senior Secured Notes:Senior Secured Notes:
5 1/4% Senior Secured Notes due 20265 1/4% Senior Secured Notes due 20265.320%$750,000 $799,905 $750,000 $825,308 5 1/4% Senior Secured Notes due 20265.320%$750,000 $830,933 $750,000 $834,045 
Senior Unsecured Notes:Senior Unsecured Notes:Senior Unsecured Notes:
7 5/8% Senior Unsecured Notes due 20217 5/8% Senior Unsecured Notes due 20218.062%900,000 935,343 900,000 963,783 7 5/8% Senior Unsecured Notes due 20218.062%809,486 821,555 900,000 924,003 
6 5/8% Senior Unsecured Notes due 20266 5/8% Senior Unsecured Notes due 20266.688%750,000 815,025 750,000 833,903 6 5/8% Senior Unsecured Notes due 20266.688%750,000 834,383 750,000 852,810 
Less: Unamortized debt issuance costsLess: Unamortized debt issuance costs(7,619)— (10,832)— Less: Unamortized debt issuance costs(5,292)— (6,507)— 
Total long-term debtTotal long-term debt2,392,381 2,550,273 2,389,168 2,622,994 Total long-term debt2,304,194 2,486,871 2,393,493 2,610,858 
Less: Current portion, netLess: Current portion, net(897,303)(935,343)0 0 Less: Current portion, net(808,758)(821,555)(898,237)(924,003)
Long-term debt, netLong-term debt, net$1,495,078 $1,614,930 $2,389,168 $2,622,994 Long-term debt, net$1,495,436 $1,665,316 $1,495,256 $1,686,855 

As of March 31, 2021, we have repurchased a total of $90.5 million in principal of the 2021 Senior Unsecured Notes in open market trades.

NOTE 11.9.    INCOME TAXES

Our income tax provision for interim periods is determined using an estimate of our annual effective tax rate, adjusted for discrete items, if any, that are taken into account in the relevant period. Each quarter we update our estimate of the annual effective tax rate, and if our estimated tax rate changes, we make a cumulative adjustment.
Our interim income tax provision and our interim estimate of our annual effective tax rate are influenced by several factors, including foreign losses and capital gains and losses for which related deferred tax assets are partially offset by a valuation allowance, changes in tax laws and relative changes in unrecognized tax benefits. Additionally,
27
Table of Contents
HUGHES SATELLITE SYSTEMS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
our effective tax rate can be affected by the amount of pre-tax income or loss. For example, the impact of discrete items and non-deductible expenses on our effective tax rate is greater when our pre-tax income or loss is lower.

Our income tax provision was $10.6 million for the three months ended March 31, 2021 compared to $5.2 million for the three months ended September 30, 2020 as compared to $5.2 million of income tax benefit for the three months ended September 30, 2019.March 31, 2020. Our estimated effective income tax rate was 31.2%37.6% and (43.5)(41.2)% for the three months ended September 30,March 31, 2021 and 2020, and 2019, respectively. The variations in our effective tax rate from the U.S. federal statutory rate for the three months ended September 30,March 31, 2021 were primarily due to excluded foreign losses where the company carries a full valuation allowance. The variations in our effective tax rate from the U.S. federal statutory rate for the three months ended March 31, 2020 were primarily due to the increase in our valuation allowance associated with certain foreign losses and the impact of state and local taxes, partially offset by research and experimentation credits. The variations in our effective tax rate from the U.S. federal statutory rate for the three months ended September 30, 2019 were primarily due to the change in net unrealized gainslosses that are capital in nature various permanent tax differences, the impact of state and local taxes, and increase in our valuation allowance associated with certain foreign losses.

Our income tax provision was $24.1 million for the nine months ended September 30, 2020 compared to $1.2 million of income tax benefit for the nine months ended September 30, 2019. Our estimated effective income tax rate was 133.6% and (3.4)% for the nine months ended September 30, 2020 and 2019, respectively. The variations in our effective tax rate from the U.S. federal statutory rate for the nine months ended September 30, 2020 were primarily due to the increase in our valuation allowance associated with certain foreign losses, permanent book tax differences and the impact of state and local taxes, partially offset by the research and experimentation credits. The variations in our effective tax rate from the U.S. federal statutory rate for the nine months ended September 30, 2019 were primarily due to the change in net unrealized gains that are capital in nature, various permanent tax differences, the impact of state and local taxes, and increase in our valuation allowance associated with certain foreign losses.

The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was enacted in March 2020. The CARES Act features significant tax provisions and other measures to assist individuals and businesses impacted by the economic effects of the COVID-19 pandemic, including a five-year carryback of net operating losses, relaxation of Section 163(j) interest deduction limitations, acceleration of Alternative Minimum Tax refunds, relief for payroll tax and tax credits for employers who retain employees. These provisions did not affect our income tax provision for the three and nine months ended September 30, 2020.

NOTE 12.    CONTINGENCIES

Patents and Intellectual Property

Many entities, including some of our competitors, have or may have in the future patents and other intellectual property rights that cover or affect products or services directly or indirectly related to those that we offer. We may not be aware of all patents and other intellectual property rights that our products and services may potentially infringe. Damages in patent infringement cases can be substantial, and in certain circumstances can be tripled. Further, we cannot estimate the extent to which we may be required in the future to obtain licenses with respect to intellectual property rights held by others and the availability and cost of any such licenses. Various parties have asserted patent and other intellectual property rights with respect to our products and services. We cannot be certain that these parties do not own the rights they claim, that these rights are not valid or that our products and services do not infringe on these rights. Further, we cannot be certain that we would be able to obtain licenses from these parties on commercially reasonable terms or, if we were unable to obtain such licenses, that we would be able to redesign our products and services to avoid infringement.
Certain Arrangements with DISH Network
In connection with EchoStar’s spin-off from DISH in 2008 (the “Spin-off”), EchoStar entered into a separation agreement with DISH Network that provides, among other things, for the division of certain liabilities, including liabilities resulting from litigation. Under the terms of the separation agreement, EchoStar assumed certain liabilities that relate to its and our business, including certain designated liabilities for acts or omissions that occurred prior to the Spin-off. Certain specific provisions govern intellectual property related claims under which EchoStar will generally only be liable for its and its subsidiaries’ acts or omissions following the Spin-off and DISH Network will indemnify EchoStar for any liabilities or damages resulting from intellectual property claims relating to the period prior to the Spin-off as well as DISH Network’s acts or omissions following the Spin-off. In connection with the
28
Table of Contents
HUGHES SATELLITE SYSTEMS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
Share Exchange and the BSS Transaction, EchoStar and certain of its and our subsidiaries entered into the Share Exchange Agreement and the Master Transaction Agreement, respectively, and other agreements which provide, among other things, for the division of certain liabilities, including liabilities relating to taxes, intellectual property and employees and liabilities resulting from litigation and the assumption of certain liabilities that relate to the transferred businesses and assets. These agreements also contain additional indemnification provisions between EchoStar and us and DISH Network for, in the case of the Share Exchange, certain pre-existing liabilities and legal proceedings and, in the case of the BSS Transaction, certain losses with respect to breaches of certain representations and covenants and certain liabilities.

Litigation

We are involved in a number of legal proceedings against us concerning matters arising in connection with the conduct of our business activities. Many of these proceedings are at preliminary stages and/or seek an indeterminate amount of damages. We regularly evaluate the status of the legal proceedings in which we are involved to assess whether a loss is probable and to determine if accruals are appropriate. We record an accrual for litigation and other loss contingencies when we determine that a loss is probable and the amount of the loss can be reasonably estimated. If accruals are not appropriate, we further evaluate each legal proceeding to assess whether an estimate of possible loss or range of loss can be made. There can be no assurance that legal proceedings against us will be resolved in amounts that will not differ from the amounts of our recorded accruals. Legal fees and other costs of defending legal proceedings are charged to expense as incurred.

For certain proceedings, management is unable to predict with any degree of certainty the outcome or provide a meaningful estimate of the possible loss or range of possible loss because, among other reasons: (i) the proceedings are in various stages; (ii) damages have not been sought or specified; (iii) damages are unsupported, indeterminate and/or exaggerated in management’s opinion; (iv) there is uncertainty as to the outcome of pending trials, appeals, motions or other proceedings; (v) there are significant factual issues to be resolved; and/or (vi) there are novel legal issues or unsettled legal theories to be presented or a large number of parties are involved (as with many patent-related cases). Except as described below, however, management does not believe, based on currently available information, that the outcomes of these proceedings will have a material effect on our financial condition, operating results or cash flows, though there is no assurance that the resolution and outcomes of these proceedings, individually or in the aggregate, will not be material to our financial condition, operating results or cash flows for any particular period, depending, in part, upon the operating results for such period.
We intend to vigorously defend the proceedings against us. In the event that a court, tribunal, other body or jury ultimately rules against us, we may be subject to adverse consequences, including, without limitation, substantial damages, which may include treble damages, fines, penalties, compensatory damages and/or other equitable or injunctive relief that could require us to materially modify our business operations or certain products or services that we offer to our consumers.

Elbit

On January 23, 2015, Elbit Systems Land and C4I LTD and Elbit Systems of America Ltd. (together referred to as “Elbit”) filed a complaint against our subsidiary Hughes Network Systems, L.L.C. (“HNS”), as well as against Black Elk Energy Offshore Operations, LLC, Bluetide Communications, Inc. and Helm Hotels Group, in the U.S. District Court for the Eastern District of Texas, alleging infringement of U.S. Patent Nos. 6,240,073 (the “073 patent”) and 7,245,874 (“874 patent”). In December 2019, we entered into a comprehensive settlement agreement with Elbit pursuant to which we paid a total of $33.0 million in satisfaction of all amounts relating to these matters and all open proceedings, including appeals, were dismissed with prejudice.

Shareholder Litigation

On July 2, 2019, the City of Hallandale Beach Police Officers’ and Firefighters’ Personnel Retirement Trust, purporting to sue on behalf of a class of EchoStar’s stockholders, filed a complaint in the District Court of Clark County, Nevada against EchoStar’s directors, Charles W. Ergen, R. Stanton Dodge, Anthony M. Federico, Pradman P. Kaul, C. Michael Schroeder, Jeffrey R. Tarr, William D. Wade, and Michael T. Dugan; our and EchoStar’s officer, David J. Rayner; EchoStar; Hughes Satellite Systems Corporation; our former subsidiary BSS Corp.; and DISH and
29
Table of Contents
HUGHES SATELLITE SYSTEMS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
its subsidiary Merger Sub. On September 5, 2019, the defendants filed motions to dismiss. On October 11, 2019, the plaintiffs filed an amended complaint removing Messrs. Dodge, Federico, Kaul, Schroeder, Tarr and Wade as defendants. The amended complaint alleges that Mr. Ergen, as EchoStar’s controlling stockholder, breached fiduciary duties to EchoStar’s minority stockholders by structuring the BSS Transaction with inadequate consideration and improperly influencing EchoStar’s and Hughes Satellite Systems Corporation’s boards of directors to approve the BSS Transaction. The amended complaint also alleges that the other defendants aided and abetted such alleged breaches. The plaintiffs seek equitable and monetary relief, including the issuance of additional DISH Common Stock, and other costs and disbursements, including attorneys’ fees on behalf of the purported class. On November 11, 2019, we and the other defendants filed separate motions to dismiss plaintiff’s amended complaint and during a hearing on January 13, 2020 the court denied these motions. On February 10, 2020, we and the other defendants filed answers to the amended complaint. We intend to vigorously defend this case. We cannot predict its outcome with any degree of certainty.

License Fee Dispute with Government of India, Department of Telecommunications

In 1994, the Government of India promulgated a “National Telecommunications Policy” under which the government liberalized the telecommunications sector and required telecommunications service providers to pay fixed license fees. Pursuant to this policy, our subsidiary Hughes Communications India Private Limited (“HCIPL”), formerly known as Hughes Escorts Communications Limited, obtained a license to operate a data network over satellite using VSAT systems. In 1999, HCIPL’s license was amended pursuant to a new government policy that eliminated the fixed license fees and instead required each telecommunications service provider to pay license fees based on its adjusted gross revenue (“AGR”). In March 2005, the Indian Department of Telecommunications (“DOT”) notified HCIPL that, based on its review of HCIPL’s audited accounts and AGR statements, HCIPL must pay additional license fees, interest on such fees and penalties and interest on the penalties. HCIPL responded that the DOT had improperly calculated its AGR by including revenue from licensed and unlicensed activities. The DOT rejected this explanation and in 2006, HCIPL filed a petition with an administrative tribunal (the “Tribunal”), challenging the DOT’s calculation of its AGR. The DOT also issued license fee assessments to other telecommunications service providers and a number of similar petitions were filed by several other such providers with the Tribunal. These petitions were amended, consolidated, remanded and re-appealed several times. On April 23, 2015, the Tribunal issued a judgment affirming the DOT’s calculation of AGR for the telecommunications service providers but reversing the DOT’s imposition of interest, penalties and interest on such penalties as excessive. Over subsequent years, the DOT and HCIPL and other telecommunications service providers, respectively, filed several appeals of the Tribunal’s ruling. On October 24, 2019, the Supreme Court of India (“Supreme Court”) issued an order (the “October 2019 Order”) affirming the license fee assessments imposed by the DOT, including its imposition of interest, penalties and interest on the penalties, but without indicating the amount HCPIL is required to pay the DOT, and ordering payment by January 23, 2020. On November 23, 2019, HCIPL and other telecommunication service providers filed a petition asking the Supreme Court to reconsider the October 2019 Order. The petition was denied on January 20, 2020. On January 22, 2020, HCIPL and other telecommunication service providers filed an application requesting that the Supreme Court modify the October 2019 Order to permit the DOT to calculate the final amount due and extend HCPIL’s and the other telecommunication service providers’ payment deadline. On February 14, 2020, the Supreme Court directed HCIPL and the other telecommunication service providers to explain why the Supreme Court should not initiate contempt proceedings for failure to pay the amounts due. During a hearing on March 18, 2020, the Supreme Court ordered that all amounts that were due before the October 2019 Order must be paid, including interest, penalties and interest on the penalties. The Supreme Court also ordered that the parties appear for a further hearing addressing, potentially among other things, a proposal by the DOT to allow for extended or deferred payments of amounts due. On June 11, 2020, the Supreme Court ordered HCIPL and the other telecommunication service providers to submit affidavits addressing the proposal made by the DOT to extend the time frame for payment of the amounts owed and for HCIPL and the other telecommunication providers to provide security for such payments. On September 1, 2020, the Supreme Court issued a judgment permitting a 10-year payment schedule. Under the payment schedule, HCIPL is required to make a payment of 10% of the legally payable dues by March 31, 2021, and thereafter make payments in yearly installments through 2031. To date, HCIPL has paid the DOT $2.9 million with respect to this matter. As a result of the Supreme Court’s orders, HCIPL’s payments to date and the impact of foreign exchange rates, we have recorded an accrual of $81.6 million as of September 30, 2020, comprised of $3.9 million for additional license fees, $4.0 million for penalties and $73.8 million for interest and interest on penalties. We had recorded an accrual of $80.2 million as of December 31, 2019. Any eventual payments made with respect to the ultimate outcome of this matter may be different from our accrual and such differences could be significant.

3018
Table of Contents
HUGHES SATELLITE SYSTEMS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
Other

In addition to
NOTE 10.    RELATED PARTY TRANSACTIONS - ECHOSTAR

The following is a summary of the above actions, we are subject to varioustransactions and the terms of the underlying principal agreements that have had or may have an impact on our consolidated financial condition and results of operations.

Services and Other Revenue — EchoStar

The following table presents our Services and other legal proceedingsrevenue from EchoStar:
For the three months ended March 31,
20212020
Services and other revenue - EchoStar$5,371 $4,699 

The following table presents the corresponding related party receivables:
As of
March 31, 2021December 31, 2020
Related party receivables - EchoStar - current$114,225 $116,220 
Related party receivables - EchoStar - non-current54,970 57,136 
Total related party receivables - EchoStar$169,195 $173,356 

Receivables. EchoStar and claims, which arise in the ordinary course of business. As part of our ongoing operations, we are subject to various inspections, audits, inquiries, investigations and similar actions by third parties, as well as by governmental/regulatory authorities responsible for enforcing the laws and regulations to which we may be subject. Further, under the federal False Claims Act, private parties have the right to bring qui tam, or “whistleblower,” suits against companies that submit false claims for payments to, or improperly retain overpayments from, the federal government. Some states have adopted similar state whistleblower and false claims provisions. In addition, weits other subsidiaries reimburse us from time to time receive inquiries from federal, statefor amounts paid by us for costs and foreign agencies regarding compliance with various lawsexpenses attributable to EchoStar and regulations.

In our opinion, the amount of ultimate liability with respect to any of theseits other actions is unlikely to materially affect our financial position, results of operations or cash flows, though the resolutions and outcomes, individually or in the aggregate, could be material to our financial position, operating results or cash flows for any particular period, depending, in part, upon the operating results for such period.

subsidiaries. We also indemnify our directors, officers and employees for certain liabilities that might arise from the performance of their responsibilities for us. Additionally, in the normal course of its business, we enter into contracts pursuant to which we may make a variety of representations and warranties and indemnify the counterparty for certain losses. Our possible exposurereport receivables under these arrangements cannot be reasonably estimated as this involveswithin Related party receivables - EchoStar - current. No repayment schedule for these receivables has been determined.
EchoStar Mobile Limited Service Agreements. We provide services and lease equipment to support the resolutionbusiness of claims made, or future claimsEchoStar Mobile Limited, a subsidiary of EchoStar that may be made, against us or our officers, directors or employees,is licensed by the outcomes European Union and its member states (“EU”) to provide mobile satellite services and complementary ground component services covering the entire EU using S-band spectrum. Generally, the amounts EchoStar’s other subsidiaries pay for these services are based on cost plus a fixed margin. We recorded revenue in Services and other revenue of which are unknown$5.4 million and not currently predictable or estimable.$4.7 million for the three months ended March 31, 2021 and 2020, respectively, related to these services. Additionally, we have converted the receivables for certain of these services into loans, bearing an annual interest rate of 5%, that mature in 2023. We report these loans within Related party receivables - EchoStar - non-current.

NOTE 13.    SEGMENT REPORTING
Business segments are components of an enterprise for which separate financial information is available and regularly evaluated by our chief operating decision maker (“CODM”), who is our Chief Executive Officer. We operate in 2 business segments, Hughes and ESS, as described in Note 1. Organization and Business Activities.Operating Expenses — EchoStar

The primary measure of segment profitability that is reported regularly tofollowing table presents our CODM is earnings before interest, taxes, depreciation and amortization, net income (loss) operating expensesfrom discontinued operations and net income (loss) attributable to non-controlling interests (“EBITDA”).

EchoStar:
Total assets by segment have not been reported herein because the information is not provided to our CODM on a regular basis.
For the three months ended March 31,
20212020
Operating expenses - EchoStar$15,387 $12,642 

3119
Table of Contents
HUGHES SATELLITE SYSTEMS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)



The following table presents revenue, EBITDA and capital expenditures for each of our business segments. Capital expenditures are net of refunds and other receiptsthe corresponding related to our property and equipment.party payables:
HughesESSCorporate and OtherConsolidated
Total
For the three months ended September 30, 2020
External revenue$466,762 $4,121 $4,977 $475,860 
Intersegment revenue0 281 (281)— 
Total revenue$466,762 $4,402 $4,696 $475,860 
EBITDA$190,016 $2,274 $(8,959)$183,331 
Capital expenditures$88,848 $41 $0 $88,889 
For the three months ended September 30, 2019
External revenue$463,735 $3,772 $5,614 $473,121 
Intersegment revenue0 326 (326)— 
Total revenue$463,735 $4,098 $5,288 $473,121 
EBITDA$155,940 $1,791 $(7,574)$150,157 
Capital expenditures$76,572 $0 $0 $76,572 
For the nine months ended September 30, 2020
External revenue$1,378,416 $12,274 $14,362 $1,405,052 
Intersegment revenue0 959 (959)— 
Total revenue$1,378,416 $13,233 $13,403 $1,405,052 
EBITDA$531,276 $5,847 $(23,745)$513,378 
Capital expenditures$263,844 $41 $0 $263,885 
For the nine months ended September 30, 2019
External revenue$1,360,919 $11,058 $17,583 $1,389,560 
Intersegment revenue0 815 (815)— 
Total revenue$1,360,919 $11,873 $16,768 $1,389,560 
EBITDA$448,837 $5,006 $(19,835)$434,008 
Capital expenditures$224,483 $0 $0 $224,483 
As of
March 31, 2021December 31, 2020
Related party payables - EchoStar - current$51,396 $51,420 
Related party payables - EchoStar - non-current24,533 25,114 
Total related party payables - EchoStar$75,929 $76,534 

Payables. We reimburse EchoStar and its other subsidiaries from time to time for amounts paid by EchoStar and its other subsidiaries for costs and expenses attributable to us. We report payables under these arrangements within Related party payables - EchoStar - current. No repayment schedule for these payables has been determined.

Shared Corporate Services. We and EchoStar, including EchoStar’s other subsidiaries, have agreed that we shall
each have the right, but not the obligation, to receive from the other certain shared corporate services, including among other things: treasury, tax, accounting and reporting, risk management, cybersecurity, legal, internal audit, human resources, and information technology. These shared corporate services are generally provided at cost. Effective March 2017, and as a result of the Share Exchange (as defined below), we implemented a new methodology for determining the cost of these shared corporate services. We and EchoStar, including EchoStar’s other subsidiaries, may each terminate a particular shared corporate service for any reason upon at least 30 days’ notice. We recorded these expenses within Operating expenses - EchoStar for shared corporate services received from EchoStar and its other subsidiaries of $0.4 million and $4.4 million for the three months ended March 31, 2021 and 2020, respectively.

Real Estate. We occupy certain office space in buildings owned or leased by EchoStar and its other subsidiaries and pay a portion of the taxes, insurance, utilities and maintenance of the premises in accordance with the percentage of the space we occupy.

Cash Advances. EchoStar and certain of its other subsidiaries have also provided cash advances to certain of our
foreign subsidiaries to fund certain expenditures pursuant to loan agreements that mature in 2021 and 2022. Advances under these agreements bear interest at annual rates ranging from 1 to 3 percent, subject to periodic adjustment based on the one-year U.S. LIBOR rate. We report amounts payable under these agreements within Related party payables - EchoStar - non-current.

Construction Management Services for EchoStar XXIV satellite. In August 2017, a subsidiary of EchoStar entered into a contract with Maxar Space, LLC (formerly Space Systems/Loral, LLC), for the design and construction of the EchoStar XXIV satellite, a new, next-generation, high throughput geostationary satellite, with an expected launch in the second half of 2022. We provide construction management services to EchoStar’s subsidiary for the construction of the EchoStar XXIV satellite. We charged EchoStar’s subsidiary and reduced our operating expenses by the costs of such services of $0.3 million and $0.3 million for the three months ended March 31, 2021 and 2020, respectively.

Other Agreements

BSS Transaction. Pursuant to the pre-closing restructuring contemplated by the Master Transaction Agreement (as defined below), and as part of the BSS Transaction (as defined below), we and our subsidiaries transferred certain of the BSS Business (as defined below) to BSS Corp. (as defined below), and we distributed all of the shares of BSS Corp. to EchoStar as a dividend. See Note 1. Organization and Business Activities for further information.

Share Exchange Agreement. Prior to consummation of the Share Exchange, EchoStar was required to complete steps necessary for the transferring of certain assets and liabilities to DISH and certain of its subsidiaries. As part of these steps, subsidiaries of EchoStar that, prior to the consummation of the Share Exchange, owned EchoStar’s business of providing online video delivery and satellite video delivery for broadcasters and pay-TV operators, including satellite uplinking/downlinking, transmission services, signal processing and conditional access
32
20
Table of Contents
HUGHES SATELLITE SYSTEMS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)

The following table reconciles
Income (loss) from continuing operations before income taxes
management, and other services and related assets and liabilities were contributed to one of our subsidiaries in the Condensed Consolidated Statementsconsideration for additional shares of OperationsHSSC’s common stock that were then issued to EBITDA:
For the three months ended September 30,For the nine months ended September 30,
2020201920202019
Income (loss) from continuing operations before income taxes$16,681 $(11,896)$18,041 $(34,598)
Interest income, net(2,839)(12,300)(16,935)(47,341)
Interest expense, net of amounts capitalized44,177 55,608 130,644 172,502 
Depreciation and amortization123,145 115,948 372,588 342,086 
Net loss (income) attributable to non-controlling interests2,167 2,797 9,040 1,359 
EBITDA$183,331 $150,157 $513,378 $434,008 
a subsidiary of EchoStar.

NOTE 14.    RELATED PARTY TRANSACTIONS - ECHOSTAR

The following is a summary of the transactions and the terms of the underlying principal agreements that have had or may have an impact on our consolidated financial condition and results of operations.

Services and Other Revenue - EchoStar

The following table presents our Services and other revenue from EchoStar:
For the three months ended September 30,For the nine months ended September 30,
2020201920202019
Services and other revenue - EchoStar$4,974 $4,448 $14,361 $13,345 

The following table presents the corresponding related party receivables:
As of
September 30,
2020		December 31, 2019
Related party receivables - EchoStar - current$109,543 $131,892 
Related party receivables - EchoStar - non-current54,865 19,759 
Total related party receivables - EchoStar$164,408 $151,651 

Receivables. EchoStar and its other subsidiaries reimburse us from time to time for amounts paid by us for costs and expenses attributable to EchoStar and its other subsidiaries. We report receivables under these arrangements within Related party receivables - EchoStar - current.  No repayment schedule for these receivables has been determined.

EchoStar Mobile Limited Service Agreements. We provide services and lease equipment to support the business of EchoStar Mobile Limited, a subsidiary of EchoStar that is licensed by the European Union and its member states (“EU”) to provide mobile satellite services and complementary ground component services covering the entire EU using S-band spectrum. Generally, the amounts EchoStar’s other subsidiaries pay for these services are based on cost plus a fixed margin. We recorded the revenue related to these services within Services and other revenue - EchoStar of $5.0 million and $4.7 million for the three months ended September 30, 2020 and 2019, respectively, and $14.4 million and $14.3 million for the nine months ended September 30, 2020 and 2019, respectively. Additionally, we have converted the receivables for certain of these services into loans payable on demand and bearing an annual interest rate of 5%. We report these loans within Related party receivables - EchoStar - non-current.

33
Table of Contents
HUGHES SATELLITE SYSTEMS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
Operating Expenses - EchoStar

The following table presents our operating expenses related to EchoStar:
For the three months ended September 30,For the nine months ended September 30,
2020201920202019
Operating expenses - EchoStar$15,163 $14,506 $41,665 $42,235 

The following table presents the corresponding related party payables:
As of
September 30,
2020		December 31, 2019
Related party payables - EchoStar - current$14,029 $11,132 
Related party payables - EchoStar - non-current24,529 23,980 
Total related party payables - EchoStar$38,558 $35,112 

Payables. We reimburse EchoStar and its other subsidiaries from time to time for amounts paid by EchoStar and its other subsidiaries for costs and expenses attributable to us. We report payables under these arrangements within Related party payables - EchoStar - current.  No repayment schedule for these payables has been determined.

Shared Corporate Services. We and EchoStar, including EchoStar’s other subsidiaries, have agreed that we shall each have the right, but not the obligation, to receive from the other certain shared corporate services, including among other things: treasury, tax, accounting and reporting, risk management, cybersecurity, legal, internal audit, human resources, and information technology.  These shared corporate services are generally provided at cost.  Effective March 2017, and as a result of the Share Exchange, we implemented a new methodology for determining the cost of these shared corporate services. We and EchoStar, including EchoStar’s other subsidiaries, may each terminate a particular shared corporate service for any reason upon at least 30 days’ notice.  We recorded these expenses within Operating expenses - EchoStar for shared corporate services received from EchoStar and its other subsidiaries of $0.9 million and $1.2 million for the three months ended September 30, 2020 and 2019, respectively, and $7.6 million and $6.1 million for the nine months ended September 30, 2020 and 2019, respectively.

Real Estate. We occupy certain office space in buildings owned or leased by EchoStar and its other subsidiaries and pay a portion of the taxes, insurance, utilities and maintenance of the premises in accordance with the percentage of the space we occupy.

Cash Advances. EchoStar and certain of its other subsidiaries have also provided cash advances to certain of our foreign subsidiaries to fund certain expenditures pursuant to loan agreements that mature in 2021 and 2022. Advances under these agreements bear interest at annual rates ranging from 1 to 3 percent, subject to periodic adjustment based on the one-year U.S. LIBOR rate. We report amounts payable under these agreements within Related party payables - EchoStar - non-current.

Construction Management Services for EchoStar XXIV Satellite. In August 2017, a subsidiary of EchoStar entered into a contract with Space Systems Loral, LLC for the design and construction of the EchoStar XXIV satellite, a new, next-generation, high throughput geostationary satellite. We provide construction management services to EchoStar’s subsidiary for the construction of the EchoStar XXIV satellite. We charged EchoStar’s subsidiary and reduced our operating expenses by the costs of such services of $0.4 million and $0.3 million for the three months ended September 30, 2020 and 2019, respectively, and $1.2 million and $1.1 million for the nine months ended September 30, 2020 and 2019, respectively.

34
Table of Contents
HUGHES SATELLITE SYSTEMS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
Other Agreements

BSS Transaction. Pursuant to the pre-closing restructuring contemplated by the Master Transaction Agreement, and as part of the BSS Transaction, we and our subsidiaries transferred certain of the BSS Business to BSS Corp., and we distributed all of the shares of BSS Corp. to EchoStar as a dividend.  See Note 1. Organization and Business Activities for further information.

Share Exchange Agreement. Prior to consummation of the Share Exchange, EchoStar was required to complete steps necessary for the transferring of certain assets and liabilities to DISH and certain of its subsidiaries. As part of these steps, subsidiaries of EchoStar that, prior to the consummation of the Share Exchange, owned EchoStar’s business of providing online video delivery and satellite video delivery for broadcasters and pay-TV operators, including satellite uplinking/downlinking, transmission services, signal processing, conditional access management and other services and related assets and liabilities were contributed to one of our subsidiaries in consideration for additional shares of HSSC’s common stock that were then issued to a subsidiary of EchoStar.

NOTE 15.11.    RELATED PARTY TRANSACTIONS - DISH NETWORK

Overview

EchoStar Corporation and DISH have operated as separate publicly-traded companies since 2008.2008 (the “Spin-off”). A substantial majority of the voting power of the shares of each of EchoStar Corporation and DISH is owned beneficially by Charles W. Ergen, our Chairman, and by certain entities established for the benefit of his family.

In addition, priorJanuary 2017, EchoStar and certain of its subsidiaries entered into a share exchange agreement (the “Share Exchange Agreement”) with DISH and certain of its subsidiaries pursuant to March 2017, DISH Network owned the Tracking Stock, which, in February 2017, we received all of the aggregate representedshares of preferred tracking stock previously issued by us and one of our subsidiaries (the “Tracking Stock”), representing an 80% economic interest in the residential retail satellite broadband business of our Hughes segment. segment, in exchange for 100% of the equity interests of certain EchoStar subsidiaries that held substantially all of our EchoStar Technologies businesses and certain other assets (collectively, the “Share Exchange”).The Tracking Stock was retired in March 2017.

In September 2019, pursuant to a master transaction agreement (the “Master Transaction Agreement”) with DISH and a wholly-owned subsidiary of DISH (“Merger Sub”), (i) we transferred certain real property and the various businesses, products, licenses, technology, revenues, billings, operating activities, assets and liabilities primarily related to the former portion of our ESS segment that managed, marketed and provided (1) broadcast satellite services primarily to DISH and its subsidiaries (“DISH Network”) and our joint venture Dish Mexico, and (2) telemetry, tracking and control (“TT&C”) services for satellites owned by DISH Network and a portion of our other businesses (collectively, the “BSS Business”) to one of our former subsidiaries, EchoStar BSS Corporation (“BSS Corp.”), (ii) we distributed to each holder of shares of our Class A or Class B common stock entitled to receive consideration in the transaction an amount of shares of common stock of BSS Corp., par value $0.001 per share (“BSS Common Stock”), equal to 1 share of BSS Common Stock for each share of our Class A or Class B common stock owned by such stockholder (the “Distribution”); and (iii) immediately after the Distribution, (1) Merger Sub merged with and into BSS Corp. (the “Merger”), such that BSS Corp. became a wholly-owned subsidiary of DISH and with DISH then owning and operating the BSS Business, and (2) each issued and outstanding share of BSS Common Stock owned by EchoStar stockholders was converted into the right to receive 0.23523769 shares of DISH Class A common stock, par value $0.001 per share (“DISH Common Stock”) ((i) - (iii) collectively, the “BSS Transaction”).
In connection with and following the Spin-off, the Share Exchange and the BSS Transaction, EchoStar, we EchoStar and certain other of its otherEchoStar’s subsidiaries and DISH Network entered into certain agreements pursuant to which we, EchoStar and certain of its other subsidiaries, on the one hand, obtain certain products, services and rights from DISH Network, on the other hand; DISH Network, on the one hand, obtains certain products, services and rights from us, EchoStar and certain of its other subsidiaries, on the other hand; and such entities indemnify each other against certain liabilities arising from their respective businesses. Generally, the amounts we and/or EchoStar and its other subsidiaries or DISH Network pay for products and services provided under the agreements are based on cost plus a fixed margin (unless noted differently below), which varies depending on the nature of the products and services provided. We and/or EchoStar and its other subsidiaries may also enter into additional agreements with DISH Network in the future.

The following is a summary of the transactions and the terms of the underlying principal agreements that have had or may have an impact on our consolidated financial condition and results of operations.

21
Table of Contents
HUGHES SATELLITE SYSTEMS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)



Services and Other Revenue — DISH Network

The following table presents our Services and other revenue - DISH Network from DISH Network::
For the three months ended September 30,For the nine months ended September 30,
2020201920202019
Services and other revenue - DISH Network$6,115 $9,747 $20,322 $32,021 
For the three months ended March 31,
20212020
Services and other revenue - DISH Network$5,727 $7,587 

The following table presents the related trade accounts receivable:
As of
September 30,
2020		December 31, 2019
Trade accounts receivable - DISH Network$6,553 $8,876 
As of
March 31, 2021December 31, 2020
Trade accounts receivable - DISH Network$4,449 $4,706 

35
Table of Contents
HUGHES SATELLITE SYSTEMS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
Satellite Capacity Leased to DISH Network. We have entered into an agreement and have previously entered into a now terminated agreement to lease satellite capacity pursuant to which we have provided satellite services to DISH Network on certain satellites owned or leased by us. The fees for the services provided under these agreements may depend upon, among other things, the orbital location of the applicable satellite, the number of transponders that are providing services on the applicable satellite, the length of the service arrangements and any third-party costs associated with the satellite capacity. The terms of these agreements are set forth below:
•EchoStar IX — Effective January 2008, DISH Network began leasing satellite capacity from us on the EchoStar IX satellite. Subject to availability, DISH Network generally has the right to continue leasing satellite capacity from us on the EchoStar IX satellite on a month-to-month basis.

•Telesat Obligation Agreement. 103 Degree Orbital Location/SES-3 — In May 2012,September 2009, we entered into a spectrum developmentan agreement (the “103 Spectrum Development Agreement”with Telesat Canada to lease satellite capacity from Telesat Canada on all 32 direct broadcast satellite (“DBS”) with Ciel Satellite Holdings Inc. (“Ciel”) to develop certain spectrum rightstransponders on the Nimiq 5 satellite at the 10372.7 degree west longitude orbital location (the “103 Spectrum Rights”“Telesat Transponder Agreement”). In June 2013, we and DISH Network entered into a spectrum development agreement (the “DISH 103 Spectrum Development Agreement”) pursuant to which DISH Network may use and develop the 103 Spectrum Rights. Effective in March 2018, DISH Network exercised its right to terminate the DISH 103 Spectrum Development Agreement and we exercised our right to terminate the 103 Spectrum Development Agreement.

In connection with the 103 Spectrum Development Agreement, in May 2012,September 2009, we also entered into a ten-year agreement with Ciel pursuant to which we leased certain satellite capacity from Ciel on the SES-3 satellite at the 103 degree west longitude orbital location (the “Ciel 103 Agreement”). In June 2013, we and DISH Network entered into an agreement with DISH Network, pursuant to which DISH Network leased certain satellite capacity from us on all 32 of the SES-3 satelliteDBS transponders covered by the Telesat Transponder Agreement (the “DISH 103Nimiq 5 Agreement”).Under the terms of the DISH 103Nimiq 5 Agreement, DISH Network made certain monthly payments to us throughthat commenced in September 2009, when the service term. Effective in March 2018,Nimiq 5 satellite was placed into service. We transferred the Telesat Transponder Agreement to DISH Network exercised its rightin September 2019 as part of the BSS Transaction; however, we retained certain obligations related to terminate the DISH 103 AgreementNetwork’s performance under that agreement and we exercised our right to terminate the Ciel 103 Agreement.entered into an agreement with DISH Network whereby DISH Network compensates us for retaining such obligations.

TerreStar Agreement. In March 2012, DISH Network completed its acquisition of substantially all the assets of TerreStar Networks Inc. (“TerreStar”). Prior to DISH Network’s acquisition of substantially all the assets of TerreStar and EchoStar’s completion of the Hughes Acquisition, TerreStar and HNS entered into various agreements pursuant to which we provide, among other things, warranty, operations and maintenance and hosting services for TerreStar’s ground-based communications equipment (the “TerreStar Agreements”). In December 2017, we and DISH Network amended these agreements, effective as of January 1, 2018, to reduce certain pricing terms through December 31, 2023 and to modify certain termination provisions. DISH Network generally has the right to continue to receive warranty services from us for our products on a month-to-month basis unless terminated by DISH Network upon at least 21 days’ written notice to us. DISH Network generally has the right to continue to receive operations and maintenance services from us on a quarter-to-quarter basis unless operations and maintenancethese services are terminated by DISH Network upon at least 90 days’ written notice to us. The provision of hosting services will continue until May 2022. In addition, DISH Network generally may terminate any and all services for convenience subject to providing us with prior notice and/or payment of termination charges. In March 2020, we entered into an agreement with DISH Network pursuant to which we perform certain work and provide certain credits to amounts owed to us under the TerreStar Agreements in exchange for DISH Network’s granting us rights to use certain satellite capacity under the Amended and Restated Professional Services Agreement (as defined below). As a result, we and DISH Network amended the TerreStar Agreements to suspend our provision of warranty services to DISH Network from April 2020 through December 2020. Following the expiration of this suspension, we will continue to providehave recommenced providing warranty services to DISH Network.

Hughes Broadband Distribution Agreement. Effective October 2012, we and DISH Network entered into a distribution agreement (the “Distribution Agreement”) pursuant to which DISH Network has the right, but not the obligation, to market, sell and distribute our Gen 4 HughesNet service. DISH Network pays us a monthly per subscriber wholesale service fee for our Gen 4 HughesNet service based upon a subscriber’s service level and
22
Table of Contents
HUGHES SATELLITE SYSTEMS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)



based upon certain volume subscription thresholds. The Distribution Agreement also provides that DISH Network has the right, but not the obligation, to purchase certain broadband equipment from us to support the sale of ourthe Gen 4 HughesNet service. The Distribution Agreement had an initial term of five years with automatic renewal for
36
Table of Contents
HUGHES SATELLITE SYSTEMS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
successive one yearone-year terms unless terminated by either party with a written notice at least 180 days’ before the expiration of the then-current term. In February 2014, we and DISH Network entered into an amendment to the Distribution Agreement which, among other things, extended the initial term of the Distribution Agreement until March 2024. Upon expiration or termination of the Distribution Agreement, we and DISH Network will continue to provide our Gen 4 HughesNet service to the then-current DISH Network subscribers pursuant to the terms and conditions of the Distribution Agreement.

DBSD North America Agreement. In March 2012, DISH Network completed its acquisition of all of the equity of reorganized DBSD North America, Inc. (“DBSD North America”). Prior to DISH Network’s acquisition of DBSD North America and EchoStar’s completion of the Hughes Acquisition, DBSD North America and HNS entered into various agreements pursuant to which we provide, among other things, warranty, operations and maintenance and hosting services of DBSD North America’s gateway and ground-based communications equipment. In December 2017, we and DBSD North America amended these agreements, effective as of January 1, 2018, to reduce certain pricing terms through December 31, 2023 and to modify certain termination provisions. DBSD North America has the right to continue to receive operations and maintenance services from us on a quarter-to-quarter basis, unless terminated by DBSD North America upon at least 120 days’ written notice to us. In February 2019, we further amended these agreements to provide DBSD North America with the right to continue to receive warranty services from us on a month-to-month basis until December 2023, unless terminated by DBSD North America upon at least 21 days’ written notice to us. The provision of hosting services will continue until February 2022 and will automatically renew for an additional five-yearfive-year period until February 2027 unless terminated by DBSD North America upon at least 180 days’ written notice to us. In addition, DBSD North America generally may terminate any and all such services for convenience, subject to providing us with prior notice and/or payment of termination charges.

Hughes Equipment and Services Agreement. In February 2019, we and DISH Network entered into an agreement pursuant to which we will sell to DISH Network our HughesNet Service and HughesNet equipment that has been modified to meet DISH Network’s internet-of-things specifications for the transfer of data to DISH Network’s network operations centers. This agreement has an initial term of five years expiring February 2024 with automatic renewal for successive one-year terms unless terminated by DISH Network with at least 180 days’days‘ written notice to us or by us with at least 365 days’ written notice to DISH Network.


Operating Expenses — DISH Network

The following table presents our operating expenses related to DISH Network:
For the three months ended September 30,For the nine months ended September 30,
2020201920202019
Operating expenses - DISH Network$1,172 $701 $3,532 $2,467 
For the three months ended March 31,
20212020
Operating expenses - DISH Network$1,099 $1,137 

The following table presents the related trade accounts payable:
As of
September 30,
2020		December 31, 2019
Trade accounts payable - DISH Network$818 $502 
As of
March 31, 2021December 31, 2020
Trade accounts payable - DISH Network$417 $477 

23
Table of Contents
HUGHES SATELLITE SYSTEMS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)



Amended and Restated Professional Services Agreement.   In connection with the Spin-off, EchoStar entered
into various agreements with DISH Network including a transition services agreement, satellite procurement agreement and services agreement, all of which expired in January 2010 and were replaced by a professional services agreement (the “Professional Services Agreement”).  In January 2010, EchoStar and DISH Network agreed that EchoStar and its subsidiaries shall continue to have the right, but not the obligation, to receive the following services from DISH Network, among others, certain of which were previously provided under a transition services agreement: information technology, travel and event coordination, internal audit, legal, accounting and tax,
37
Table of Contents
HUGHES SATELLITE SYSTEMS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
benefits administration, program acquisition services and other support services.  Additionally, EchoStar and DISH Network agreed that DISH Network would continue to have the right, but not the obligation, to engage EchoStar and its subsidiaries to manage the process of procuring new satellite capacity for DISH Network (previously provided under a satellite procurement agreement), receive logistics, procurement and quality assurance services from EchoStar and its subsidiaries (previously provided under a services agreement) and provide other support services. In connection with the consummation of the Share Exchange, EchoStar and DISH amended and restated the Professional Services Agreement (as amended to date, the “Amended and Restated Professional Services Agreement”) to provide that EchoStar and its subsidiaries and DISH Network shall have the right to receive additional services that either EchoStar and its subsidiaries or DISH Network may require as a result of the Share Exchange, including access to antennas owned by DISH Network for our use in performing TT&C services and maintenance and support services for our antennas (collectively, the “TT&C Antennas”). In September 2019, in connection with the BSS Transaction, EchoStar and DISH further amended the AmendedProfessional Services Agreement (the “Amended and Restated Professional Services AgreementAgreement”) to provide that EchoStar and its subsidiaries and DISH Network shall have the right to receive additional services that either EchoStar and its subsidiaries or DISH Network may require as a result of the BSS Transaction and to remove our access to and the maintenance and support services for the TT&C Antennas. A portion of these costs and expenses have been allocated to us in the manner described inNote 14.10. Related Party Transactions - EchoStar. EchoStar. The term of the Amended and Restated Professional Services Agreement is through January 20211, 2022 and renews automatically for successive one-yearone-year periods thereafter, unless the agreement is terminated earlier by either party upon at least 60 days’ notice.  However, either party may generally terminate the Amended and Restated Professional Services Agreement in part with respect to any particular service it receives for any reason upon at least 30 days’ notice, unless the statement of work for particular services states otherwise. Certain services being provided for under the Amended and Restated Professional Services Agreement may survive the termination of the agreement.

Real Estate Lease from DISH Network. Effective March 2017, we entered into an agreement with DISH Network for certain space at 796 East Utah Valley Drive in American Fork, Utah for a period ending in August 2017. We exercised our option to renew this agreement for a five-year period ending in August 2022. We and DISH Network amended this agreement to, among other things, terminate this agreement in March 2019. The rent on a per square foot basis for the lease was comparable to per square foot rental rates of similar commercial property in the same geographic area at the time of the lease, and we were responsible for our portion of the taxes, insurance, utilities and maintenance of the premises.

Collocation and Antenna Space Agreements. We and DISH Network have entered into an agreement pursuant to which DISH Network providesprovided us with collocation space in El Paso, Texas. This agreement was for an initial period ending in August 2015, and providesprovided us with renewal options for four2 consecutive years.three-year terms. Effective August 2015, we exercised our first renewal option for a period ending in August 2018 and in April 2018 we exercised our second renewal option for a period ending in August 2021. In connection with the Share Exchange, effective March 2017, we also entered into certain agreements pursuant to which DISH Network provides collocation and antenna space to EchoStar through February 2022 at the following locations: Cheyenne, Wyoming; Gilbert, Arizona; New Braunfels, Texas; Monee, Illinois; Spokane, Washington; and Englewood, Colorado. In October 2019, we provided a termination notice for our New Braunfels, Texas agreement to be effective May 2020. In August 2017, we and DISH Network also entered into certain other agreements pursuant to which DISH Network provides additional collocation and antenna space to us in Monee, Illinois and Spokane, Washington through August 2022. Generally, we may renew our collocation and antenna space agreements for three-year periods by providing DISH Network with prior written notice no more than 120 days but no less than 90 days prior to the end of the then-current term. We may terminate certain of these agreements with 180 days’ prior written notice. In September 2019, in connection with the BSS Transaction, we entered into an agreement pursuant to which DISH Network provided us with certain additional collocation space in Cheyenne, Wyoming for a period that ended in September 2020. The fees for the services provided under these agreements depend on the number of racks located at the location.

Also in connection with the BSS Transaction, in September 2019, we entered into an agreement pursuant to which DISH Network will provideprovides us with antenna space and power in Cheyenne, Wyoming for a period of five years commencing no later than Octoberin August 2020, with 4 three-year renewal terms, with prior written notice of renewal required no more than 120 days but no less than 90 days prior to the end of the then-current term. In March 2021, we entered into additional agreements pursuant to which DISH Network provides us with a gateway, including antenna space in Cheyenne, Wyoming and Gilbert, Arizona. Both agreements are for a period of five years with 4 three-year
24
Table of Contents
HUGHES SATELLITE SYSTEMS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)



renewal terms, with prior written notice of renewal required no more than 120 days but no less than 90 days prior to the end of the then-current term.

Hughes Broadband Master Services Agreement.  In conjunction with the launch of our EchoStar XIX satellite, in March 2017, we and DISH Network entered into a master service agreement (the “Hughes Broadband MSA”) pursuant to which DISH Network, among other things: (i) has the right, but not the obligation, to market, promote
38
Table of Contents
HUGHES SATELLITE SYSTEMS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
and solicit orders and upgrades for our Gen 5 HughesNet service and related equipment and other telecommunication services and (ii) installs Gen 5 HughesNet service equipment with respect to activations generated by DISH Network.  Under the Hughes Broadband MSA, we and DISH Network make certain payments to each other relating to sales, upgrades, purchases and installation services. The Hughes Broadband MSA has an initial term of five years through March 2022 with automatic renewal for successive one-year terms. Either party has the ability to terminate the Hughes Broadband MSA, in whole or in part, for any reason upon at least 90 days’ notice to the other party. Upon expiration or termination of the Hughes Broadband MSA, we will continue to provide our Gen 5 HughesNet service to subscribers and make certain payments to DISH Network pursuant to the terms and conditions of the Hughes Broadband MSA. We incurred sales incentives and other costs under the Hughes Broadband MSA totaling $5.2$1.9 million and $3.7$4.6 million for the three months ended September 30,March 31, 2021 and 2020, and 2019, respectively, and $14.2 million and $13.2 million for the nine months ended September 30, 2020 and 2019, respectively.

2019 TT&C Agreement.  In September 2019, in connection with the BSS Transaction, we and a subsidiary of EchoStar entered into an agreement pursuant to which DISH Network provides TT&C services to us and EchoStar and its other subsidiaries for a period ending in September 2021, with the option for a subsidiary of EchoStar to renew for a one-year period upon written notice at least 90 days prior to the initial expiration (the “2019 TT&C Agreement”). The fees for services provided under the 2019 TT&C Agreement are calculated at either: (i) a fixed fee or (ii) cost plus a fixed margin, which will vary depending on the nature of the services provided.  Any party is able to terminate the 2019 TT&C Agreement for any reason upon 12 months’ notice.

Other Receivables - DISH Network

Tax Sharing Agreement. Effective December 2007, EchoStar and DISH Network entered into a tax sharing agreement (the “Tax Sharing Agreement”) in connection with the Spin-off. This agreement governs EchoStar and DISH and their respective subsidiaries’ respective rights, responsibilities and obligations after the Spin-off with respect to taxes for the periods ending on or before the Spin-off.  Generally, all pre-Spin-off taxes, including any taxes that are incurred as a result of restructuring activities undertaken to implement the Spin-off, are borne by DISH Network and DISH Network indemnifies EchoStar and its subsidiaries for such taxes. However, DISH Network is not liable for and does not indemnify EchoStar or its subsidiaries for any taxes that are incurred as a result of the Spin-off or certain related transactions failing to qualify as tax-free distributions pursuant to any provision of Section 355 or Section 361 of the Code, because of: (i) a direct or indirect acquisition of any of EchoStar’s stock, stock options or assets; (ii) any action that EchoStar or its subsidiaries take or fail to take or (iii) any action that EchoStar or its subsidiaries take that is inconsistent with the information and representations furnished to the IRS in connection with the request for the private letter ruling, or to counsel in connection with any opinion being delivered by counsel with respect to the Spin-off or certain related transactions. In such case, EchoStar and its subsidiaries will be solely liable for, and will indemnify DISH Network for any resulting taxes, as well as any losses, claims and expenses. The Tax Sharing Agreement will terminate after the later of the full period of all applicable statutes of limitations, including extensions, or once all rights and obligations are fully effectuated or performed.

In light of the Tax Sharing Agreement, among other things, and in connection with EchoStar’s consolidated federal income tax returns for certain tax years prior to and for the year of the Spin-off, in September 2013, EchoStar and DISH Network agreed upon a supplemental allocation of the tax benefits arising from certain tax items resolved in the course of the IRS’s examination of EchoStar’s consolidated tax returns. As a result, DISH Network agreed to pay EchoStar an amount of that includes the federal tax benefit DISH received as a result of our operations.

In August 2018, EchoStar and DISH Network amended the Tax Sharing Agreement and the 2013 agreements (the “Tax Sharing Amendment”). Under the Tax Sharing Amendment, DISH Network is required to compensate EchoStar for certain past and future excess California research and development tax credits generated by EchoStar and its subsidiaries and used by DISH Network.
25
Table of Contents
HUGHES SATELLITE SYSTEMS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)




Other Agreements

Master Transaction Agreement. In May 2019, EchoStar and BSS Corp. entered into the Master Transaction Agreement with DISH and Merger Sub with respect to the BSS Transaction. Pursuant to the terms of the Master
39
Table of Contents
HUGHES SATELLITE SYSTEMS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
Transaction Agreement, on September 10, 2019: (i) EchoStar and its subsidiaries and we and our subsidiaries transferred the BSS Business to BSS Corp.; (ii) weEchoStar completed the Distribution; and (iii) immediately after the Distribution, (1) BSS Corp. became a wholly-owned subsidiary of DISH such that DISH owns and operates the BSS Business and (2) each issued and outstanding share of BSS Common Stock owned by EchoStar stockholders was converted into the right to receive 0.23523769 shares of DISH Common Stock. Following the consummation of the BSS Transaction, we no longer operate the BSS Business, which was a substantial portion of our ESS segment. The Master Transaction Agreement contained customary representations and warranties by the parties, including EchoStar’s representations relating to the assets, liabilities and financial condition of the BSS Business, and representations by DISH Network relating to its financial condition and liabilities.  EchoStar and DISH Network have agreed to indemnify each other against certain losses with respect to breaches of certain representations and covenants and certain retained and assumed liabilities, respectively.

BSS Transaction Intellectual Property and Technology License Agreement.Effective September 2019, in connection with the BSS Transaction, we, EchoStar and DISH Network entered into an intellectual property and technology license agreement (the “BSS IPTLA”) pursuant to which we, EchoStar and its other subsidiaries and DISH Network license to each other certain intellectual property and technology. The BSS IPTLA will continue in perpetuity, unless mutually terminated by the parties. Pursuant to the BSS IPTLA, we, EchoStar and its other subsidiaries granted to DISH Network a license to our and their intellectual property and technology for use by DISH Network, among other things, in connection with its continued operation of the BSS Business acquired pursuant to the BSS Transaction, including a limited license to use the “ESS” and “ECHOSTAR SATELLITE SERVICES” trademarks during a transition period.  EchoStar retains full ownership of the “ESS” and “ECHOSTAR SATELLITE SERVICES” trademarks. In addition, DISH Network granted a license back to us, EchoStar and its other subsidiaries, among other things, for the continued use of all intellectual property and technology that is used in our, EchoStar and its other subsidiaries’ retained businesses but the ownership of which was transferred to DISH Network pursuant to the BSS Transaction.

BSS Transaction Tax Matters Agreement.Effective September 2019, in connection with the BSS Transaction, EchoStar, BSS Corp. and DISH entered into a tax matters agreement. This agreement governs certain rights, responsibilities and obligations of EchoStar and its subsidiariessubsidiaries’ with respect to taxes of the BSS Business transferred pursuant to the BSS Transaction. Generally, EchoStar is responsible for all tax returns and tax liabilities for the BSS Business for periods prior to the BSS Transaction and DISH is responsible for all tax returns and tax liabilities for the BSS Business from and after the BSS Transaction.

Both EchoStar and DISH made certain tax-related representations and are subject to various tax-related covenants after the consummation of the BSS Transaction. Both EchoStar and DISH Network have agreed to indemnify each other for certain losses if there is a breach of any of the tax representations or violation of any of the tax covenants in the tax matters agreement and that breach or violation results in the failure of the BSS Transaction being treated as a transaction that is tax-free for EchoStar or its stockholders for U.S. federal income tax purposes. In addition, DISH Network has agreed to indemnify EchoStar if the BSS Business is acquired, either directly or indirectly (e.g., via an acquisition of DISH Network), by one or more persons, where either it took an action, or knowingly facilitated, consented to or assisted with an action by its stockholders, that resulted in the failure of the BSS Transaction being treated as a transaction that is tax-free for EchoStar and its stockholders for U.S. federal income tax purposes. This tax matters agreement supplements the Tax Sharing Agreement outlined above and the Share Exchange Tax Matters Agreement outlined below, both of which continue in full force and effect.

BSS Transaction Employee Matters AgreementAgreement. . Effective September 2019, in connection with the BSS Transaction, EchoStar and DISH Network entered into an employee matters agreement that addressed the transfer of employees from us to DISH Network, including certain benefit and compensation matters and the allocation of responsibility for employee related liabilities relating to current and past employees of the BSS Business. DISH Network assumed employee-related liabilities relating to the BSS Business as part of the BSS Transaction, except
26
Table of Contents
HUGHES SATELLITE SYSTEMS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)



that EchoStar is responsible for certain pre-BSS Transaction compensation and benefits for employees who transferred to DISH Network in connection with the BSS Transaction.

Share Exchange Agreement.Agreement. In JanuaryFebruary 2017 EchoStar consummated the Share Exchange, following which EchoStar and certain of its and our subsidiaries entered into the Share Exchange Agreement with DISH and certain of its subsidiaries pursuant to which, in February 2017, EchoStar and certain of its and our subsidiaries received all of the shares of the Tracking Stock in exchange for 100% of the equity interests of certain EchoStar subsidiaries that held substantially all of EchoStar’s EchoStar Technologies
40
Table of Contents
HUGHES SATELLITE SYSTEMS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
businesses and certain other assets. Following consummation of the Share Exchange, EchoStar no longer operatesoperate the transferred EchoStar Technologies businesses and the Tracking Stock was retired and is no longer outstanding and all agreements, arrangements and policy statements with respect to such Tracking Stock terminated and are of no further effect. Pursuant to the Share Exchange Agreement, EchoStar and certain of its and our subsidiaries transferred certain assets, investments in joint ventures, spectrum licenses and real estate properties and DISH Network assumed certain liabilities relating to the transferred assets and businesses. The Share Exchange Agreement contained customary representations and warranties by the parties, including representations by EchoStar related to the transferred assets, assumed liabilities and the financial condition of the transferred businesses. EchoStar and DISH Network also agreed to customary indemnification provisions whereby each party indemnifies the other against certain losses with respect to breaches of representations, warranties or covenants and certain liabilities and if certain actions undertaken by EchoStar or DISH causes the transaction to be taxable to the other party after closing.

Share Exchange Intellectual Property and Technology License Agreement.Agreement. Effective March 2017, in connection with the Share Exchange, EchoStar and one of its other subsidiaries and DISH Network entered into an intellectual property and technology license agreement (“IPTLA”) pursuant to which we, EchoStar and one of its other subsidiaries and DISH Network license to each other certain intellectual property and technology. The IPTLA will continue in perpetuity, unless mutually terminated by the parties. Pursuant to the IPTLA, we, EchoStar and one of its other subsidiaries granted to DISH Network a license to our and their intellectual property and technology for use by DISH Network, among other things, in connection with its continued operation of the businesses acquired pursuant to the Share Exchange, including a limited license to use the “ECHOSTAR” trademark during a transition period.  EchoStar retains full ownership of the “ECHOSTAR” trademark. In addition, DISH Network granted a license back to us, EchoStar and one of its other subsidiaries, among other things, for the continued use of all intellectual property and technology that is used in our, EchoStar and one of its other subsidiaries’ retained businesses but the ownership of which was transferred to DISH Network pursuant to the Share Exchange.

Share Exchange Tax Matters Agreement.Agreement. Effective March 2017, in connection with the Share Exchange, EchoStar and DISH entered into a tax matters agreement. This agreement governs certain rights, responsibilities and obligations of EchoStar and its subsidiaries with respect to taxes of the transferred businesses pursuant to the Share Exchange. Generally, EchoStar is responsible for all tax returns and tax liabilities for the transferred businesses and assets for periods prior to the Share Exchange and DISH Network is responsible for all tax returns and tax liabilities for the transferred businesses and assets from and after the Share Exchange. Both EchoStar and DISH Network made certain tax-related representations and are subject to various tax-related covenants after the consummation of the Share Exchange. Both EchoStar and DISH Network have agreed to indemnify each other if there is a breach of any such tax representation or violation of any such tax covenant and that breach or violation results in the Share Exchange not qualifying for tax free treatment for the other party. In addition, DISH Network has agreed to indemnify EchoStar if the transferred businesses are acquired, either directly or indirectly (e.g., via an acquisition of DISH Network), by one or more persons and such acquisition results in the Share Exchange not qualifying for tax free treatment. The tax matters agreement supplements the Tax Sharing Agreement outlined above which continues in full force and effect.

NOTE 12.    RELATED PARTY TRANSACTIONS - OTHER

Hughes Systique Corporation

We contract with Hughes Systique Corporation (“Hughes Systique”) for software development services. In addition to our approximately 43% ownership in Hughes Systique, Mr. Pradman Kaul, the President of our subsidiary Hughes Communications, Inc. and a member of our board of directors, and his brother, who is the Chief Executive Officer and President of Hughes Systique, own in the aggregate approximately 25%, on an undiluted basis, of Hughes Systique’s outstanding shares as of March 31, 2021. Furthermore, Mr. Pradman Kaul serves on the board of directors of Hughes Systique. Hughes Systique is a variable interest entity and we are considered the primary beneficiary of Hughes Systique due to, among other factors, our ability to direct the activities that most significantly impact the economic performance of Hughes Systique. As a result, we consolidate Hughes Systique’s financial
27
Table of Contents
HUGHES SATELLITE SYSTEMS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)



statements in these Consolidated Financial Statements.

TerreStar Solutions

DISH Network owns more than 15% of TerreStar Solutions, Inc. (“TSI”). In May 2018, we and TSI entered into an equipment and services agreement pursuant to which we design, manufacture and install upgraded ground communications network equipment for TSI’s network and provide, among other things, warranty and support services. We recognized revenue of $0.4 million and $2.2 million for the three months ended March 31, 2021 and 2020, respectively. As of March 31, 2021 and December 31, 2020, we had $1.5 million and $0.4 million trade accounts receivable from TSI.

NOTE 13.    CONTINGENCIES

Patents and Intellectual Property
Many entities, including some of our competitors, have, or may have in the future, patents and other intellectual property rights that cover or affect products or services directly or indirectly related to those that we offer. We may not be aware of all patents and other intellectual property rights that our products and services may potentially infringe. Damages in patent infringement cases can be substantial, and in certain circumstances can be tripled. Further, we cannot estimate the extent to which we may be required in the future to obtain licenses with respect to intellectual property rights held by others and the availability and cost of any such licenses. Various parties have asserted patent and other intellectual property rights with respect to our products and services. We cannot be certain that these parties do not own the rights they claim, that these rights are not valid or that our products and services do not infringe on these rights. Further, we cannot be certain that we would be able to obtain licenses from these parties on commercially reasonable terms or, if we were unable to obtain such licenses, that we would be able to redesign our products and services to avoid infringement.

Certain Arrangements with DISH Network

In connection with EchoStar’s spin-off from DISH in 2008, EchoStar entered into a separation agreement with DISH Network that provides, among other things, for the division of certain liabilities, including liabilities resulting from litigation. Under the terms of the separation agreement, EchoStar assumed certain liabilities that relate to its and our business, including certain designated liabilities for acts or omissions that occurred prior to the Spin-off. Certain specific provisions govern intellectual property related claims under which EchoStar will generally only be liable for its and its subsidiaries’ acts or omissions following the Spin-off and DISH Network will indemnify EchoStar for any liabilities or damages resulting from intellectual property claims relating to the period prior to the Spin-off as well as DISH Network’s acts or omissions following the Spin-off. In connection with the Share Exchange and BSS Transaction, EchoStar and certain of its and our subsidiaries entered into the Share Exchange Agreement and the Master Transaction Agreement, respectively, and other agreements which provide, among other things, for the division of certain liabilities, including liabilities relating to taxes, intellectual property and employees and liabilities resulting from litigation and the assumption of certain liabilities that relate to the transferred businesses and assets. These agreements also contain additional indemnification provisions between EchoStar and us and DISH Network for, in the case of the Share Exchange, certain pre-existing liabilities and legal proceedings and, in the case of the BSS Transaction, certain losses with respect to breaches of certain representations and covenants and certain liabilities.

Litigation
We are involved in a number of legal proceedings concerning matters arising in connection with the conduct of our business activities. Many of these proceedings are at preliminary stages and/or seek an indeterminate amount of damages. We regularly evaluate the status of the legal proceedings in which we are involved to assess whether a loss is probable and to determine if accruals are appropriate. We record an accrual for litigation and other loss contingencies when we determine that a loss is probable, and the amount of the loss can be reasonably estimated. If accruals are not appropriate, we further evaluate each legal proceeding to assess whether an estimate of possible loss or range of loss can be made. There can be no assurance that legal proceedings against us will be resolved in
28
Table of Contents
HUGHES SATELLITE SYSTEMS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)



amounts that will not differ from the amounts of our recorded accruals. Legal fees and other costs of defending legal proceedings are charged to expense as incurred.

For certain proceedings, management is unable to predict with any degree of certainty the outcome or provide a meaningful estimate of the possible loss or range of possible loss because, among other reasons: (i) the proceedings are in various stages; (ii) damages have not been sought or specified; (iii) damages are unsupported, indeterminate and/or exaggerated in management’s opinion; (iv) there is uncertainty as to the outcome of pending trials, appeals, motions or other proceedings; (v) there are significant factual issues to be resolved; and/or (vi) there are novel legal issues or unsettled legal theories to be presented or a large number of parties are involved (as with many patent-related cases). Except as described below, however, management does not believe, based on currently available information, that the outcomes of these proceedings will have a material effect on our financial condition, operating results or cash flows, though there is no assurance that the resolution and outcomes of these proceedings, individually or in the aggregate, will not be material to our financial condition, operating results or cash flows for any particular period, depending, in part, upon the operating results for such period.
We intend to vigorously defend the proceedings against us. In the event that a court, tribunal, other body or jury ultimately rules against us, we may be subject to adverse consequences, including, without limitation, substantial damages, which may include treble damages, fines, penalties, compensatory damages and/or other equitable or injunctive relief that could require us to materially modify our business operations or certain products or services that we offer to our consumers.

Shareholder Litigation

On July 2, 2019, the City of Hallandale Beach Police Officers’ and Firefighters’ Personnel Retirement Trust, purporting to sue on behalf of a class of EchoStar Corporation’s stockholders, filed a complaint in the District Court of Clark County, Nevada against EchoStar’s directors, Charles W. Ergen, R. Stanton Dodge, Anthony M. Federico, Pradman P. Kaul, C. Michael Schroeder, Jeffrey R. Tarr, William D. Wade, and Michael T. Dugan; our chief financial officer, David J. Rayner; EchoStar ; HSSC; our former subsidiary BSS Corp.; and DISH and its subsidiary Merger Sub. On September 5, 2019, the defendants filed motions to dismiss. On October 11, 2019, the plaintiffs filed an amended complaint removing Messrs. Dodge, Federico, Kaul, Schroeder, Tarr and Wade as defendants. The amended complaint alleges that Mr. Ergen, as our controlling stockholder, breached fiduciary duties to EchoStar’s minority stockholders by structuring the BSS Transaction with inadequate consideration and improperly influencing our and EchoStar’s boards of directors to approve the BSS Transaction. The amended complaint also alleges that the other defendants aided and abetted such alleged breaches. The plaintiffs seek equitable and monetary relief, including the issuance of additional DISH Common Stock, and other costs and disbursements, including attorneys’ fees on behalf of the purported class. On November 11, 2019, we and the other defendants filed separate motions to dismiss plaintiff’s amended complaint and during a hearing on January 13, 2020 the court denied these motions. On February 10, 2020, we and the other defendants filed answers to the amended complaint. The Court certified plaintiff’s class on January 11, 2021. We intend to vigorously defend this case. We cannot predict its outcome with any degree of certainty.

License Fee Dispute with Government of India, Department of Telecommunications

In 1994, the Government of India promulgated a “National Telecommunications Policy” under which the government liberalized the telecommunications sector and required telecommunications service providers to pay fixed license fees. Pursuant to this policy, our subsidiary Hughes Communications India Private Limited (“HCIPL”), formerly known as Hughes Escorts Communications Limited, obtained a license to operate a data network over satellite using VSAT systems. In 2002, HCIPL’s license was amended pursuant to a new government policy that was first established in 1999. The new policy eliminated the fixed license fees and instead required each telecommunications service provider to pay license fees based on its adjusted gross revenue (“AGR”). In March 2005, the Indian Department of Telecommunications (“DOT”) notified HCIPL that, based on its review of HCIPL’s audited accounts and AGR statements, HCIPL must pay additional license fees and penalties and interest on such fees and penalties. HCIPL responded that the DOT had improperly calculated its AGR by including revenue from licensed and unlicensed activities. The DOT rejected this explanation and in 2006, HCIPL filed a petition with an administrative tribunal (the “Tribunal”), challenging the DOT’s calculation of its AGR. The DOT also issued license fee assessments to other telecommunications service providers and a number of similar petitions were filed by several
29
Table of Contents
HUGHES SATELLITE SYSTEMS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)



other such providers with the Tribunal. These petitions were amended, consolidated, remanded and re-appealed several times. On April 23, 2015, the Tribunal issued a judgment affirming the DOT’s calculation of AGR for the telecommunications service providers but reversing the DOT’s imposition of interest, penalties and interest on such penalties as excessive. Over subsequent years, the DOT and HCIPL and other telecommunications service providers, respectively, filed several appeals of the Tribunal’s ruling. On October 24, 2019, the Supreme Court of India (“Supreme Court”) issued an order (the “October 2019 Order”) affirming the license fee assessments imposed by the DOT, including its imposition of interest, penalties and interest on the penalties, but without indicating the amount HCIPL is required to pay the DOT, and ordering payment by January 23, 2020. On November 23, 2019, HCIPL and other telecommunication service providers filed a petition asking the Supreme Court to reconsider the October 2019 Order. The petition was denied on January 20, 2020. On January 22, 2020, HCIPL and other telecommunication service providers filed an application requesting that the Supreme Court modify the October 2019 Order to permit the DOT to calculate the final amount due and extend HCIPL’s and the other telecommunication service providers’ payment deadline. On February 14, 2020, the Supreme Court directed HCIPL and the other telecommunication service providers to explain why the Supreme Court should not initiate contempt proceedings for failure to pay the amounts due. During a hearing on March 18, 2020, the Supreme Court ordered that all amounts that were due before the October 2019 Order must be paid, including interest, penalties and interest on the penalties. The Supreme Court also ordered that the parties appear for a further hearing addressing, potentially among other things, a proposal by the DOT to allow for extended or deferred payments of amounts due. On June 11, 2020, the Supreme Court ordered HCIPL and the other telecommunication service providers to submit affidavits addressing the proposal made by the DOT to extend the time frame for payment of the amounts owed and for HCIPL and the other telecommunication providers to provide security for such payments. On September 1, 2020, the Supreme Court issued a judgment permitting a 10-year payment schedule. Under this payment schedule, HCIPL is required to make an annual payment every March 31, through 2031. Following the Supreme Court of India’s October 2019 judgment, HCIPL made payments during the first quarter of 2020, and an additional payment on March 31, 2021.

The following table presents the components of the accrual:
As of
March 31, 2021December 31, 2020
Additional license fees$3,867 $3,890 
Penalties3,969 3,992 
Interest and interest on penalties77,774 76,871 
Less: Payments(8,574)(2,975)
Total accrual$77,036 $81,778 


Any eventual payments made with respect to the ultimate outcome of this matter may be different from our accrual and such differences could be significant.

Other

In addition to the above actions, we are subject to various other legal proceedings and claims, which arise in the ordinary course of business. As part of our ongoing operations, we are subject to various inspections, audits, inquiries, investigations and similar actions by third parties, as well as by governmental/regulatory authorities responsible for enforcing the laws and regulations to which we may be subject. Further, under the federal False Claims Act, private parties have the right to bring qui tam, or “whistleblower,” suits against companies that submit false claims for payments to, or improperly retain overpayments from, the federal government. Some states have adopted similar state whistleblower and false claims provisions. In addition, we from time to time receive inquiries from federal, state and foreign agencies regarding compliance with various laws and regulations.

In our opinion, the amount of ultimate liability with respect to any of these other actions is unlikely to materially affect our financial position, results of operations or cash flows, though the resolutions and outcomes, individually or in the aggregate, could be material to our financial position, operating results or cash flows for any particular period, depending, in part, upon the operating results for such period.
30
Table of Contents
HUGHES SATELLITE SYSTEMS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)




We also indemnify our directors, officers and employees for certain liabilities that might arise from the performance of their responsibilities for us. Additionally, in the normal course of its business, we enter into contracts pursuant to which we may make a variety of representations and warranties and indemnify the counterparty for certain losses. Our possible exposure under these arrangements cannot be reasonably estimated as this involves the resolution of claims made, or future claims that may be made, against us or our officers, directors or employees, the outcomes of which are unknown and not currently predictable or estimable.

NOTE 16.    RELATED PARTY TRANSACTIONS - OTHER14.SEGMENT REPORTING

Business segments are components of an enterprise for which separate financial information is available and regularly evaluated by our chief operating decision maker (“CODM”), who is our Chief Executive Officer. We operate in 2 business segments, Hughes and ESS, as described in Note 1. Organization and Business Activities.
The primary measure of segment profitability that is reported regularly to our CODM is earnings before interest, taxes, depreciation and amortization, and net income (loss) attributable to non-controlling interests (“EBITDA”).

Total assets by segment have not been reported herein because the information is not provided to our CODM on a regular basis. 

Hughes Systique Corporation
We contract with Hughes Systique Corporation (“Hughes Systique”)The following table presents revenue, EBITDA and capital expenditures for software development services. In addition to our approximately 43% ownership in Hughes Systique, Mr. Pradman Kaul, the Presidenteach of our subsidiary Hughes Communications, Inc. and a member of EchoStar’s board of directors, and his brother, who is the Chief Executive Officer and President of Hughes Systique, in the aggregate, own approximately 25%, on an undiluted basis, of Hughes Systique’s outstanding shares as of September 30, 2020. Furthermore, Mr. Pradman Kaul serves on the board of directors of Hughes Systique. Hughes Systique is a variable interest entity and we are considered the primary beneficiary of Hughes Systique due to, among other factors, our ability to direct the activities that most significantly impact the economic performance of Hughes Systique. As a result, we consolidate Hughes Systique’s financial statements in these Condensed Consolidated Financial Statements.business segments:
HughesESS
Corporate
and Other
Consolidated
Total
For the three months ended March 31, 2021
External revenue$475,859 $4,001 $5,370 $485,230 
Intersegment revenue0 88 (88)— 
Total revenue$475,859 $4,089 $5,282 $485,230 
EBITDA$198,578 $1,919 $(9,091)$191,406 
Capital expenditures$82,196 $0 $0 $82,196 
For the three months ended March 31, 2020
External revenue$458,482 $4,367 $4,698 $467,547 
Intersegment revenue0 285 (285)— 
Total revenue$458,482 $4,652 $4,413 $467,547 
EBITDA$154,641 $2,030 $(6,646)$150,025 
Capital expenditures$91,517 $0 $0 $91,517 

4131
Table of Contents
HUGHES SATELLITE SYSTEMS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
TerreStar Solutions, Inc.

DISH Network owns more than 15%
The following table reconciles Net income (loss) in the Consolidated Statements of TerreStar Solutions, Inc. (“TSI”). In May 2018, we and TSI entered into an equipment and services agreement pursuantOperations to which we design, manufacture and install upgraded ground communications network equipment for TSI’s network and provide, among other things, warranty and support services. We recognized revenue of $0.7 million and $2.0 million for the three months ended September 30, 2020 and 2019, respectively, and $3.8 million and $10.2 million for the nine months ended September 30, 2020 and 2019, respectively. As of September 30, 2020 and December 31, 2019, we had trade accounts receivable from TSI of $0.0 million and $2.7 million, respectively.EBITDA:
For the three months ended March 31,
20212020
Net income (loss)$17,630 $(17,913)
Interest income, net(2,394)(8,892)
Interest expense, net of amounts capitalized41,922 42,192 
Income tax benefit (provision), net10,637 5,231 
Depreciation and amortization122,664 125,965 
Net loss (income) attributable to non-controlling interests947 3,442 
EBITDA$191,406 $150,025 

Global-IP Cayman

In May 2017, we entered into an agreement with Global-IP Cayman (“Global IP”) providing for the sale of certain equipment and services to Global IP. Mr. William David Wade, a member of EchoStar’s board of directors, served as a member of the board of directors of Global IP and as an executive advisor to the Chief Executive Officer of Global IP from September 2017 until April 2019 and from September 2017 until December 2019, respectively. In August 2018, we and Global IP amended the agreement to: (i) change certain of the equipment and services to be provided to Global IP, (ii) modify certain payment terms, (iii) provide Global IP an option to use one of our test lab facilities and (iv) effectuate the assignment of the agreement from Global IP to one of its wholly-owned subsidiaries. In February 2019, we terminated this agreement as a result of Global IP’s defaults resulting from its failure to make payments to us as required under the terms of this agreement. We have reserved our rights and remedies against Global IP under this agreement. We have not recognized any revenue since the termination of this agreement. As of September 30, 2020, we were owed $7.5 million from Global IP.

Maxar Technologies Inc.

Mr. Jeffrey Tarr, who joined EchoStar’s board of directors in March 2019, served as a consultant and advisor to Maxar Technologies Inc. and its subsidiaries (“Maxar Tech”) through May 2019. We previously entered into agreements with Maxar Tech for the manufacture and certain other services of the EchoStar IX satellite, the EchoStar XVII satellite, the EchoStar XIX satellite and the EchoStar XXI satellite and our former EchoStar XI satellite, EchoStar XIV satellite, EchoStar XVI satellite and EchoStar XXIII satellite. Maxar Tech provides us with anomaly support for these satellites once launched pursuant to the terms of the agreements. Maxar Tech also provides a warranty on one of these satellites and may be required to pay us certain amounts should the satellite not operate according to certain performance specifications. Our obligations to pay Maxar Tech under these agreements during the design life of the applicable satellites may be reduced if the applicable satellites do not operate according to certain performance specifications. We incurred aggregate costs payable to Maxar Tech under these agreements of $0.9 million and $12.1 million for the three months ended September 30, 2020 and 2019, respectively, and $5.3 million and $78.9 million for the nine months ended September 30, 2020 and 2019, respectively. At both September 30, 2020 and December 31, 2019, we had 0 trade accounts payable to Maxar Tech.

NOTE 17.15.    SUPPLEMENTAL FINANCIAL INFORMATION

ResearchOther Current Assets, Net and DevelopmentOther Non-current Assets, Net

The following table presents the researchcomponents of Other current assets, net, and development costs incurred in connection with customers’ orders:Other non-current assets, net:
For the three months ended September 30,For the nine months ended September 30,
2020201920202019
Cost of sales - equipment (exclusive of depreciation and amortization)$4,158 $6,564 $14,762 $18,275 
Research and development expenses$7,676 $6,136 $21,378 $19,411 

As of
March 31, 2021December 31, 2020
Other current assets, net:
Trade accounts receivable - DISH Network$4,449 $4,706 
Inventory95,439 97,831 
Prepaids and deposits43,812 42,243 
Related party receivables - EchoStar114,225 116,220 
Other, net28,764 30,815 
Total other current assets$286,689 $291,815 
Other non-current assets, net:
Restricted cash$835 $807 
Deferred tax assets, net1,520 1,679 
Capitalized software, net118,953 116,661 
Contract acquisition costs, net94,593 99,837 
Contract fulfillment costs, net1,916 2,580 
Related party receivables - EchoStar54,970 57,136 
Other, net29,629 28,977 
Total other non-current assets, net$302,416 $307,677 
4232
Table of Contents
HUGHES SATELLITE SYSTEMS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
Cash and Cash Equivalents and Restricted Cash

The following table reconciles Cash and cash equivalents and restricted cash, as presented in the Condensed Consolidated Balance Sheets, to the total of the same as presented in the Condensed Consolidated Statements of Cash Flows:
For the nine months ended September 30,
20202019
Cash and cash equivalents, including restricted amounts, beginning of period:
Cash and cash equivalents$1,139,435 $847,823 
Restricted cash887 796 
Total cash and cash equivalents, included restricted amounts, beginning of period$1,140,322 $848,619 
Cash and cash equivalents, including restricted amounts, end of period:
Cash and cash equivalents$443,727 $1,076,271 
Restricted cash795 973 
Total cash and cash equivalents, included restricted amounts, end of period$444,522 $1,077,244 

Other Current Assets, Net and Other Non-Current Assets, Net

The following table presents the components of Other current assets, net, and Other non-current assets, net:
As of
September 30,
2020		December 31, 2019
Other current assets, net:
Trade accounts receivable - DISH Network$6,553 $8,876 
Inventory93,597 79,474 
Prepaids and deposits43,758 42,324 
Contract acquisition costs, net12,578 16,869 
Related party receivables - EchoStar109,543 131,892 
Other, net27,350 22,217 
Total other current assets, net$293,379 $301,652 
Other non-current assets, net:
Restricted cash$795 $887 
Deferred tax assets, net9,449 7,215 
Capitalized software, net111,912 101,786 
Contract acquisition costs, net91,190 96,723 
Contract fulfillment costs, net2,625 3,010 
Related party receivables - EchoStar54,865 19,759 
Other, net25,797 22,556 
Total other non-current assets, net$296,633 $251,936 

43
Table of Contents
HUGHES SATELLITE SYSTEMS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
The following table presents the activity in our allowance for doubtful accounts, which is included within Other, net in each of Other current assets, net and Other non-current assets, net in the table above:
For the nine months ended September 30, 2020
Other current assets, netOther non-current assets, net
Balance at beginning of period$0 $0 
Credit losses (1)
1,595 13,378 
Foreign currency translation152 (606)
Balance at end of period$1,747 $12,772 

(1)    The impact of adopting ASC 326 on January 1, 2020 was a net increase to our allowance for doubtful accounts largely driven by a $13.4 million reclassification from Trade accounts receivables and contracts assets, net.

Accrued Expenses and Other Current Liabilities and Other Non-Current Liabilities

The following table presents the components of Accrued expenses and other current liabilities and Other non-current liabilities:
As of
September 30,
2020		December 31, 2019
Accrued expenses and other current liabilities:
Trade accounts payable - DISH Network$818 $502 
Accrued interest36,813 32,184 
Accrued compensation47,999 42,846 
Accrued taxes11,652 18,493 
Operating lease obligation14,466 14,112 
Related party payables - EchoStar14,029 11,132 
Other142,028 139,148 
Total accrued expenses and other current liabilities$267,805 $258,417 
Other non-current liabilities:
Related party payables - EchoStar$24,529 $23,980 
Other66,175 66,500 
Total other non-current liabilities$90,704 $90,480 

As of
March 31, 2021December 31, 2020
Accrued expenses and other current liabilities:
Related party payables - EchoStar$51,396 $51,421 
Trade accounts payable - DISH Network417 477 
Accrued interest34,514 42,388 
Accrued compensation44,489 52,231 
Accrued taxes11,937 11,780 
Operating lease obligation14,986 14,670 
Other170,577 152,620 
Total accrued expenses and other current liabilities$328,316 $325,587 
Other non-current liabilities:
Related party payables - EchoStar$24,533 $25,114 
Other62,109 62,843 
Total other non-current liabilities$86,642 $87,957 

Inventory

The following table presents the components of inventory:
As of
September 30,
2020		December 31, 2019
Raw materials$6,357 $4,240 
Work-in-process9,197 6,979 
Finished goods78,043 68,255 
Total inventory$93,597 $79,474 

As of
March 31, 2021December 31, 2020
Raw materials$5,308 $4,564 
Work-in-process7,054 8,280 
Finished goods83,077 84,987 
Total inventory$95,439 $97,831 

4433
Table of Contents
HUGHES SATELLITE SYSTEMS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)



Supplemental and Non-cash Investing and Financing Activities

The following table presents the supplemental and non-cash investing and financing activities:
For the nine months ended September 30,
 20202019
Supplemental disclosure of cash flow information:
Cash paid for interest, net of amounts capitalized$128,399 $176,919 
Cash paid for income taxes$3,550 $1,919 
Non-cash investing and financing activities:
Increase (decrease) in capital expenditures included in accounts payable, net$(1,418)$(1,883)

For the three months ended March 31,
 20212020
Supplemental disclosure of cash flow information:
Cash paid for interest, net of amounts capitalized$45,329 $49,563 
Cash paid for income taxes$276 $716 
Non-cash investing and financing activities:
Increase (decrease) in capital expenditures included in accounts payable, net$(973)$(5,359)

NOTE 18.    16.SUPPLEMENTAL GUARANTOR AND NON-GUARANTOR FINANCIAL INFORMATION

Certain of our wholly-owned subsidiaries (together, the “Guarantor Subsidiaries”) have fully and unconditionally guaranteed, on a joint and several basis, the obligations of our 5 1/4% Senior Secured Notes due August 1, 2026, 7 5/8% Senior Unsecured Notes due 2021 and 6 5/8% Senior Unsecured Notes due August 1, 2026 (collectively, the “Notes”).

The indentures governing the Notes contain restrictive covenants that, among other things, impose limitations on our ability and the ability of certain of our subsidiaries to pay dividends or make distributions, incur additional debt, make certain investments, create liens or enter into sale and leaseback transactions, merge or consolidate with another company, transfer and sell assets, enter into transactions with affiliates or allow to exist certain restrictions on the ability of certain of our subsidiaries to pay dividends, make distributions, make other payments, or transfer assets to us.

In lieu of separate financial statements of the Guarantor Subsidiaries, we have prepared the accompanying condensed consolidating financial information in accordance with Rule 3-10(f) of Regulation S-X. This includes:

•the accompanying condensed balance sheet;
•the accompanying condensed statement of operations and comprehensive income (loss); and
•the accompanying condensed statement of cash flows.

This also includes consolidating financial information as follows:

•the Guarantor Subsidiaries on a combined basis;
•the non-guarantor subsidiaries of HSSC on a combined basis; and
•the eliminations necessary to arrive at the corresponding information of HSSC on a consolidated basis.

This accompanying condensed consolidating financial information should be read in conjunction with these Condensed Consolidated Financial Statements.

4534
Table of Contents
HUGHES SATELLITE SYSTEMS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)

Condensed

Consolidating Balance Sheet as of September 30,March 31, 2021
Hughes Satellite Systems CorporationGuarantor
Subsidiaries		Non-Guarantor
Subsidiaries		EliminationsTotal
Assets
Current assets:
Cash and cash equivalents$1,313,882 $36,207 $53,837 $0 $1,403,926 
Marketable investment securities515,306 0 0 0 515,306 
Trade accounts receivable and contract assets, net0 130,895 56,377 0 187,272 
Other current assets, net148,125 922,870 93,812 (878,118)286,689 
Total current assets1,977,313 1,089,972 204,026 (878,118)2,393,193 
Non-current assets:
Property and equipment, net0 1,277,785 353,436 0 1,631,221 
Operating lease right-of-use assets0 104,304 27,148 0 131,452 
Goodwill0 504,173 6,772 0 510,945 
Regulatory authorizations, net0 400,000 9,960 0 409,960 
Other intangible assets, net0 16,246 0 0 16,246 
Other investments, net0 15,455 86,708 0 102,163 
Investment in subsidiaries2,965,049 322,434 0 (3,287,483)0 
Other non-current assets, net700 304,863 91,659 (94,806)302,416 
Total non-current assets2,965,749 2,945,260 575,683 (3,382,289)3,104,403 
Total assets$4,943,062 $4,035,232 $779,709 $(4,260,407)$5,497,596 
Liabilities and Shareholder's Equity
Current liabilities:
Trade accounts payable$0 $89,812 $14,871 $0 $104,683 
Current portion of long-term debt, net808,758 0 0 0 808,758 
Contract liabilities0 107,467 5,040 0 112,507 
Accrued expenses and other current liabilities635,846 341,850 228,738 (878,118)328,316 
Total current liabilities1,444,604 539,129 248,649 (878,118)1,354,264 
Non-current liabilities:
Long-term debt, net1,495,436 0 0 0 1,495,436 
Deferred tax liabilities, net345 373,485 2,536 0 376,366 
Operating lease liabilities0 96,042 22,410 0 118,452 
Other non-current liabilities0 62,089 119,359 (94,806)86,642 
Total non-current liabilities1,495,781 531,616 144,305 (94,806)2,076,896 
Total liabilities2,940,385 1,070,745 392,954 (972,924)3,431,160 
Shareholder's equity:
Total Hughes Satellite Systems Corporation shareholder's equity2,002,677 2,964,487 322,996 (3,287,483)2,002,677 
Non-controlling interests0 0 63,759 0 63,759 
Total shareholder's equity2,002,677 2,964,487 386,755 (3,287,483)2,066,436 
Total liabilities and shareholder's equity$4,943,062 $4,035,232 $779,709 $(4,260,407)$5,497,596 
35
Table of Contents
HUGHES SATELLITE SYSTEMS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)



Consolidating Balance Sheet as of December 31, 2020
Hughes Satellite Systems CorporationGuarantor
Subsidiaries		Non-Guarantor
Subsidiaries		EliminationsTotalHughes Satellite Systems CorporationGuarantor
Subsidiaries		Non-Guarantor
Subsidiaries		EliminationsTotal
AssetsAssetsAssets
Current assets:Current assets:Current assets:
Cash and cash equivalentsCash and cash equivalents$363,227 $40,947 $39,553 $0 $443,727 Cash and cash equivalents$649,851 $46,055 $44,584 $0 $740,490 
Marketable investment securitiesMarketable investment securities1,418,436 0 0 0 1,418,436 Marketable investment securities1,203,296 0 0 0 1,203,296 
Trade accounts receivable and contract assets, netTrade accounts receivable and contract assets, net0 135,355 55,547 0 190,902 Trade accounts receivable and contract assets, net0 129,572 54,416 0 183,988 
Other current assets93,564 823,948 97,272 (721,405)293,379 
Other current assets, netOther current assets, net148,158 830,912 171,676 (858,931)291,815 
Total current assetsTotal current assets1,875,227 1,000,250 192,372 (721,405)2,346,444 Total current assets2,001,305 1,006,539 270,676 (858,931)2,419,589 
Non-current assets:Non-current assets:Non-current assets:
Property and equipment, netProperty and equipment, net0 1,344,094 344,230 0 1,688,324 Property and equipment, net0 1,312,673 378,850 0 1,691,523 
Operating lease right-of-use assetsOperating lease right-of-use assets0 100,742 28,279 0 129,021 Operating lease right-of-use assets0 99,578 28,688 0 128,266 
GoodwillGoodwill0 504,173 4,487 0 508,660 Goodwill0 504,173 7,424 0 511,597 
Regulatory authorizations, netRegulatory authorizations, net0 400,000 10,558 0 410,558 Regulatory authorizations, net0 400,000 10,451 0 410,451 
Other intangible assets, netOther intangible assets, net0 20,433 0 0 20,433 Other intangible assets, net0 18,340 0 0 18,340 
Other investments, netOther investments, net0 105,161 0 0 105,161 Other investments, net0 103,924 0 0 103,924 
Investment in subsidiariesInvestment in subsidiaries2,884,940 216,617 0 (3,101,557)0 Investment in subsidiaries2,942,178 251,394 0 (3,193,572)0 
Other non-current assets, netOther non-current assets, net35,403 288,962 82,081 (109,813)296,633 Other non-current assets, net700 307,661 94,031 (94,715)307,677 
Total non-current assetsTotal non-current assets2,920,343 2,980,182 469,635 (3,211,370)3,158,790 Total non-current assets2,942,878 2,997,743 519,444 (3,288,287)3,171,778 
Total assetsTotal assets$4,795,570 $3,980,432 $662,007 $(3,932,775)$5,505,234 Total assets$4,944,183 $4,004,282 $790,120 $(4,147,218)$5,591,367 
Liabilities and Shareholder's EquityLiabilities and Shareholder's EquityLiabilities and Shareholder's Equity
Current liabilities:Current liabilities:Current liabilities:
Trade accounts payableTrade accounts payable$0 $89,227 $19,691 $0 $108,918 Trade accounts payable$0 $98,914 $19,654 $0 $118,568 
Current portion of long-term debt, netCurrent portion of long-term debt, net897,303 0 0 0 897,303 Current portion of long-term debt, net898,237 0 0 0 898,237 
Contract liabilitiesContract liabilities0 85,029 4,593 0 89,622 Contract liabilities0 99,838 4,731 0 104,569 
Accrued expenses and other current liabilitiesAccrued expenses and other current liabilities419,904 331,061 238,245 (721,405)267,805 Accrued expenses and other current liabilities529,661 352,121 302,736 (858,931)325,587 
Total current liabilitiesTotal current liabilities1,317,207 505,317 262,529 (721,405)1,363,648 Total current liabilities1,427,898 550,873 327,121 (858,931)1,446,961 
Non-current liabilities:Non-current liabilities:Non-current liabilities:
Long-term debt, netLong-term debt, net1,495,078 0 0 0 1,495,078 Long-term debt, net1,495,256 0 0 0 1,495,256 
Deferred tax liabilities, netDeferred tax liabilities, net0 433,366 0 (34,787)398,579 Deferred tax liabilities, net9,569 357,835 2,536 0 369,940 
Operating lease liabilitiesOperating lease liabilities0 92,101 23,265 0 115,366 Operating lease liabilities0 91,241 23,636 0 114,877 
Other non-current liabilitiesOther non-current liabilities0 65,271 100,459 (75,026)90,704 Other non-current liabilities0 62,717 119,955 (94,715)87,957 
Total non-current liabilitiesTotal non-current liabilities1,495,078 590,738 123,724 (109,813)2,099,727 Total non-current liabilities1,504,825 511,793 146,127 (94,715)2,068,030 
Total liabilitiesTotal liabilities2,812,285 1,096,055 386,253 (831,218)3,463,375 Total liabilities2,932,723 1,062,666 473,248 (953,646)3,514,991 
Shareholder's equity:Shareholder's equity:Shareholder's equity:
Total Hughes Satellite Systems Corporation shareholder's equityTotal Hughes Satellite Systems Corporation shareholder's equity1,983,285 2,884,377 217,180 (3,101,557)1,983,285 Total Hughes Satellite Systems Corporation shareholder's equity2,011,460 2,941,616 251,956 (3,193,572)2,011,460 
Non-controlling interestsNon-controlling interests0 0 58,574 0 58,574 Non-controlling interests0 0 64,916 0 64,916 
Total shareholder's equityTotal shareholder's equity1,983,285 2,884,377 275,754 (3,101,557)2,041,859 Total shareholder's equity2,011,460 2,941,616 316,872 (3,193,572)2,076,376 
Total liabilities and shareholder's equityTotal liabilities and shareholder's equity$4,795,570 $3,980,432 $662,007 $(3,932,775)$5,505,234 Total liabilities and shareholder's equity$4,944,183 $4,004,282 $790,120 $(4,147,218)$5,591,367 

 
4636
Table of Contents
HUGHES SATELLITE SYSTEMS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)

Condensed

Consolidating Balance Sheet asStatement of DecemberOperations and Comprehensive Income (Loss)
For the Three Months Ended March 31, 20192021
Hughes Satellite Systems CorporationGuarantor
Subsidiaries		Non-Guarantor
Subsidiaries		EliminationsTotal
Assets
Current assets:
Cash and cash equivalents$1,057,903 $32,338 $49,194 $0 $1,139,435 
Marketable investment securities652,594 241 0 0 652,835 
Trade accounts receivable and contract assets, net0 129,722 66,798 0 196,520 
Other current assets93,536 602,337 107,959 (502,180)301,652 
Total current assets1,804,033 764,638 223,951 (502,180)2,290,442 
Non-current assets:
Property and equipment, net0 1,459,151 398,430 0 1,857,581 
Operating lease right-of-use assets0 89,106 24,293 0 113,399 
Goodwill0 504,173 2,780 0 506,953 
Regulatory authorizations, net0 400,000 12,363 0 412,363 
Other intangible assets, net0 29,321 0 0 29,321 
Other investments, net0 110,040 0 0 110,040 
Investment in subsidiaries2,876,572 282,163 0 (3,158,735)0 
Other non-current assets, net10,672 772,193 42,557 (573,486)251,936 
Total non-current assets2,887,244 3,646,147 480,423 (3,732,221)3,281,593 
Total assets$4,691,277 $4,410,785 $704,374 $(4,234,401)$5,572,035 
Liabilities and Shareholder's Equity
Current liabilities:
Trade accounts payable$0 $102,744 $18,808 $0 $121,552 
Contract liabilities0 96,485 4,575 0 101,060 
Accrued expenses and other current liabilities243,694 314,583 202,320 (502,180)258,417 
Total current liabilities243,694 513,812 225,703 (502,180)481,029 
Non-current liabilities:
Long-term debt, net2,389,168 0 0 0 2,389,168 
Deferred tax liabilities, net0 390,288 0 (9,972)380,316 
Operating lease liabilities0 77,366 19,513 0 96,879 
Other non-current liabilities0 553,518 100,476 (563,514)90,480 
Total non-current liabilities2,389,168 1,021,172 119,989 (573,486)2,956,843 
Total liabilities2,632,862 1,534,984 345,692 (1,075,666)3,437,872 
Shareholder's equity:
Total Hughes Satellite Systems Corporation shareholder's equity2,058,415 2,875,801 282,934 (3,158,735)2,058,415 
Non-controlling interests0 0 75,748 0 75,748 
Total shareholder's equity2,058,415 2,875,801 358,682 (3,158,735)2,134,163 
Total liabilities and shareholder's equity$4,691,277 $4,410,785 $704,374 $(4,234,401)$5,572,035 
Hughes Satellite Systems Corporation
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries
EliminationsTotal
Revenue:
Services and other revenue$0 $363,697 $77,703 $(8,409)$432,991 
Equipment revenue0 61,037 8,046 (16,844)52,239 
Total revenue0 424,734 85,749 (25,253)485,230 
Costs and expenses:
Cost of sales - services and other (exclusive of depreciation and amortization)0 103,207 36,229 (8,024)131,412 
Cost of sales - equipment (exclusive of depreciation and amortization)0 56,430 5,369 (16,659)45,140 
Selling, general and administrative expenses0 83,543 21,397 (570)104,370 
Research and development expenses0 7,358 187 0 7,545 
Depreciation and amortization0 94,252 28,412 0 122,664 
Impairment of long-lived assets0 210 0 0 210 
Total costs and expenses0 345,000 91,594 (25,253)411,341 
Operating income (loss)0 79,734 (5,845)0 73,889 
Other income (expense):
Interest income1,036 1,287 1,281 (1,210)2,394 
Interest expense, net of amounts capitalized(40,244)45 (2,933)1,210 (41,922)
Equity in earnings (losses) of unconsolidated affiliates, net0 219 (1,980)0 (1,761)
Equity in earnings (losses) of subsidiaries, net50,143 (12,617)0 (37,526)0 
Foreign currency transaction gains (losses), net0 (3)(3,357)0 (3,360)
Other, net(1,582)744 (135)0 (973)
Total other income (expense), net9,353 (10,325)(7,124)(37,526)(45,622)
Income (loss) before income taxes9,353 69,409 (12,969)(37,526)28,267 
Income tax benefit (provision), net9,224 (19,266)(595)0 (10,637)
Net income (loss)18,577 50,143 (13,564)(37,526)17,630 
Less: Net loss (income) attributable to non-controlling interests0 0 947 0 947 
Net income (loss) attributable to HSSC$18,577 $50,143 $(12,617)$(37,526)$18,577 
Comprehensive income (loss):
Net income (loss)$18,577 $50,143 $(13,564)$(37,526)$17,630 
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments0 0 (33,742)0 (33,742)
Unrealized gains (losses) on available-for-sale securities(88)0 0 0 (88)
Amounts reclassified to net income (loss):
Equity in other comprehensive income (loss) of subsidiaries, net(28,132)(28,132)0 56,264 0 
Total other comprehensive income (loss), net of tax(28,220)(28,132)(33,742)56,264 (33,830)
Comprehensive income (loss)(9,643)22,011 (47,306)18,738 (16,200)
Less: Comprehensive loss (income) attributable to non-controlling interests0 0 6,557 0 6,557 
Comprehensive income (loss) attributable to HSSC$(9,643)$22,011 $(40,749)$18,738 $(9,643)
4737
Table of Contents
HUGHES SATELLITE SYSTEMS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)



Consolidating Statement of Operations and Comprehensive Income (Loss)
For the Three Months Ended March 31, 2020
Hughes Satellite Systems Corporation
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries
EliminationsTotal
Revenue:     
Services and other revenue$0 $354,399 $64,928 $(9,089)$410,238 
Equipment revenue0 65,586 5,410 (13,687)57,309 
Total revenue0 419,985 70,338 (22,776)467,547 
Costs and expenses:
Cost of sales - services and other (exclusive of depreciation and amortization)0 110,471 42,063 (8,649)143,885 
Cost of sales - equipment (exclusive of depreciation and amortization)0 55,374 4,221 (13,687)45,908 
Selling, general and administrative expenses0 95,818 20,482 (440)115,860 
Research and development expenses0 6,109 145 0 6,254 
Depreciation and amortization0 99,359 26,606 0 125,965 
Total costs and expenses0 367,131 93,517 (22,776)437,872 
Operating income (loss)0 52,854 (23,179)0 29,675 
Other income (expense):
Interest income7,953 971 891 (923)8,892 
Interest expense, net of amounts capitalized(40,472)(613)(2,030)923 (42,192)
Gains (losses) on investments, net0 (164)0 0 (164)
Equity in earnings (losses) of unconsolidated affiliates, net0 (1,087)0 0 (1,087)
Equity in earnings (losses) of subsidiaries, net10,630 (29,167)0 18,537 0 
Foreign currency transaction gains (losses), net0 (2)(7,526)0 (7,528)
Other, net0 (275)(3)0 (278)
Total other income (expense), net(21,889)(30,337)(8,668)18,537 (42,357)
Income (loss) before income taxes(21,889)22,517 (31,847)18,537 (12,682)
Income tax benefit (provision), net7,418 (11,804)(845)0 (5,231)
Net income (loss)(14,471)10,713 (32,692)18,537 (17,913)
Less: Net loss (income) attributable to non-controlling interests0 0 3,442 0 3,442 
Net income (loss) attributable to HSSC$(14,471)$10,713 $(29,250)$18,537 $(14,471)
Comprehensive income (loss):     
Net income (loss)$(14,471)$10,713 $(32,692)$18,537 $(17,913)
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments0 0 (82,836)0 (82,836)
Unrealized gains (losses) on available-for-sale securities(2,479)0 0 0 (2,479)
Other0 0 (405)0 (405)
Equity in other comprehensive income (loss) of subsidiaries, net(66,918)(66,918)0 133,836 0 
Total other comprehensive income (loss), net of tax(69,397)(66,918)(83,241)133,836 (85,720)
Comprehensive income (loss)(83,868)(56,205)(115,933)152,373 (103,633)
Less: Comprehensive loss (income) attributable to non-controlling interests0 0 19,765 0 19,765 
Comprehensive income (loss) attributable to HSSC$(83,868)$(56,205)$(96,168)$152,373 $(83,868)

38
Table of Contents
HUGHES SATELLITE SYSTEMS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)

Condensed

Consolidating Statement of Operations and Comprehensive Income (Loss)Cash Flows
For the Three Months Ended September 30, 2020March 31, 2021
Hughes Satellite Systems CorporationGuarantor
Subsidiaries		Non-Guarantor
Subsidiaries		EliminationsTotal
Revenue:
Services and other revenue$0 $367,007 $70,686 $(8,803)$428,890 
Equipment revenue0 62,643 4,887 (20,560)46,970 
Total revenue0 429,650 75,573 (29,363)475,860 
Costs and expenses:
Cost of sales - services and other (exclusive of depreciation and amortization)0 112,074 41,988 (8,654)145,408 
Cost of sales - equipment (exclusive of depreciation and amortization)0 56,311 1,323 (20,560)37,074 
Selling, general and administrative expenses0 90,020 15,438 (149)105,309 
Research and development expenses0 7,509 167 0 7,676 
Depreciation and amortization0 97,213 25,932 0 123,145 
Total costs and expenses0 363,127 84,848 (29,363)418,612 
Operating income (loss)0 66,523 (9,275)0 57,248 
Other income (expense):
Interest income1,398 1,025 1,375 (959)2,839 
Interest expense, net of amounts capitalized(40,512)(286)(4,338)959 (44,177)
Gains (losses) on investments, net(75)1 0 0 (74)
Equity in earnings (losses) of unconsolidated affiliates, net0 (2,422)0 0 (2,422)
Equity in earnings (losses) of subsidiaries, net43,893 (7,079)0 (36,814)0 
Foreign currency transaction gains (losses), net0 5 3,067 0 3,072 
Other, net0 (82)277 0 195 
Total other income (expense), net4,704 (8,838)381 (36,814)(40,567)
Income (loss) from continuing operations before income taxes4,704 57,685 (8,894)(36,814)16,681 
Income tax benefit (provision), net8,945 (13,760)(384)0 (5,199)
Net income (loss)13,649 43,925 (9,278)(36,814)11,482 
Less: Net loss (income) attributable to non-controlling interests0 0 2,167 0 2,167 
Net income (loss) attributable to HSSC$13,649 $43,925 $(7,111)$(36,814)$13,649 
Comprehensive income (loss):
Net income (loss)$13,649 $43,925 $(9,278)$(36,814)$11,482 
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments0 0 (10,170)0 (10,170)
Unrealized gains (losses) on available-for-sale securities20 0 0 0 20 
Other0 0 500 0 500 
Equity in other comprehensive income (loss)
of subsidiaries, net		(7,739)(7,739)0 15,478 0 
Total other comprehensive income (loss), net of tax(7,719)(7,739)(9,670)15,478 (9,650)
Comprehensive income (loss)5,930 36,186 (18,948)(21,336)1,832 
Less: Comprehensive loss (income) attributable to non-controlling interests0 0 4,098 0 4,098 
Comprehensive income (loss) attributable to HSSC$5,930 $36,186 $(14,850)$(21,336)$5,930 
Hughes Satellite Systems CorporationGuarantor
Subsidiaries		Non-Guarantor
Subsidiaries		EliminationsTotal
Cash flows from operating activities:
Net income (loss)$18,577 $50,143 $(13,564)$(37,526)$17,630 
Adjustments to reconcile net income (loss) to net cash flows from operating activities(61,725)102,402 25,616 37,526 103,819 
Net cash provided by (used for) operating activities(43,148)152,545 12,052 0 121,449 
Cash flows from investing activities:
Purchases of marketable investment securities(310,528)0 0 0 (310,528)
Sales and maturities of marketable investment securities1,003,198 0 0 0 1,003,198 
Expenditures for property and equipment0 (52,246)(29,950)0 (82,196)
Expenditures for externally marketed software0 (7,846)0 0 (7,846)
Distributions (contributions) and advances from (to) subsidiaries, net77,097 (24,100)0 (52,997)0 
Net cash provided by (used for) investing activities769,767 (84,192)(29,950)(52,997)602,628 
Cash flows from financing activities:
Repurchase of the 2021 Senior Unsecured Notes(62,588)0 0 0 (62,588)
Payment of finance lease obligations0 0 (329)0 (329)
Payment of in-orbit incentive obligations0 (1,104)0 0 (1,104)
Contribution by non-controlling interest holder0 0 5,400 0 5,400 
Other, net0 0 (292)0 (292)
Contribution (distributions) and advances (to) from parent, net0 (77,097)24,100 52,997 0 
Net cash provided by (used for) financing activities(62,588)(78,201)28,879 52,997 (58,913)
Effect of exchange rates on cash and cash equivalents0 0 (1,700)0 (1,700)
Net increase (decrease) in cash and cash equivalents664,031 (9,848)9,281 0 663,464 
Cash and cash equivalents, including restricted amounts, beginning of period649,851 46,055 45,391 0 741,297 
Cash and cash equivalents, including restricted amounts, end of period$1,313,882 $36,207 $54,672 $0 $1,404,761 

4839
Table of Contents
HUGHES SATELLITE SYSTEMS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)

Condensed Consolidating Statement of Operations and Comprehensive Income (Loss)
For the Three Months Ended September 30, 2019
Hughes Satellite Systems CorporationGuarantor
Subsidiaries		Non-Guarantor
Subsidiaries		EliminationsTotal
Revenue:
Services and other revenue$0 $356,682 $59,569 $(8,855)$407,396 
Equipment revenue0 76,905 4,246 (15,426)65,725 
Total revenue0 433,587 63,815 (24,281)473,121 
Costs and expenses:
Cost of sales - services and other (exclusive of depreciation and amortization)0 110,388 40,428 (8,387)142,429 
Cost of sales - equipment (exclusive of depreciation and amortization)0 63,437 3,177 (15,426)51,188 
Selling, general and administrative expenses0 88,853 23,602 (468)111,987 
Research and development expenses0 5,953 183 0 6,136 
Depreciation and amortization0 99,099 16,849 0 115,948 
Total costs and expenses0 367,730 84,239 (24,281)427,688 
Operating income (loss)0 65,857 (20,424)0 45,433 
Other income (expense):
Interest income10,968 1,466 1,106 (1,240)12,300 
Interest expense, net of amounts capitalized(40,433)(1,016)(15,399)1,240 (55,608)
Gains (losses) on investments, net37 33 0 0 70 
Equity in earnings (losses) of unconsolidated affiliates, net0 (894)0 0 (894)
Equity in earnings (losses) of subsidiaries, net26,054 (44,409)0 18,355 0 
Foreign currency transaction gains (losses), net0 (3)(11,635)0 (11,638)
Other, net0 (6)(1,553)0 (1,559)
Total other income (expense), net(3,374)(44,829)(27,481)18,355 (57,329)
Income (loss) from continuing operations before income taxes(3,374)21,028 (47,905)18,355 (11,896)
Income tax benefit (provision), net7,590 (13,375)609 0 (5,176)
Net income (loss) from continuing operations4,216 7,653 (47,296)18,355 (17,072)
Net income (loss) from discontinued operations(4,109)18,491 0 0 14,382 
Net income (loss)107 26,144 (47,296)18,355 (2,690)
Less: Net loss (income) attributable to non-controlling interests0 0 2,797 0 2,797 
Net income (loss) attributable to HSSC$107 $26,144 $(44,499)$18,355 $107 
Comprehensive income (loss):
Net income (loss)$107 $26,144 $(47,296)$18,355 $(2,690)
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments0 0 (16,247)0 (16,247)
Unrealized gains (losses) on available-for-sale securities15 0 (145)0 (130)
Other0 0 13 0 13 
Equity in other comprehensive income (loss)
of subsidiaries, net		(16,379)(16,379)0 32,758 0 
Total other comprehensive income (loss), net of tax(16,364)(16,379)(16,379)32,758 (16,364)
Comprehensive income (loss)(16,257)9,765 (63,675)51,113 (19,054)
Less: Comprehensive loss (income) attributable to non-controlling interests0 0 2,797 0 2,797 
Comprehensive income (loss) attributable to HSSC$(16,257)$9,765 $(60,878)$51,113 $(16,257)
49

Table of Contents
HUGHES SATELLITE SYSTEMS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
Condensed Consolidating Statement of Operations and Comprehensive Income (Loss)
For the Nine Months Ended September 30, 2020
Hughes Satellite Systems CorporationGuarantor
Subsidiaries		Non-Guarantor
Subsidiaries		EliminationsTotal
Revenue:
Services and other revenue$0 $1,087,252 $197,827 $(26,729)$1,258,350 
Equipment revenue0 186,814 16,563 (56,675)146,702 
Total revenue0 1,274,066 214,390 (83,404)1,405,052 
Costs and expenses:
Cost of sales - services and other (exclusive of depreciation and amortization)0 333,195 121,582 (25,531)429,246 
Cost of sales - equipment (exclusive of depreciation and amortization)0 158,800 13,399 (56,675)115,524 
Selling, general and administrative expenses0 269,090 56,508 (1,198)324,400 
Research and development expenses0 20,924 454 0 21,378 
Depreciation and amortization0 295,236 77,352 0 372,588 
Total costs and expenses0 1,077,245 269,295 (83,404)1,263,136 
Operating income (loss)0 196,821 (54,905)0 141,916 
Other income (expense):
Interest income13,603 2,999 3,163 (2,830)16,935 
Interest expense, net of amounts capitalized(121,477)(1,367)(10,630)2,830 (130,644)
Gains (losses) on investments, net(73)(149)0 0 (222)
Equity in earnings (losses) of unconsolidated affiliates, net0 (4,878)0 0 (4,878)
Equity in earnings (losses) of subsidiaries, net86,290 (59,399)0 (26,891)0 
Foreign currency transaction gains (losses), net0 (241)(4,355)0 (4,596)
Other, net0 (632)162 0 (470)
Total other income (expense), net(21,657)(63,667)(11,660)(26,891)(123,875)
Income (loss) from continuing operations before income taxes(21,657)133,154 (66,565)(26,891)18,041 
Income tax benefit (provision), net24,640 (46,660)(2,078)0 (24,098)
Net income (loss)2,983 86,494 (68,643)(26,891)(6,057)
Less: Net loss (income) attributable to non-controlling interests0 0 9,040 0 9,040 
Net income (loss) attributable to HSSC$2,983 $86,494 $(59,603)$(26,891)$2,983 
Comprehensive income (loss):
Net income (loss)$2,983 $86,494 $(68,643)$(26,891)$(6,057)
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments0 0 (103,351)0 (103,351)
Unrealized gains (losses) on available-for-sale securities(189)0 0 0 (189)
Other0 0 380 0 380 
Equity in other comprehensive income (loss)
of subsidiaries, net		(82,344)(82,344)0 164,688 0 
Total other comprehensive income (loss), net of tax(82,533)(82,344)(102,971)164,688 (103,160)
Comprehensive income (loss)(79,550)4,150 (171,614)137,797 (109,217)
Less: Comprehensive loss (income) attributable to non-controlling interests0 0 29,667 0 29,667 
Comprehensive income (loss) attributable to HSSC$(79,550)$4,150 $(141,947)$137,797 $(79,550)
50
Table of Contents
HUGHES SATELLITE SYSTEMS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
Condensed Consolidating Statement of Operations and Comprehensive Income (Loss)
For the Nine Months Ended September 30, 2019
Hughes Satellite Systems CorporationGuarantor
Subsidiaries		Non-Guarantor
Subsidiaries		EliminationsTotal
Revenue:
Services and other revenue$0 $1,062,574 $178,525 $(26,623)$1,214,476 
Equipment revenue0 190,394 21,961 (37,271)175,084 
Total revenue0 1,252,968 200,486 (63,894)1,389,560 
Costs and expenses:
Cost of sales - services and other (exclusive of depreciation and amortization)0 330,634 120,061 (24,799)425,896 
Cost of sales - equipment (exclusive of depreciation and amortization)0 164,027 15,988 (37,271)142,744 
Selling, general and administrative expenses88 290,556 64,739 (1,824)353,559 
Research and development expenses0 18,893 518 0 19,411 
Depreciation and amortization0 293,519 48,567 0 342,086 
Total costs and expenses88 1,097,629 249,873 (63,894)1,283,696 
Operating income (loss)(88)155,339 (49,387)0 105,864 
Other income (expense):
Interest income44,693 3,403 2,198 (2,953)47,341 
Interest expense, net of amounts capitalized(150,234)(7,302)(17,919)2,953 (172,502)
Gains (losses) on investments, net437 (727)0 0 (290)
Equity in earnings (losses) of unconsolidated affiliates, net0 (2,882)0 0 (2,882)
Equity in earnings (losses) of subsidiaries, net110,118 (77,204)0 (32,914)0 
Foreign currency transaction gains (losses), net0 (19)(10,330)0 (10,349)
Other, net(100)(38)(1,642)0 (1,780)
Total other income (expense), net4,914 (84,769)(27,693)(32,914)(140,462)
Income (loss) from continuing operations before income taxes4,826 70,570 (77,080)(32,914)(34,598)
Income tax benefit (provision), net25,193 (24,656)(1,722)0 (1,185)
Net income (loss) from continuing operations30,019 45,914 (78,802)(32,914)(35,783)
Net income (loss) from discontinued operations(6,709)64,443 0 0 57,734 
Net income (loss)23,310 110,357 (78,802)(32,914)21,951 
Less: Net loss (income) attributable to non-controlling interests0 0 1,359 0 1,359 
Net income (loss) attributable to HSSC$23,310 $110,357 $(77,443)$(32,914)$23,310 
Comprehensive income (loss):
Net income (loss)$23,310 $110,357 $(78,802)$(32,914)$21,951 
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments0 0 (13,927)0 (13,927)
Unrealized gains (losses) on available-for-sale securities2,333 0 (145)0 2,188 
Other0 0 0 0 0 
Equity in other comprehensive income (loss)
of subsidiaries, net		(14,072)(14,072)0 28,144 0 
Amounts reclassified to net income (loss):
Realized losses (gains) on available-for-sale securities(400)0 0 0 (400)
Total other comprehensive income (loss), net of tax(12,139)(14,072)(14,072)28,144 (12,139)
Comprehensive income (loss)11,171 96,285 (92,874)(4,770)9,812 
Less: Comprehensive loss (income) attributable to non-controlling interests0 0 1,359 0 1,359 
Comprehensive income (loss) attributable to HSSC$11,171 $96,285 $(91,515)$(4,770)$11,171 
51
Table of Contents
HUGHES SATELLITE SYSTEMS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
Condensed Consolidating Statement of Cash Flows
For the NineThree Months Ended September 30,March 31, 2020
Hughes Satellite Systems CorporationGuarantor
Subsidiaries		Non-Guarantor
Subsidiaries		EliminationsTotalHughes Satellite Systems Corporation
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries
EliminationsTotal
Cash flows from operating activities:Cash flows from operating activities:Cash flows from operating activities:
Net income (loss)Net income (loss)$2,983 $86,494 $(68,643)$(26,891)$(6,057)Net income (loss)$(14,471)$10,713 $(32,692)$18,537 $(17,913)
Adjustments to reconcile net income (loss) to net cash flows from operating activitiesAdjustments to reconcile net income (loss) to net cash flows from operating activities(37,046)261,104 109,927 26,891 360,876 Adjustments to reconcile net income (loss) to net cash flows from operating activities(22,215)95,031 28,858 (18,537)83,137 
Net cash flows from operating activities(34,063)347,598 41,284 0 354,819 
Net cash provided by (used for) operating activitiesNet cash provided by (used for) operating activities(36,686)105,744 (3,834)0 65,224 
Cash flows from investing activities:Cash flows from investing activities:Cash flows from investing activities:
Purchases of marketable investment securitiesPurchases of marketable investment securities(1,611,870)0 0 0 (1,611,870)Purchases of marketable investment securities(365,877)0 0 0 (365,877)
Sales and maturities of marketable investment securitiesSales and maturities of marketable investment securities843,294 0 0 0 843,294 Sales and maturities of marketable investment securities490,020 0 0 0 490,020 
Dividend received from unconsolidated affiliate0 0 0 0 0 
Expenditures for property and equipmentExpenditures for property and equipment0 (152,660)(111,224)0 (263,884)Expenditures for property and equipment0 (61,134)(30,383)0 (91,517)
Expenditures for externally marketed softwareExpenditures for externally marketed software0 (27,824)0 0 (27,824)Expenditures for externally marketed software0 (8,638)0 0 (8,638)
Distributions (contributions) and advances
from (to) subsidiaries, net		Distributions (contributions) and advances
from (to) subsidiaries, net		107,963 (49,274)0 (58,689)0 Distributions (contributions) and advances from (to) subsidiaries, net29,290 (18,939)0 (10,351)0 
Net cash flows from investing activities(660,613)(229,758)(111,224)(58,689)(1,060,284)
Net cash provided by (used for) investing activitiesNet cash provided by (used for) investing activities153,433 (88,711)(30,383)(10,351)23,988 
Cash flows from financing activities:Cash flows from financing activities:Cash flows from financing activities:
Payment of finance lease obligationsPayment of finance lease obligations0 0 (606)0 (606)Payment of finance lease obligations0 0 (215)0 (215)
Payment of in-orbit incentive obligationsPayment of in-orbit incentive obligations0 (1,268)0 0 (1,268)Payment of in-orbit incentive obligations0 (203)0 0 (203)
Contribution by non-controlling interest holderContribution by non-controlling interest holder0 0 14,268 0 14,268 Contribution by non-controlling interest holder0 0 4,000 0 4,000 
Other, netOther, net0 0 998 0 998 Other, net0 0 979 0 979 
Contributions (distributions) and advances
(to) from parent, net		0 (107,963)49,274 58,689 0 
Net cash flows from financing activities0 (109,231)63,934 58,689 13,392 
Contribution (distributions) and advances (to) from parent, netContribution (distributions) and advances (to) from parent, net0 (29,290)18,939 10,351 0 
Net cash provided by (used for) financing activitiesNet cash provided by (used for) financing activities0 (29,493)23,703 10,351 4,561 
Effect of exchange rates on cash and cash equivalentsEffect of exchange rates on cash and cash equivalents0 0 (3,727)0 (3,727)Effect of exchange rates on cash and cash equivalents0 0 (4,618)0 (4,618)
Net increase (decrease) in cash and cash equivalentsNet increase (decrease) in cash and cash equivalents(694,676)8,609 (9,733)0 (695,800)Net increase (decrease) in cash and cash equivalents116,747 (12,460)(15,132)0 89,155 
Cash and cash equivalents, including restricted amounts, beginning of periodCash and cash equivalents, including restricted amounts, beginning of period1,057,903 32,338 50,081 0 1,140,322 Cash and cash equivalents, including restricted amounts, beginning of period1,057,903 32,338 50,081 0 1,140,322 
Cash and cash equivalents, including restricted amounts, end of periodCash and cash equivalents, including restricted amounts, end of period$363,227 $40,947 $40,348 $0 $444,522 Cash and cash equivalents, including restricted amounts, end of period$1,174,650 $19,878 $34,949 $0 $1,229,477 

 
52
Table of Contents
HUGHES SATELLITE SYSTEMS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
Condensed Consolidating Statement of Cash Flows
For the Nine Months Ended September 30, 2019
Hughes Satellite Systems CorporationGuarantor
Subsidiaries		Non-Guarantor
Subsidiaries		EliminationsTotal
Cash flows from operating activities:
Net income (loss)$23,310 $110,357 $(78,802)$(32,914)$21,951 
Adjustments to reconcile net income (loss) to net cash flows from operating activities(132,557)493,418 105,514 32,914 499,289 
Net cash flows from operating activities(109,247)603,775 26,712 0 521,240 
Cash flows from investing activities:
Purchases of marketable investment securities(462,625)0 0 0 (462,625)
Sales and maturities of marketable investment securities1,375,245 (3)0 0 1,375,242 
Dividend received from unconsolidated affiliate0 2,284 0 0 2,284 
Expenditures for property and equipment0 (162,643)(62,351)0 (224,994)
Expenditures for externally marketed software0 (21,364)0 0 (21,364)
Distributions (contributions) and advances
from (to) subsidiaries, net		359,145 (38,282)0 (320,863)0 
Net cash flows from investing activities1,271,765 (220,008)(62,351)(320,863)668,543 
Cash flows from financing activities:
Repurchase and maturity of the 2019 Senior Secured Notes(920,923)0 0 0 (920,923)
Payment of finance lease obligations0 (27,203)(1,932)0 (29,135)
Payment of in-orbit incentive obligations0 (5,269)0 0 (5,269)
Purchase of non-controlling interest0 (2,666)(4,647)0 (7,313)
Other, net0 0 1,172 0 1,172 
Contributions (distributions) and advances
(to) from parent, net		0 (359,145)38,282 320,863 0 
Net cash flows from financing activities(920,923)(394,283)32,875 320,863 (961,468)
Effect of exchange rates on cash and cash equivalents0 0 310 0 310 
Net increase (decrease) in cash and cash equivalents241,595 (10,516)(2,454)0 228,625 
Cash and cash equivalents, including restricted amounts, beginning of period771,718 46,353 30,548 0 848,619 
Cash and cash equivalents, including restricted amounts, end of period$1,013,313 $35,837 $28,094 $0 $1,077,244 
5340
Table of Contents

ITEM 2.MANAGEMENT’S NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS
Unless the context indicates otherwise, the terms “we,” “us,” “HSSC,” the “Company” and “our” refer to Hughes Satellite Systems Corporation and its subsidiaries. The following Management’s Narrative Analysis of Results of Operations (“Management’s Narrative Analysis”) should be read in conjunction with our accompanying Condensed Consolidated Financial Statements and notes thereto (“Accompanying Condensed Consolidated Financial Statements”) in Item 1 of this Quarterly Report on Form 10-Q (“Form 10-Q”).  This Management’s Narrative 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 Narrative 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
 
We are a holding company and a subsidiary of EchoStar Corporation (“EchoStar”).EchoStar.  We were formed as a Colorado corporation in March 2011.  We are a global provider of broadband satellite technologies, broadband internet services for consumer customers, which include home and small to medium-sized businesses, and satellite services. We also deliver innovative network technologies, managed services and communications solutions for enterprise customers, which include aeronautical and government enterprises.

In September 2019, pursuant to a master transaction agreement (the “Master Transaction Agreement”) with DISH Network Corporation (“DISH”) and a wholly-owned subsidiary of DISH (“Merger Sub”), (i) we, EchoStar and its other subsidiaries transferred certain real property and the various businesses, products, licenses, technology, revenues, billings, operating activities, assets and liabilities primarily related to the former portion of our ESS segment that managed, marketed and provided (1) broadcast satellite services primarily to DISH and its subsidiaries (together with DISH, “DISH Network”) and EchoStar’s joint venture Dish Mexico, S. de R.L. de C.V. (“Dish Mexico”) and its subsidiaries, and (2) telemetry, tracking and control (“TT&C”) services for satellites owned by DISH Network and a portion of EchoStar’s and our other businesses (collectively, the “BSS Business”) to one of our former subsidiaries, EchoStar BSS Corporation (“BSS Corp.”), (ii) EchoStar distributed to each holder of shares of EchoStar’s Class A or Class B common stock entitled to receive consideration in the transaction an amount of shares of common stock of BSS Corp., par value $0.001 per share (“BSS Common Stock”), equal to one share of BSS Common Stock for each share of EchoStar’s Class A or Class B common stock owned by such EchoStar stockholder (the “Distribution”); and (iii) immediately after the Distribution, (1) Merger Sub merged with and into BSS Corp. (the “Merger”), such that BSS Corp. became a wholly-owned subsidiary of DISH and with DISH then owning and operating the BSS Business, and (2) each issued and outstanding share of BSS Common Stock owned by EchoStar stockholders was converted into the right to receive 0.23523769 shares of DISH Class A common stock, par value $0.001 per share (“DISH Common Stock”) ((i) - (iii) collectively, the “BSS Transaction”).

Following the consummation of the BSS Transaction, we no longer operate the BSS Business, which was a substantial portion of our ESS segment. As a result of the BSS Transaction, the financial results of the BSS Business, except for certain real estate that transferred in the transaction, are presented as discontinued operations and, as such, excluded from continuing operations and segment results for the three and nine months ended September 30, 2019 in our Accompanying Condensed Consolidated Financial Statements. Refer to Note 4. Discontinued Operations in our Accompanying Condensed Consolidated Financial Statements in Item 1 of this Form 10-Q.

We currently operate in two business segments:  Hughes and ESS. These segments are consistent with the way we make decisions regarding the allocation of resources, as well as how operating results are reviewed by our chief operating decision maker, who is the Company’s Chief Executive Officer.

Our operations also include various corporate departments (primarily Executive, Treasury, Strategic Development, Human Resources, IT,Information Technology, Finance, Accounting, Real Estate and Legal) and other activities, such as costs incurred in certain satellite development programs and other business development activities, and gains or losses from certain of our investments, that have not been assigned to our business segments. These activities, costs and income, as well as eliminations of intersegment transactions, are accounted for in Corporate and Other in our segment reporting.

All amounts presented in this Management’s Narrative Analysis, unless otherwise noted, are expressed in thousands of United States (“U.S.”) dollars, except share and per share amounts and unless otherwise noted.

Highlights from our financial results are as follows:
Consolidated Results of Operations for the Three Months Ended March 31, 2021:

•Revenue of $485.2 million
•Operating income (loss) of $73.9 million
•Net income (loss) of $17.6 million
•Net income (loss) attributable to HSSC of $18.6 million
•Earnings before interest, taxes, depreciation and amortization, and net income (loss) attributable to non-controlling interests (“EBITDA”) of $191.4 million (see reconciliation of this non-GAAP measure in Results of Operations)

Consolidated Financial Condition as of March 31, 2021:

•Total assets of $5.5 billion
•Total liabilities of $3.4 billion
•Total shareholder’s equity of $2.1 billion
5441
Table of Contents

ITEMItem 2. MANAGEMENT’S NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS - CONTINUED
of our investments, that have not been assigned to our business segments. These activities, costs and income, as well as eliminations of intersegment transactions, are accounted for in Corporate and Other.

All amounts presented in this Management’s Discussion and Analysis reference results from continuing operations unless otherwise noted and are expressed in thousands of United States (“U.S.”) dollars, except share and per share amounts and unless otherwise noted.

Highlights from our financial results are as follows:
Consolidated Results of Operations for the Nine Months Ended September 30, 2020:
•Revenue of $1.4 billion
•Operating income (loss) of $141.9 million
•Net income (loss) from continuing operations of $6.1 million
•Net income (loss) attributable to HSSC of $3.0 million
•Earnings before interest, taxes, depreciation and amortization, net income (loss) from discontinued operations and net income (loss) attributable to non-controlling interests (“EBITDA”) of $513.4 (refer to the reconciliation of this non-GAAP measure in Results of Operations)
Consolidated Financial Condition as of September 30, 2020:
•Total assets of $5.5 billion
•Total liabilities of $3.5 billion
•Total shareholder’s equity of $2.0 billion
•Cash and cash equivalents and marketable investment securities of $1.9 billion

Hughes Segment

Our Hughes segment is a global provider of broadband satellite technologies and broadband internet services to consumer customers and broadband network technologies, managed services, equipment, hardware, satellite services and communications solutions to consumer and enterprise customers. The Hughes segment also designs, provides and installs gateway and terminal equipment to customers for other satellite systems. In addition, our Hughes segment designs, develops, constructs and provides telecommunication networks comprising satellite ground segment systems and terminals to mobile system operators and our enterprise customers.

We incorporate advances in technology to reduce costs and to increase the functionality and reliability of our products and services.  Through advanced and proprietary methodologies, technologies, software and techniques, we continue to improve the efficiency of our networks.  We invest in technologies to enhance our system and network management capabilities, specifically our managed services for enterprises.  We also continue to invest in next generation technologies that can be applied to our future products and services.

We continue to focus our efforts on growing our consumer revenue by maximizing utilization of our existing satellites while planning for new satellites to be launched or acquired. Our consumer revenue growth depends on our success in adding new and retaining existing subscribers in our domestic and international markets across wholesale and retail channels.channels, as well as increasing our Average Revenue Per User/subscriber (“ARPU”). Service 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 businesses relies heavily on global economic conditions and the competitive landscape for pricing relative to competitors and alternative technologies. As a result of the COVID-19 pandemic, in accordance with instructions received from some of our enterprise customers, we have deferred or canceled the delivery of some products or services. In the third quarter of 2020, we have recognized revenue for services that have been provided and are no longer deferred. In addition, weWe have seen a limited number of our enterprise customers file for bankruptcy protection. We have reserved an amount related to pre-petition receivables and are working closely with these customers on providing post-petition services and products. 
55
Tableproducts, as well as working with the customer regarding collection of Contentspre-petition amounts.

ITEM 2.    MANAGEMENT’S NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS - CONTINUED

Our Hughes segment currently uses capacity from three of our satellites (the SPACEWAY 3 satellite, the EchoStar XVII satellite and the EchoStar XIX satellite), our Al Yah 3 Brazilian payload and additional satellite capacity acquired from third-party providers to provide services to our customers.Growth of our consumer subscriber base in certain areas in the U.S. continues to be constrained where we are nearing or have reached maximum capacity.capacity in most areas. While these constraints are not expected to be resolved until we launch new satellites, we continue to focus on revenue growth in all areas and consumer subscriber growth in the areas where we have available capacity.

In May 2019, we entered into an agreement with Al Yah Satellite Communications Company PrJSC (“Yahsat”) pursuant to which, in November 2019, Yahsat contributed its satellite communications services business in Brazil to us in exchange for a 20% ownership interest in our existing Brazilian subsidiary that conducts our satellite communications services business in Brazil (the “Yahsat Brazil JV Transaction”). The combined business provides broadband internet services and enterprise solutions in Brazil using the Telesat T19V satellite, the Eutelsat 65W satellite and Yahsat’s Al Yah 3 satellite.  Under the terms of the agreement, Yahsat may also acquire, for further cash investments, additional minority ownership interests in the business in the future provided certain conditions are met. 

In May 2019, we also entered into an agreement with Bharti Airtel Limited (“BAL”) and its subsidiary, Bharti Airtel Services Limited (together with BAL, “Bharti”), pursuant to which Bharti will contribute its very small aperture terminal (“VSAT”) telecommunications services and hardware business in India to our two existing Indian subsidiaries that conduct our VSAT services and hardware business. The combined entities will provide broadband satellite and hybrid solutions for enterprise networks. Upon consummation of the transaction, Bharti will have a 33% ownership interest in the combined business. The completion of the transaction is subject to customary regulatory approvals and closing conditions. No assurance can be given that the transaction will be consummated on the terms agreed to or at all.

In August 2018, we entered into an agreement with Yahsat to establish a new entity, Broadband Connectivity Solutions (Restricted) Limited (together with its subsidiaries, “BCS”), to provide commercial Ka-band satellite broadband services across Africa, the Middle East and southwest Asia operating over Yahsat’s Al Yah 2 and Al Yah 3 Ka-band satellites. The transaction was consummated in December 2018 when we invested $100.0 million in cash in exchange for a 20% interest in BCS. Under the terms of the agreement, we may also acquire, for further cash investments, additional ownership interests in BCS in the future provided certain conditions are met. We supply network operations and management services and equipment to BCS.

In August 2017, a subsidiary of EchoStar entered into a long-term contract for the design and construction of the EchoStar XXIV satellite, a new, next-generation, high throughput geostationary satellite. The EchoStar XXIV satellite is primarily intended to provide additional capacity for our HughesNet satellite internet service (“HughesNet service”) in North, Central and South America as well as enterprise broadband services. Space Systems/Loral, LLC (“SS/L”), the manufacturer of our EchoStar XXIV satellite has notified us of a delay in completion of the satellite. The EchoStar XXIV satellite is expected to be launched no earlier thanin the first quartersecond half of 2022. This or otherFurther delays or impediments to SS/L’s meeting its obligations could have a material adverse impact on our business operations, future revenues, financial position and prospects, the completion of manufacture of the EchoStar XXIV satellite and our planned expansion of satellite broadband services throughout North, South and Central America. In December 2020, we entered into an agreement with a launch provider for the launch of EchoStar XXIV. Capital expenditures associated with the construction and launch of the EchoStar XXIV satellite are included in EchoStar’s Corporate and Other in its segment reporting.
42
Table of Contents

In March 2017, we and DISH Network entered into a master service agreement (the “Hughes Broadband MSA”). Pursuant to the Hughes Broadband MSA, DISH Network, among other things: (i) has the right, but not the obligation, to market, promote and solicit orders and upgrades for our HughesNet service and related equipment and other telecommunication services; and (ii) installs HughesNet service equipment with respect to activations generated by DISH Network.  As a result of the Hughes Broadband MSA, we have not earned, and do not expect to earn in the future, significant equipment revenue from our distribution agreement with DISH Network.Item 2. MANAGEMENT’S NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS - CONTINUED

We continue our efforts to expand our consumer satellite services business outside of the U.S. We have been delivering high-speed consumer satellite broadband services in Brazil since July 2016 and are also providing satellite broadband internet service in several other Latin American countries. Additionally, inIn September 2015, we entered into 15-year agreements with affiliates of Telesat Canada for Ka-band capacity on the Telesat T19V satellite
56
Table of Contents

ITEM 2.    MANAGEMENT’S NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS - CONTINUED
located at the 63 degree west longitude orbital location, which was launched in July 2018. Telesat T19V was placed in service during the fourth quarter of 2018 and augmented the capacity being provided by the EUTELSAT 65 West A satellite and the EchoStar XIX satellite in South America. In March 2021, we entered into an agreement for additional capacity on the Telesat T19V satellite over Puerto Rico.

Our broadband subscribers include customers that subscribe to our HughesNet serviceservices in Norththe U.S. and Latin America through retail, wholesale and small/medium enterprise service channels. In connection with the COVID-19 pandemic, we voluntarily signed on to the Federal Communications Commissions’ (“FCC”) Keep Americans Connected Pledge (the “Pledge”), promising not to terminate residential or small business customers because of their inability to pay their bills due to the disruptions caused by the COVID-19 pandemic. As a result, we have provided HughesNet service to consumers who may not have the ability to pay for such services, but have excluded any subscribers whose HughesNet service would have ordinarily been terminated in the absence of the Pledge from our subscriber numbers as of June 30, 2020.

The following table presents our approximate number of broadband subscribers:
As of
September 30,
2020		June 30,
2020
Broadband subscribers in the United States1,216,000 1,221,000 
Broadband subscribers in Latin America364,000 321,000 
Total broadband subscribers1,580,000 1,542,000 
As of
March 31, 2021December 31, 2020
United States1,164,000 1,189,000 
Latin America389,000 375,000 
Total broadband subscribers1,553,000 1,564,000 

During
The following table presents the thirdapproximate number of net subscriber additions:

For the three months ended
March 31, 2021December 31, 2020
United States(25,000)(27,000)
Latin America14,000 11,000 
Total net subscriber additions(11,000)(16,000)

Our U.S. consumer subscriber base in certain areas continues to be capacity constrained and we are managing the available capacity to maintain service quality to our existing subscribers. While the balancing of total subscribers relative to capacity utilization in the first quarter resulted in lower total subscribers, ARPU increased.

In Latin America, we continued to see growth in our subscriber base and net subscriber additions compared to the fourth quarter of 2020, ourmainly due to higher gross subscriber additions increased by approximately 9,000 as compared to the second quarter of 2020. Our net subscriber additions for the third quarter increased by approximately 12,000 as compared to the second quarter of 2020, reflecting lower churn in the third quarter as compared to the second quarter of 2020, driven primarily by the retention of HughesNet subscribers previously reported as having churned under the Pledge.additions.

As of September 30, 2020March 31, 2021 and December 31, 2019,2020, our Hughes segment had $1.1$1.4 billion and $1.4$1.3 billion of contracted revenue backlog, respectively. We define Hughes contracted revenue backlog as our expected future revenue under enterprise customer contracts that are non-cancelable, including lease revenue. Our contracted revenue backlog as of September 30, 2020 decreased primarily due to the bankruptcy of a certain customer and the effects of the COVID-19 pandemic, including lengthened or delayed sales cycles with some of our enterprise customers.

ESS Segment

Our ESS segment provides satellite services on a full-time and/or occasional-use basis to U.S. government service providers, internet service providers, broadcast news organizations, content providers and private enterprise customers. We operate our ESS business using primarily the EchoStar IX satellite and the EchoStar 105/SES-11 satellite and related infrastructure. Revenue in our ESS segment depends largely on our ability to continuously make use of our available satellite capacity with existing customers and our ability to enter into commercial relationships with new customers. Our ESS segment, like others in the fixed satellite services industry, has encountered, and may continue to encounter, negative pressure on transponder rates and demand.

43
Table of Contents

Item 2. MANAGEMENT’S NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS - CONTINUED

As of September 30, 2020March 31, 2021 and December 31, 2019,2020, our ESS segment had contracted revenue backlog of $7.8$9.2 million and $11.4$6.7 million, respectively. We define contracted revenue backlog for our ESS segment as contracted future satellite lease revenue.

Other Business Opportunities

Our industry continues to evolve with the increasing worldwide demand for broadband internet access for information, entertainment and commerce. The current COVID-19 pandemic has made even more evident the worldwide need and demand for connectivity and communications to facilitate an ever-increasing virtual global community and workplace. In addition to fiber and wireless systems, technologies such as geostationary high throughput satellites, low-earth orbit (“LEO”) networks, medium-earth orbit (“MEO”) systems, balloons and High
57
Table of Contents

ITEM 2.    MANAGEMENT’S NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS - CONTINUED
Altitude Platform Systems are expected to continue to play significant roles in enabling global broadband access, networks and services. We intend to use our expertise, technologies, capital, investments, global presence, relationships and other capabilities to continue to provide broadband internet systems, equipment, networks and services for information, the internet-of-things, entertainment, education, remote-connectivity and commerce across many industries and communities in North America and internationallyglobally for consumer and enterprise customers. We are closely tracking the developments in next-generation satellite businesses, and we are seeking to utilize our services, technologies, licenses and expertise to find new commercial opportunities for our business.

We intend to continue to selectively explore opportunities to pursue investments, commercial alliances, partnerships, joint ventures, acquisitions, dispositions and other strategic initiatives and transactions, domestically and internationally, that we believe may allow us to increase our existing market share, increase our satellite capacity, expand into new satellite and other technologies, markets and customers, broaden our portfolio of services, products and intellectual property, make our business more valuable, align us for future growth and expansion, maximize the return on our investments and strengthen our business and relationships with our customers. We may allocate or dispose of significant resources for long-term value that may not have a short or medium-term or any positive impact on our revenue, results of operations, or cash flow.

Cybersecurity

As a global provider of satellite technologies and services, internet services and communications equipment and networks, we may be prone to more targeted and persistent levels of cyber-attacks than other businesses. These risks may be more prevalent as we continue to expand and grow our business into other areas of the world outside of North America, some of which are still developing their cybersecurity infrastructure maturity. Detecting, deterring, preventing and mitigating incidents caused by hackers and other parties may result in significant costs to us and may expose our customers to financial or other harm that have the potential to significantly increase our liability.

Due to the COVID-19 pandemic, a large portion of our workforce has been working remotely and we expect certain portions of our workforce to continue to do so from time to time.  While we have cybersecurity risk management tools to help protect our technology, information and networks that our employees access remotely, we cannot guarantee the security of the network that they will be using, the security status of the other non-company managed devices that might be on the network to which they are connected or the devices or networks used by third parties with whom our employees conduct business, such as customers, suppliers, vendors and other persons.  Additionally, there continues to be a significant amount of COVID-19 related cyber-fraud and phishing attacks that continue to target our employees, vendors, suppliers, customers and others. Accordingly, we increased our cybersecurity efforts and resources as a result of the COVID-19 pandemic.

On December 8, 2020, the cyber security company FireEye announced that they detected a sophisticated nation state level cyber campaign that targeted FireEye, other public and private companies, and government organizations. FireEye reported that the attack against them was facilitated through the Orion IT management software owned by a company called SolarWinds. Based on information from FireEye, we reviewed all instances of SolarWinds software in use at the Company and have determined that the version we are using is not susceptible to the malware within the version that is compromised.

The SolarWinds hack continues to evolve. Specifically, there have been many reports of intrusions into Microsoft Exchange on-premise systems possibly due to the SolarWinds issue and other unrelated matters. While we are customers of Microsoft, to date, our investigations into the announced issues indicate that we were not detrimentally affected by the vulnerabilities due to our security controls and other proactive measures which include security patching. We treat cybersecurity risk seriouslycontinue to receive information about these breaches from the U.S. government and are focused on maintaining theprivate security offirms, and we use this data to update our and our partners’ systems, networks, technologies and data. We regularly review and revise our relevant policies and procedures, invest in and maintain internal resources, personnel anddefense systems and review, modify and supplementto investigate our defenses through the use of various services, programs and outside vendors. Additionally, we provide resourcesown networks for compromise. We will continue to assist employeesupdate our systems as more information comes to light in better securing their home networks and remote connections.  EchoStar also maintains agreements with third party vendors and expertsreference to assist in our remediation and mitigation efforts if we experience or identify a material incident or threat. In addition, senior management and the Audit Committee of EchoStar’s Board of Directors are regularly briefed on cybersecurity matters.these issues.

We are not aware of any additional 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 and nine months ended September 30, 2020March 31, 2021 and through November 5, 2020.May 6, 2021. 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.


58
44
Table of Contents

ITEMItem 2. MANAGEMENT’S NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS - CONTINUED

RESULTS OF OPERATIONS
 
Nine
Three Months Ended September 30, 2020March 31, 2021 Compared to the NineThree Months Ended September 30, 2019March 31, 2020

The following table presents our consolidated results of operations for the ninethree months ended September 30, 2020March 31, 2021 compared to the ninethree months ended September 30, 2019:March 31, 2020:
For the nine months ended September 30,VarianceFor the three months ended March 31,Variance
Statements of Operations DataStatements of Operations Data20202019Amounts%Statements of Operations Data20212020Amount%
Revenue:Revenue:Revenue:
Services and other revenueServices and other revenue$1,258,350 $1,214,476 $43,874 3.6 Services and other revenue$432,991 $410,238 $22,753 5.5 
Equipment revenueEquipment revenue146,702 175,084 (28,382)(16.2)Equipment revenue52,239 57,309 (5,070)(8.8)
Total revenueTotal revenue1,405,052 1,389,560 15,492 1.1 Total revenue485,230 467,547 17,683 3.8 
Costs and expenses:Costs and expenses:Costs and expenses:
Cost of sales - services and otherCost of sales - services and other429,246 425,896 3,350 0.8 Cost of sales - services and other131,412 143,885 (12,473)(8.7)
% of total services and other revenue% of total services and other revenue34.1 %35.1 %% of total services and other revenue30.3 %35.1 %
Cost of sales - equipmentCost of sales - equipment115,524 142,744 (27,220)(19.1)Cost of sales - equipment45,140 45,908 (768)(1.7)
% of total equipment revenue% of total equipment revenue78.7 %81.5 %% of total equipment revenue86.4 %80.1 %
Selling, general and administrative expensesSelling, general and administrative expenses324,400 353,559 (29,159)(8.2)Selling, general and administrative expenses104,370 115,860 (11,490)(9.9)
% of total revenue% of total revenue23.1 %25.4 %% of total revenue21.5 %24.8 %
Research and development expensesResearch and development expenses21,378 19,411 1,967 10.1 Research and development expenses7,545 6,254 1,291 20.6 
% of total revenue% of total revenue1.5 %1.4 %% of total revenue1.6 %1.3 %
Depreciation and amortizationDepreciation and amortization372,588 342,086 30,502 8.9 Depreciation and amortization122,664 125,965 (3,301)(2.6)
Impairment of long-lived assetsImpairment of long-lived assets210 — 210 *
Total costs and expensesTotal costs and expenses1,263,136 1,283,696 (20,560)(1.6)Total costs and expenses411,341 437,872 (26,531)(6.1)
Operating income (loss)Operating income (loss)141,916 105,864 36,052 34.1 Operating income (loss)73,889 29,675 44,214 *
Other income (expense):Other income (expense):Other income (expense):
Interest income, netInterest income, net16,935 47,341 (30,406)(64.2)Interest income, net2,394 8,892 (6,498)(73.1)
Interest expense, net of amounts capitalizedInterest expense, net of amounts capitalized(130,644)(172,502)41,858 (24.3)Interest expense, net of amounts capitalized(41,922)(42,192)270 (0.6)
Gains (losses) on investments, netGains (losses) on investments, net(222)(290)68 (23.4)Gains (losses) on investments, net— (164)164 (100.0)
Equity in earnings (losses) of unconsolidated affiliates, netEquity in earnings (losses) of unconsolidated affiliates, net(4,878)(2,882)(1,996)69.3 Equity in earnings (losses) of unconsolidated affiliates, net(1,761)(1,087)(674)62.0 
Foreign currency transaction gains (losses), netForeign currency transaction gains (losses), net(4,596)(10,349)5,753 (55.6)Foreign currency transaction gains (losses), net(3,360)(7,528)4,168 (55.4)
Other, netOther, net(470)(1,780)1,310 (73.6)Other, net(973)(278)(695)*
Total other income (expense), netTotal other income (expense), net(123,875)(140,462)16,587 (11.8)Total other income (expense), net(45,622)(42,357)(3,265)7.7 
Income (loss) from continuing operations before income taxes18,041 (34,598)52,639 *
Income (loss) before income taxesIncome (loss) before income taxes28,267 (12,682)40,949 *
Income tax benefit (provision), netIncome tax benefit (provision), net(24,098)(1,185)(22,913)*Income tax benefit (provision), net(10,637)(5,231)(5,406)*
Net income (loss) from continuing operations(6,057)(35,783)29,726 (83.1)
Net income (loss) from discontinued operations— 57,734 (57,734)(100.0)
Net income (loss)Net income (loss)(6,057)21,951 (28,008)*Net income (loss)17,630 (17,913)35,543 *
Less: Net loss (income) attributable to non-controlling interests9,040 1,359 7,681 *
Less: Net income (loss) attributable to non-controlling interestsLess: Net income (loss) attributable to non-controlling interests947 3,442 (2,495)(72.5)
Net income (loss) attributable to HSSCNet income (loss) attributable to HSSC$2,983 $23,310 $(20,327)(87.2)Net income (loss) attributable to HSSC$18,577 $(14,471)$33,048 *
Other data:Other data:Other data:
EBITDA (1)
EBITDA (1)
$513,378 $434,008 $79,370 18.3 
EBITDA (1)
$191,406 $150,025 $41,381 27.6 
Subscribers, end of periodSubscribers, end of period1,580,000 1,437,000 143,000 10.0 Subscribers, end of period1,553,000 1,516,000 37,000 2.4 
*    Percentage is not meaningful.meaningful
(1)    A reconciliation of EBITDA to Net income (loss), the most directly comparable generally accepted accounting principles in the U.S. (“U.S. GAAP”)GAAP measure in our Accompanying Condensed Consolidated Financial Statements, is included in Results of Operations.  For further information on our use of EBITDA, refer to thesee Explanation of Key Metrics and Other Items.

5945
Table of Contents

ITEMItem 2. MANAGEMENT’S NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS - CONTINUED

The following discussion relates to our continuingresults of operations for the ninethree months ended September 30, 2020March 31, 2021 and 2019 unless otherwise stated.2020.

Services and other revenue.  Services and other revenue totaled $1.3 billion$433.0 million for the ninethree months ended September 30, 2020,March 31, 2021, an increase of $43.9$22.8 million, or 3.6%5.5%, as compared to 2019.2020. The increase was primarily attributable to increases in sales of broadband services to our consumer customers of $77.0$27.0 million, partially offset by a decrease in sales of broadband services to our enterprise customers of $28.6$3.1 million. Both of theseThese variances reflect the negative impact of exchange rate fluctuations.fluctuations of $5.4 million, primarily attributable to our consumer customers.

Equipment revenue. Equipment revenue totaled $146.7$52.2 million for the ninethree months ended September 30, 2020,March 31, 2021, a decrease of $28.4$5.1 million, or 16.2%8.8%, as compared to 2019.2020. The decrease was primarily attributable to: (i) $17.4to decreases in hardware sales of $4.8 million related to the bankruptcy of a certain customer and (ii) $9.3 million decreased sales to our enterprisemobile satellite systems customers.

Cost of sales - services and other.  Cost of sales - services and other totaled $429.2$131.4 million for the ninethree months ended September 30, 2020, an increaseMarch 31, 2021, a decrease of $3.4$12.5 million, or 0.8%8.7%, as compared to 2019.2020. The increasedecrease was primarily attributable to our Hughes segment due to an increase in saleslower costs of broadband services provided to our consumer and enterprise customers partially offset byprimarily associated with field services and leased satellite capacity as well as a non-recurring decrease in salesa certain international regulatory fee of broadband services to our enterprise customers.$4.5 million.

Cost of sales - equipmentequipment. .  Cost of sales - equipment totaled $115.5$45.1 million for the ninethree months ended September 30, 2020,March 31, 2021, a decrease of $27.2$0.8 million, or 19.1%1.7%, as compared to 2019.2020. 
Selling, general and administrative expenses.  Selling, general and administrative expenses totaled $104.4 million for the three months ended March 31, 2021, a decrease of $11.5 million, or 9.9%, as compared to 2020. The decrease was primarily attributable to the corresponding reduction in equipment revenue.

Selling, generaldecreased sales and administrative expenses.  Selling, general and administrative expenses totaled $324.4 million for the nine months ended September 30, 2020, a decrease of $29.2 million, or 8.2%, compared to 2019. The decrease was primarily attributable to expenses related to the license fee dispute in India of $7.2 million in 2019 and a certain legal proceeding of $26.3 million in 2019, partially offset by increased general and administrativemarketing expenses of $1.3$9.6 million attributable to the Yahsat Brazil JV.from our Hughes segment mainly associated with our consumer customers and decreases in bad debt expense of $2.4 million.

Depreciation and amortization.  Depreciation and amortization expenses totaled $372.6$122.7 million for the ninethree months ended September 30, 2020, an increaseMarch 31, 2021, a decrease of $30.5$3.3 million, or 8.9%2.6%, as compared to 2019.2020.  The increasedecrease was primarily dueattributable to increasesdecreases in other property and equipment depreciation expense of $16.4$2.0 million relating to our customer premises equipment and $14.4 million relating to the depreciationdecreases in amortization of assets acquired in the Yahsat Brazil JV Transaction.intangibles of $1.5 million.

Interest income, net.  Interest income, net totaled $16.9$2.4 million for the ninethree months ended September 30, 2020,March 31, 2021, a decrease of $30.4$6.5 million, or 64.2%73.1%, as compared to 2019,2020, primarily attributable to decreases in the yield on our marketable investment securities.
Interest expense, net of amounts capitalized.  Interest expense, net of amounts capitalized totaled $130.6 million for the nine months ended September 30, 2020, a decrease of $41.9 million, or 24.3%, compared to 2019.  The decrease was primarily due to a decrease of $29.0 million in interest expense and in amortization of deferred financing cost as a result of the repurchase and maturity in June 2019 of our 6 1/2% Senior Secured Notes due 2019, a decrease of $6.9 million of interest expense related to the license fee dispute in India, a decrease of $4.2 million related to a certain legal proceeding in 2019 and an increase of $4.4 million in capitalized interest in 2020 relating to the construction of the EchoStar XXIV satellite and its related infrastructure.

Foreign currency transaction gains (losses), net. Foreign currency transaction gains (losses), net totaled $4.6$3.4 million in losses for the ninethree months ended September 30, 2020,March 31, 2021, as compared to $10.3$7.5 million in losses for the ninethree months ended September 30, 2019.March 31, 2020, a positive change of $4.2 million. The change was due to the net weakeningimpact of the U.S. dollar againstforeign exchange rate fluctuations of certain foreign currencies in 2020 compared to 2019.during the quarter.

Income tax benefit (provision), net.  Income tax benefit (provision), net was $(24.1)$(10.6) million in provision for the three months ended March 31, 2021, as compared to $(5.2) million for the ninethree months ended September 30, 2020 compared to $1.2 million for the nine months ended September 30, 2019.March 31, 2020. Our effective income tax rate was 133.6% and (3.4)37.6% for the three months ended March 31, 2021, compared to (41.2)% for the nine months ended September 30, 2020 and 2019, respectively.same period in 2020.  The variations in our effective tax rate from the U.S. federal statutory rate for the ninethree months ended September 30, 2020March 31, 2021 were primarily due to the increase in our valuation allowance associated with certainexcluded foreign losses permanent book tax differences andwhere the impact of state and local taxes, partially offset bycompany carries a full valuation allowance. For the research and experimentation credits. Thethree months ended March 31, 2020, the variations in our effective tax rate from the U.S. federal statutory rate for the nine
60
Table of Contents

ITEM 2.    MANAGEMENT’S NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS - CONTINUED
months ended September 30, 2019 were primarily due to the change in net unrealized gainslosses that are capital in nature, various permanent tax differences, the impact of state and local taxes, and increase in our valuation allowance associated with certain foreign losses.






46
Table of Contents

Item 2. MANAGEMENT’S NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS - CONTINUED

Net income (loss) attributable to HSSC.HSSC.  The following table reconciles the change in Net income (loss) attributable to HSSC totaled $3.0 million for the nine months ended September 30, 2020, compared to net income attributable to HSSC of $23.3 million for the nine months ended September 30, 2019, a decrease in net income of $20.3 million, as set forth in the following table:HSSC:
Amounts
Net income (loss) attributable to HSSC for the ninethree months ended September 30, 2019March 31, 2020$23,310 (14,471)
Increase (decrease) in interest income, net(6,498)
Decrease (increase) in income tax benefit (provision), net(5,406)
Decrease (increase) in net income (loss) attributable to non-controlling interests(2,495)
Increase (decrease) in other, net(695)
Increase (decrease) in gains (losses) on investments, net164 
Decrease (increase) in equity in earnings (losses) of unconsolidated affiliates, net(674)
Decrease (increase) in interest expense, net of amounts capitalized41,858 
Increase (decrease) in operating income, including depreciation and amortization36,052 
Decrease (increase) in net income attributable to non-controlling interests7,681270 
Increase (decrease) in foreign currency transaction gains (losses), net5,7534,168 
Increase (decrease) in other, netoperating income (loss), including depreciation and amortization1,310 
Increase (decrease) in gains on investments, net68 
Decrease (increase) in equity in losses of unconsolidated affiliates, net(1,996)
Decrease (increase) in income tax provision, net(22,913)
Increase (decrease) in interest income, net(30,406)
Increase (decrease) in net income from discontinued operations(57,734)44,214 
Net income (loss) attributable to HSSC for the ninethree months ended September 30, 2020March 31, 2021$2,98318,577 

EBITDA. EBITDA.  EBITDA is a non-GAAP financial measure and is described under Explanation of Key Metrics and Other Items below.  The following table reconciles EBITDA to Net income (loss), the most directly comparable U.S. GAAP measure in our Accompanying Condensed Consolidated Financial Statements, to EBITDA:Statements:
For the nine months ended September 30,VarianceFor the three months ended March 31,Variance
20202019Amounts%20212020Amount%
Net income (loss)Net income (loss)$(6,057)$21,951 $(28,008)*Net income (loss)$17,630 $(17,913)$35,543 *
Interest income, netInterest income, net(16,935)(47,341)30,406 (64.2)Interest income, net(2,394)(8,892)6,498 (73.1)
Interest expense, net of amounts capitalizedInterest expense, net of amounts capitalized130,644 172,502 (41,858)(24.3)Interest expense, net of amounts capitalized41,922 42,192 (270)(0.6)
Income tax provision (benefit), netIncome tax provision (benefit), net24,098 1,185 22,913 *Income tax provision (benefit), net10,637 5,231 5,406 *
Depreciation and amortizationDepreciation and amortization372,588 342,086 30,502 8.9 Depreciation and amortization122,664 125,965 (3,301)(2.6)
Net loss (income) from discontinued operations— (57,734)57,734 (100.0)
Net loss (income) attributable to non-controlling interestsNet loss (income) attributable to non-controlling interests9,040 1,359 7,681 *Net loss (income) attributable to non-controlling interests947 3,442 (2,495)(72.5)
EBITDAEBITDA$513,378 $434,008 $79,370 18.3 EBITDA$191,406 $150,025 $41,381 27.6 
* Percentage is not meaningful.

61
Table of Contents

ITEM 2.    MANAGEMENT’S NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS - CONTINUED
EBITDA was $513.4 million forThe following table reconciles the nine months ended September 30, 2020, an increase of $79.4 million, or 18.3%, compared to 2019 as set forthchange in the following table:EBITDA: 
Amounts
EBITDA for the ninethree months ended September 30, 2019March 31, 2020$434,008150,025 
Increase (decrease) in operating income (loss), excluding depreciation and amortization66,554 
Decrease (increase) in net income attributable to non-controlling interests7,68140,913 
Increase (decrease) in foreign currency transaction gains (losses), net5,753 4,168 
Increase (decrease) in gains (losses) on investments, net164 
Decrease (increase) in equity in earnings (losses) of unconsolidated affiliates, net(674)
Increase (decrease) in other, net1,310 
Increase (decrease) in gains on investments, net68 (695)
Decrease (increase) in equity in losses of unconsolidated affiliates, net loss (income) attributable to non-controlling interests(1,996)(2,495)
EBITDA for the ninethree months ended September 30, 2020March 31, 2021$513,378191,406 

47
Table of Contents

Item 2. MANAGEMENT’S NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS - CONTINUED

Segment Operating Results and Capital Expenditures

The following tables present our operating results, capital expenditures and EBITDA by segment for the ninethree months ended September 30, 2020March 31, 2021, as compared to the ninethree months ended September 30, 2019. Capital expenditures in the table below are net of refunds and other receipts related to our property and equipment.March 31, 2020:
HughesESSCorporate and OtherConsolidated
Total		HughesESSCorporate and OtherConsolidated Total
For the nine months ended September 30, 2020
For the three months ended March 31, 2021For the three months ended March 31, 2021
Total revenueTotal revenue$1,378,416 $13,233 $13,403 $1,405,052 Total revenue$475,859 $4,089 $5,282 $485,230 
Capital expendituresCapital expenditures263,844 41 — 263,885 Capital expenditures82,196 — — 82,196 
EBITDAEBITDA531,276 5,847 (23,745)513,378 EBITDA198,578 1,919 (9,091)191,406 
For the nine months ended September 30, 2019
For the three months ended March 31, 2020For the three months ended March 31, 2020
Total revenueTotal revenue$1,360,919 $11,873 $16,768 $1,389,560 Total revenue$458,482 $4,652 $4,413 $467,547 
Capital expendituresCapital expenditures224,483 — — 224,483 Capital expenditures91,517 — — 91,517 
EBITDAEBITDA448,837 5,006 (19,835)434,008 EBITDA154,641 2,030 (6,646)150,025 

Hughes Segment
For the nine months ended September 30,VarianceFor the three months ended March 31,Variance
20202019Amounts%20212020Amount%
Total revenueTotal revenue$1,378,416 $1,360,919 $17,497 1.3 Total revenue$475,859 $458,482 $17,377 3.8 
Capital expendituresCapital expenditures263,844 224,483 39,361 17.5 Capital expenditures82,196 91,517 (9,321)(10.2)
EBITDAEBITDA531,276 448,837 82,439 18.4 EBITDA198,578 154,641 43,937 28.4 

Total revenue was $1.4 billion$475.9 million for the ninethree months ended September 30, 2020March 31, 2021, an increase of $17.5$17.4 million, or 1.3%3.8%, as compared to 2019. The increase was2020.  Services and other revenue increased primarily due to increases of $77.0 million in sales of broadband services to our consumer customers of $27.0 million, partially offset by decreased hardwarea decrease in sales of $28.4 million and decreased sales of broadband services to our enterprise customers of $28.6$3.1 million. Equipment revenue decreased primarily due to decreases in hardware sales of $4.8 million to our mobile satellite systems customers. These variances reflect the negative impact of exchange rate fluctuations.fluctuations of $5.9 million.

Capital expenditures were $263.8$82.2 million for the ninethree months ended September 30, 2020, an increaseMarch 31, 2021, a decrease of $39.4$9.3 million, or 17.5%10.2%, as compared to 2019,2020, primarily due to net increasesdecreases in expenditures associated with our consumer business.business, partially offset by increased expenditures related to construction of our satellite-related ground infrastructure.
 
62
Table of Contents

ITEM 2.    MANAGEMENT’S NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS - CONTINUED
EBITDA was $531.3 million forThe following table reconciles the nine months ended September 30, 2020, an increase of $82.4 million, or 18.4%, as compared to 2019 as set forthchange in the following table:

Amounts
EBITDA for the nine months ended September 30, 2019$448,837 
Increase (decrease) in operating income, excluding depreciation and amortization67,620 
Decrease (increase) in net income attributable to non-controlling interests7,681 
Increase (decrease) in foreign currency transaction gains, net5,748 
Increase (decrease) in other, net1,210 
Increase (decrease) in gains on investments, net578 
Decrease (increase) in equity in losses of unconsolidated affiliates, net(398)
EBITDA for the nine months ended September 30, 2020$531,276 

ESSHughes Segment
For the nine months ended September 30,Variance
20202019Amounts%
Total revenue$13,233 $11,873 $1,360 11.5 
EBITDA5,847 5,006 841 16.8 

Total revenue was $13.2 million for the nine months ended September 30, 2020, an increase of $1.4 million, or 11.5%, as compared to 2019, primarily due to an increase in transponder services provided to third parties.

EBITDA was $5.8 million for the nine months ended September 30, 2020, an increase of $0.8 million, or 16.8%, as compared to 2019, primarily due to the increase in revenue.

Corporate and Other
For the nine months ended September 30,Variance
20202019Amounts%
Total revenue$13,403 $16,768 $(3,365)(20.1)
EBITDA(23,745)(19,835)(3,910)19.7 

Total revenue was $13.4 million for the nine months ended September 30, 2020, a decrease of $3.4 million, or 20.1%, as compared to 2019 which was primarily attributable to a decrease in revenue from certain real estate previously leased to DISH Network and transferred as part of the BSS Transaction.

EBITDA for the nine months ended September 30, 2020 was a loss of $23.7 million, an increase in loss of $3.9 million, or 19.7%, as compared to 2019 as set forth in the following table: EBITDA: 
Amounts
EBITDA for the three months ended September 30, 2019March 31, 2020$(19,835)154,641 
Increase (decrease) in operating income (loss), excluding depreciation and amortization41,297 
Increase (decrease) in foreign currency transaction gains (losses), net4,165 
Increase (decrease) in other, net103 887 
Increase (decrease) in gains (losses) on investments, net164 
Decrease (increase) in equity in earnings (losses) of unconsolidated affiliates, net(81)
Decrease (increase) in net loss (income) attributable to non-controlling interests(2,495)
EBITDA for the three months ended March 31, 2021$198,578 

48
Table of Contents

Item 2. MANAGEMENT’S NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS - CONTINUED

ESS Segment
For the three months ended March 31,Variance
20212020Amount%
Total revenue$4,089 $4,652 $(563)(12.1)
EBITDA1,919 2,030 (111)(5.5)

Total revenue was $4.1 million for the three months ended March 31, 2021, a decrease of $0.6 million, or 12.1%, as compared to 2020, primarily due to a decrease in transponder services provided to third parties.
EBITDA was $1.9 million for the three months ended March 31, 2021, a decrease of $0.1 million, or 5.5%, as compared to 2020, primarily due to the decrease in overall ESS revenue.

Corporate and Other
For the three months ended March 31,Variance
20212020Amount%
Total revenue$5,282 $4,413 $869 19.7 
EBITDA(9,091)(6,646)(2,445)36.8 

The following table reconciles the change in the Corporate and Other Segment EBITDA:  
Amounts
EBITDA for the three months ended March 31, 2020$(6,646)
Increase (decrease) in other, net(1,583)
Decrease (increase) in equity in earnings (losses) of unconsolidated affiliates, net(592)
Increase (decrease) in operating income (loss), excluding depreciation and amortization(273)
Increase (decrease) in foreign currency transaction gains (losses), net4 
Increase (decrease) in gains on investments, net(510)
Decrease (increase) in equity in losses of unconsolidated affiliates, net(1,600)
Increase (decrease) in operating income, excluding depreciation and amortization(1,907)3 
EBITDA for the three months ended September 30, 2020March 31, 2021$(23,745)(9,091)

63
49
Table of Contents

ITEMItem 2. MANAGEMENT’S NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS - CONTINUED

EXPLANATION OF KEY METRICS AND OTHER ITEMS
 
Services and other revenue.  Services and other revenue primarily includes the sales of consumer and enterprise broadband services, maintenance and other contracted services, revenue associated with satellite and transponder leases and services, satellite uplinking/downlinking, subscriber wholesale service fees for the HughesNet service professional services and facilities rental revenue.

Equipment revenue.  Equipment revenue primarily includes broadband equipment and networks sold to customers in our consumer and enterprise markets.

Cost of sales - services and other.  Cost of sales - services and other primarily includes the cost of broadband services provided to our consumer and enterprise customers, maintenance and other contracted services, costs associated with satellite and transponder leases and services, professional services and facilities rental.

Cost of sales - equipment. Cost of sales - equipment consists primarily of the cost of broadband equipment and networks sold to customers in our consumer and enterprise markets. It also includes certain other costs associated with the deployment of equipment to our customers.

Selling, general and administrative expenses.Selling, general and administrative expenses primarily includesinclude selling and marketing costs and employee-related costs associated with administrative services (e.g., information systems, human resources and other services andservices), including stock-based compensation expense).expense.  It also includes professional fees (e.g. legal, information systems and accounting services), and other expenses associated with facilities and administrative services and credit losses, which include customer related estimated credit losses and estimated credit losses on non-current receivables.services.

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

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

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

Interest expense, net of amounts capitalized. Interest expense, net of amounts capitalized primarily includes interest expense associated with our debt and finance lease obligations (net of capitalized interest), amortization of debt issuance costs and interest expense related to certain legal proceedings.

Gains (losses) on investments, net.  Gains (losses) on investments, net primarily includes changes in fair value of our marketable equity securities.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 debt securities, realized gains and losses on the sale or exchange of other equity investmentssecurities and other debt investmentssecurities 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 and estimated credit losses.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 Condensed Consolidated Statements of Operations in our Accompanying Condensed Consolidated Financial Statements.

6450
Table of Contents

ITEMItem 2. MANAGEMENT’S NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS - CONTINUED
Net income (loss) from discontinued operations
. Net income (loss) from discontinued operations includes the financial results of the BSS Business transferred in the BSS Transaction, except for certain real estate that transferred in the transaction.

EBITDAEarnings before interest, taxes, depreciation and amortization (“EBITDA”). EBITDA is defined as Net income (loss) excluding Interest income net, Interestand expense, net, of amounts capitalized, Income tax benefit (provision), net, Depreciation and amortization, Net income (loss) from discontinued operations and Net income (loss) attributable to non-controlling interests.  EBITDA is not a measure determined in accordance with U.S. GAAP. This non-GAAP measure is reconciled to Net income (loss) in our discussion of Results of Operations above. EBITDA should not be considered in isolation or as a substitute for operating income, net income or any other measure determined in accordance with U.S. GAAP. EBITDA is used by our management as a measure of operating efficiency and overall financial performance for benchmarking against our peers and competitors. Management believes EBITDA provides meaningful supplemental information regarding the underlying operating performance of our business and is appropriate to enhance an overall understanding of our financial performance. Management also believes that EBITDA is useful to investors because it is frequently used by securities analysts, investors and other interested parties to evaluate the performance of companies in our industry.

SubscribersSubscribers. . Subscribers include customers that subscribe to our HughesNet service, through retail, wholesale and small/medium enterprise service channels.

65
Table of Contents
ITEM 4.    CONTROLS AND PROCEDURES
 
Disclosure Controls and Procedures
 
Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this Form 10-Q. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this Form 10-Q such that the information required to be disclosed in our Securities and Exchange Commission reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms, and is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
In November 2019, we consummated the Yahsat Brazil JV Transaction. As a result, we are reviewing the internal controls of the business we acquired from Yahsat in the Yahsat Brazil JV Transaction and we may make appropriate changes as deemed necessary.

Changes in Internal Control Over Financial Reporting
 
Except as noted above, thereThere has been no change in our internal control over financial reporting (as defined in Rule 15d-15(f) under the Exchange Act) that occurred during the ninethree months ended September 30, 2020March 31, 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. We continue to review our internal control over financial reporting and may from time to time make changes aimed at enhancing its effectiveness and to ensure that our systems evolve with our business.

66
51
Table of Contents
PART II — OTHER INFORMATION

ITEM 1.    LEGAL PROCEEDINGS
 
For a discussion of legal proceedings, refer to Part I, Item 1. Financial Statements —- Note 12.13. Contingencies —- Litigation in this Form 10-Q.

ITEM 1A.    RISK FACTORS

The following information updates, and should be read in conjunction with, the information in Part I, Item 1A, Risk Factors, of our Form 10-K.

RISKS RELATED TO THE COVID-19 PANDEMIC

The COVID-19 pandemic, its economic impacts and related government and private sector responsive actions could have a material adverse effect our business operations. As a result of the COVID-19 pandemic, many countries, including the U.S., and other governmental authorities have imposed restrictions on travel, as well as general movement and gathering restrictions, business closures and other measures imposed to slow the spread of COVID-19.

We have set forth below key risks from the COVID-19 pandemic that we have identified to date. The situation continues to develop, however, and it is impossible to predict the effect and ultimate impact of the COVID-19 pandemic on our business, financial condition or results of operations.  We cannot estimate or determine the duration of the quarantine, social distancing and other regulatory measures instituted or recommended in response to the COVID-19 pandemic, whether they will recur or the duration or degree of the business disruptions, and related financial impact. The COVID-19 pandemic has evolved into a worldwide health crisis that may continue for an extended period of time and that has adversely affected economies and financial markets throughout the world, resulting in a significant economic downturn and changes in global economic policy that is expected to continue10-K for the foreseeable future and could haveyear ended December 31, 2020 includes a material adverse effect on our business, financial condition or results of operations.

Our operations and thosedetailed discussion of our customers and other third parties with whom we conduct business are located in areas impacted by the COVID‑19 pandemic, and those operations have been, and may continue to be, adversely affected by the COVID‑19 pandemic.

We conduct our product development, manufacturing, installation and customer support and services in areas where, in order to attempt to mitigate the COVID-19 pandemic, (a) states of emergency related to the spread of COVID-19 have been declared and (b) various levels of “shelter-in-place” or “safer-at-home” orders have been issued, which (i) direct individuals living in those locations to shelter at their places of residence (subject to limited exceptions), (ii) direct businesses and governmental agencies to cease or limit non-essential operations at physical locations, (iii) limit the number of employees that may be present in a particular location; (iv) prohibit or limit non-essential gatherings of various number of individuals, and (v) order cessation of non-essential travel. The effects of the COVID-19 pandemic and the actions from applicable governmental authorities has negatively impacted productivity, increased cybersecurity risks as a large portion of our workforce has been working remotely, disrupted our and our customers’, suppliers’, vendors’ and other business partners’ and investees’ businesses and finances, delayed regulatory and other timelines, and delayed the manufacture and deployment of our satellites. Additionally, some regulatory bodies have furloughed employees, reduced activities and temporarily closed their offices. Such measures may materially delay the review and/or approval of licenses or authorizations we need to operate our business. The magnitude of these impacts will depend, in part, on the length and severity of the pandemic, associated restrictions and resulting economic and financial consequences and other limitations and impediments on the conduct of business in the ordinary course.

Extended periods of interruption to our corporate, development or manufacturing facilities due to the COVID-19 pandemic could cause us to lose revenue, which would depress our financial performance and could be difficult to recapture. Our business may also be harmed if travel continues to be restricted or inadvisable or if members of management and other employees are unable to work because they contract COVID-19, they elect not to come to work due to the illness affecting others in our office or other facilities, or they are subject to quarantines or other governmentally imposed restrictions. Additionally, many of our subscribers are working remotely or
67
Table of Contents
engaging in distance learning. These activities have increased the usage on our HughesNet service so that there is little or no capacity remaining for subscriber growth in our most popular geographic areas. In addition, the limitation on capacity may result in our subscribers experiencing slower speeds. This, in turn, could result in higher churn and may negatively affect our financial results.

A portion of the expected sales of our products or services have been, and additional sales may be, delayed or canceled as a result of effects of the COVID-19 pandemic on the operations of our customers.

Our customers’ business operations have been, and are continuing to be, subject to business interruptions arising from the COVID-19 pandemic. Due to the downturn in financial markets arising from the COVID-19 pandemic, a number of our current enterprise customers are facing uncertain futures and certain of these customers have filed for bankruptcy protection, which has negatively impacted our revenue and cash flow. When enterprise customers fail or seek reorganization under the bankruptcy laws, we may be obliged to provide satellite capacity for which we are not being paid. Further, the COVID-19 pandemic has resulted in increased unemployment, which could result in reduced demand and increased inability to pay from our consumer customers. Any resulting financial impact cannot be reasonably estimated at this time but may materially affect our subscriber numbers, business, financial condition, results of operations, and cash flows. We are diligently working to ensure that we can operate with minimal disruption and address potential business interruptions on ourselves and our customers. However, the full extent to which the COVID-19 pandemic could affect the global economy and our business will depend on future developments and factors that cannot be predicted and there can be no assurance that the COVID-19 pandemic will not result in further delays, or possibly reductions, in our recognition of revenue.

Our supply chain may be materially adversely impacted due to the COVID-19 pandemic.

We rely upon the facilities of our domestic and foreign suppliers to support our business. The COVID-19 pandemic has resulted in significant governmental measures in many countries being implemented to control the spread of COVID-19, including restrictions on manufacturing and the movement of employees. As a result, our suppliers may not have the materials, capacity, or capability to supply our components according to our schedule and specifications. Further, there may be logistics issues, including our ability and our supply chain’s ability to quickly ramp up production, and transportation demands that may cause further delays. If our suppliers’ operations are curtailed, we may need to seek alternate sources of supply, which may be more expensive. Alternate sources may not be available or may result in delays in shipments to us from our supply chain and subsequently to our customers, each of which would affect our results of operations. The duration of the disruptions and restrictions on the ability to travel, quarantines and temporary closures of the facilities of our suppliers, as well as general limitations on movement in the region, are unknown and they may recur and the duration of the production and supply chain disruption, and related financial impact, cannot be estimated at this time. Should the production and distribution closures continue for an extended period of time or recur, the impact on our supply chain could have a material adverse effect on our results of operations and cash flows. Business disruptions could also negatively affect the sources and availability of components and materials that are essential to the operation of our business.

The COVID-19 pandemic could negatively impact our planned or potential strategic initiatives.

Our strategy includes a number of plans to support the growth of our core businesses, including continuing to selectively explore opportunities to pursue investments, commercial alliances, partnerships, joint ventures, acquisitions, dispositions and other strategic initiatives and transactions, domestically and internationally. The extent to which the COVID-19 pandemic impacts these potential strategic initiatives will depend on future developments that are highly uncertain. If the disruptions posed by the COVID-19 pandemic and related government measures, economic downturns or other matters of global concern continue for an extensive period of time or recur, our ability to pursue and consummate planned or potential strategic initiatives could be materially adversely affected.risk factors.

ITEM 4.    MINE SAFETY DISCLOSURES
 
Not applicableapplicable.
68

Table of Contents
ITEM 5.    OTHER INFORMATION

Financial Results

On November 5, 2020,May 6, 2021, EchoStar issued a press release (the “Press Release”) announcing its financial results for the quarter ended September 30, 2020.March 31, 2021. A copy of the Press Release is furnished herewith as Exhibit 99.1. The foregoing information, including the exhibitsexhibit related thereto, areis furnished in response to Item 2.02 of Form 8-K and shall not be deemed filed“filed” for the purposes of Section 18 of the Securities Exchange Act, of 1934, as amended (the “Exchange Act”), or otherwise, and shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933, as amended, or into any filing or other document pursuant to the Exchange Act, except as otherwise expressly stated in any such filing.

ITEM 6.EXHIBITS
Exhibit No.Description
10.1(H)
31.1(H)31.1 (H)
31.2(H)31.2 (H)
32.1(I)32.1 (H)
99.1(I)99.1 (I)
101.INSXBRL Instance Document. The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCHXBRL Taxonomy Extension Schema.
101.CALXBRL Taxonomy Extension Calculation Linkbase.
101.DEFXBRL Taxonomy Extension Definition Linkbase.
101.LABXBRL Taxonomy Extension Label Linkbase.
101.PREXBRL Taxonomy Extension Presentation Linkbase.

(H)    Filed herewith.
(H)Filed(I)    Furnished herewith.
(I)Furnished herewith
*Incorporated by reference.
**Constitutes a management contract or compensatory plan or arrangement.
***Schedules and exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K. We agree to furnish supplementally to the Securities and Exchange Commission a copy of any omitted schedule or exhibit upon request, subject to our right to request confidential treatment of any requested schedule or exhibit.
6952
Table of Contents
SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Form 10-Q to be signed on its behalf by the undersigned thereunto duly authorized.
 
HUGHES SATELLITE SYSTEMS CORPORATION
Date: November 5, 2020May 6, 2021By:
/s/ Michael T. Dugan
Michael T. Dugan
Chief Executive Officer, President and Director
(Principal Executive Officer)
Date: November 5, 2020May 6, 2021By:
/s/ David J. Rayner
David J. Rayner
Executive Vice President, Chief Financial Officer, Chief Operating Officer and Treasurer
(Principal Financial and Accounting Officer)

7053