Ladies and gentlemen, thank you for standing by and welcome to the EchoStar Earnings Conference Call for the Fourth Quarter and Year-End 2020. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today, Terry Brown. Thank you. Please go ahead, sir.

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

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

Thank you, Dean and thanks to all of you that decided to join us today for our Q4 2020 earnings call. By all accounts 2020 brought a share of challenges, but the EchoStar team rose to the occasion and once again delivered solid financial results. I'm very pleased with our 2020 performance as evidenced by growth over 2019 in both revenue and adjusted EBITDA. As we enter the second year of the global pandemic, we continue to supply the connectivity on which millions of consumers, enterprise, government agencies and communities depend. I'm also proud of the EchoStar team's efforts and operational accomplishments in delivering services that have never been more vital to our customers. Let me now turn it over to the management team to expand on their business segments before closing with some final comments and then the question-and-answer period. Pradman?

Thank you, Mike. I'd like to echo Mike's comments and say that I'm extremely proud of our performance and our financial results. Hughes 2020 revenue was our highest on record. Our adjusted EBITDA grew 7% in the fourth quarter and 8% for the full year compared to the same period last year. Our 2020 adjusted EBITDA margin was 38.9% increasing from 36% in 2019. We grew our Hughes net subscriber base by approximately 87,000 during this year and were recently recognized by US News & World Report 360 Reviews as the Best Satellite Internet Provider of 2021. This is welcome validation of our dedication to connecting the unconnected to a high-performance Internet service. We ended 2020 with 1564,000 subscribers. In the fourth quarter, our subscriber base in the US declined by approximately 27,000. As you know our US consumer offering is currently capacity constrained. As a result, we continue to manage our sales and marketing efforts to optimize service to our existing subs. We also continue to innovate to enhance the customer experience applying advanced technologies such as artificial intelligence across our network. Driven by the ongoing strong demand for broadband services and our focus on offering ancillary services that enhance our customers' experience, our US ARPU has steadily increased. We expect these trends to continue in the near-term. In Latin America in Q4, we grew our subscriber base by approximately 11,000 and improved ARPU over the previous quarter. Our sales slowed in this market relative to the third quarter as COVID-19 pandemic restrictions eased and many people returned to schools and offices on a regular basis. We saw an increase in churn which we believe was partially due to changes we made in our collections process impacting net sub additions. Community WiFi services which we offer in partnership with…

Thanks, Pradman. Good morning. In Q4, ESS revenue was $4 million, down slightly from Q4 of last year. We continue to pursue opportunities to lease our excess Ku-band capacity. The overall FSS market continues to be soft and declines in demand for IFC capacity, has obviously impacted the current environment. We are staying focused on these markets and we are ready to react when the rebound occurs. We mentioned last quarter that the first pair of NGSO S-band satellites for our EchoStar global subsidiary were in the commissioning phase. Unfortunately, both satellites have experienced technical anomalies that preclude them from fulfilling their intended regulatory milestone missions. Although, I would like to note that our AG1 satellite is still operational and we are using it for testing. We intend to seek regulatory milestone relief due to the force majeure events. And despite this setback, business development activities continue, and we've been pleased with the interest the EchoStar Global mission is received from a range of vertical players. Our third nanosat is expected to launch in either Q2 or Q3 of this year and we are evaluating options for additional spacecraft. With respect to developments in Europe, EchoStar Mobile has successfully launched its new synergy service a hybrid offering that seamlessly integrates satellite and terrestrial LTE roaming services in a single small low-cost mobile terminal, using a single subscription and management portal. We continue to see strong interest from our distribution partners in all of EchoStar Mobile's new products and services, and we are excited to see many of the new opportunities for application of MSS technologies to a variety of emerging verticals, including autonomous platforms and 5G integration. Additionally, we have launched several initiatives to deploy new hybrid satellite and terrestrial technologies and services on our E XXI platform. On the satellite IoT front, we are working with ProEsys and others to develop and deploy the first real-time bidirectional satellite delivered LoRaWan services, which will leverage next-generation technology that fully integrates satellite and terrestrial services on a single chip. We expect the initial operations of the LoRaWan service to begin in the second half of this year. We are also working with Sequans and others to develop hybrid services leveraging our complementary ground component licenses in Europe. These new services will focus on industrial enterprise applications such as utilities, transportation logistics and maritime as well as emerging verticals, such as unmanned aerial systems and urban air mobility. Finally as always, we remain focused on our longer-term strategic goal of full integration of S-band satellite services into the emerging global 5G network. I'll now turn it over to Dave.

Thank you, Anders. My comments this morning will be primarily on Q4 results and include comments on adjusted EBITDA, which is reconciled to GAAP measurements in our press release. Consolidated revenue in the fourth quarter was $489 million, down $10 million compared to the same period last year. Hughes revenue was $482 million, down $9 million compared to fourth quarter last year. Higher consumer revenue from increased ARPU and growth in Latin American subscribers were offset by lower equipment sales to enterprise customers primarily due to the impact of the OneWeb bankruptcy in Q1 2020. In addition, we experienced negative foreign exchange impacts of approximately $10 million, principally related to revenue in Brazil. ESS revenue in Q4 was $4 million down slightly as compared to the same period last year and corporate and other revenues $3 million also down slightly compared to last year. Consolidated adjusted EBITDA in the fourth quarter was $167 million, an increase of 7% from last year. Hughes adjusted EBITDA in Q4 was $188 million higher by $12 million. Hughes adjusted EBITDA margin increased by 3.2 percentage points largely as a result of growth in the higher margin of consumer broadband business. ESS and corporate and other were primarily flat as compared to last year. Net loss from continuing operations was $3 million in Q4, an improvement of $54 million from last year. This change was primarily due to higher operating income of $7 million, lower net interest expense of $47 million driven primarily by $50 million of interest expense accrued in the fourth quarter of 2019 related to our fee dispute with the Government of India, improvement in foreign currency transactions of $6 million and higher gains on investments of $6 million. This was partially offset by higher income tax provision of $10 million. Capital…

Thank you, Dave. As you can all see, we've had a successful year and I remain extremely excited about our position within the satellite communications industry. Demand for global connectivity continues to outpace supply and we remain well positioned from a technology and financial standpoint. Let me now turn it over to the operator to start the question-and-answer session.

[Operator Instructions] Your first question comes from the line of Rick Prentiss from Raymond James.

Thanks, good morning guys.

Good morning, Rick.

First I know I'm glad I think the market is also to see you put your balance sheet to work on stock buybacks. It looks like maybe close to $400 million left on the authorized plan compared to your $2 billion market cap. I just want to confirm that that's right. And we think the best M&A opportunity is to buy your own stock where it's at. But what other M&A opportunities might be out there that you'd be interested in and might want?

Well as you know Rick I mean we've been looking at a lot of different opportunities over a period of several years. And I think we remain interested in transactions that make sense where it grows our customer base grows our technology base and provides for incremental growth. That's where we remain focused.

Okay. And on the buyback it's about $390 million maybe left that ballpark?

Yes. I'm sorry you had the numbers right. That's approximately correct as of the filing.

Okay. And then obviously the Jupiter three has been delayed a little bit with Maxar. Are there any abilities to recover costs from them with the delay? And also as you think about growth pre-Jupiter three launch can you -- should we think of this quarter sub decline as kind of more similar to what you might experience until the launch? And obviously ARPU increases can help offset that but just trying to think through the delay and the impact?

Well we're working all the options as far as the contract with Maxar. And I don't think I'm going to say anything more about that. We still need the spacecraft and we're very disappointed in the delays. It's that simple. The issue with the US sub count is that with the continued growing demand of each consumer in the Jupiter 2 and Jupiter 1 field, we try to manage the number of customers we can support along with the capacity constraints. We try to make sure the capacity is what our customers need. And therefore at times we do in certain beams, allow the sub count to go down to ensure that we've got solid support of the plans that people are buying. So I can't totally predict it, as people -- more and more people hopefully return to office and the work-from-home demand goes down, I would think that will have a positive impact on our ability to add subs, but I can't say for sure. I don't know what things are going to look like for the next six months. So yeah, I don't expect major changes either up or down, as we manage through customer requirements in turn.

And as we think of the Jupiter 3 getting in service Pradman, I think you mentioned that the launch vehicle choice would reduce the time from launch to in-service. Can you give us an idea of how fast that might be? And I know people are very interested in knowing how much capacity will the Jupiter 3 bring on? And what that might do for growth as we look beyond the launch in-service dates?

Well I think we've talked capacity in the past and I don't see any reason to keep going over that. Nothing's changed as far as the spacecraft as it's gone through the design. The deliver capacity is expected to be pretty close to spec. As to the launch vehicle, the time through in-orbit testing and getting into service, I got to be honest with you we're working it every day. And that is one area with the delay in the production of the satellite that there's a possibility of gaining back some in-service time. However, the opposite of that is we do not want to take -- we do not want to rush through in-orbit testing in a way that might have a negative impact on the spacecraft or our ability to meet spec as we get going. So it's a very precise activity we got to be careful of, but we're going to shave off every possible day from the time we launch till the time we're in service. But again, that's a work in progress.

Okay. Last one for me. Another work in progress has been the JV in India. A lot of business happening in India. Can you help us understand what you think of reasonable time frame is that that deal might close as it continues to wait approval?

Yeah. We're aiming for somewhere in the middle of the year.

So mid 2022?

Yeah. It's being held -- we have to get through a bunch of.

No, no. Mid -- yes. Mid 2021.

Sorry. Mid 2021. I misspoke.

Mid of 2021. Sorry. Yes. We're actually working through some regulatory approvals. Everything is all set. As soon as we get the last couple of regulatory approvals, we should be ready to close the deal.

And then hit the ground running pretty fast?

Yes. Yes.

Great. Thanks guys. Stay well.

Thank you.

[Operator Instructions] Your next question comes from the line of Chris Quilty from Quilty Analytics. Your line is open.

Thank you. Pradman I wanted to follow up on the consumer ARPU which you indicated was up both in the US and international. In the US market, is the increasing ARPU more a function of existing customers stepping up their plans, or is it simply a mix issue of some lower-value subscribers dropping off?

Well it definitely is the existing customers stepping up. As this COVID crisis has been obviously spreading all over and increasing the demand for the services so people are stepping up going up to higher plans et cetera which has good effect on the ARPU, but obviously has an impact on the number of subs you can accommodate over these satellites. So that's one part of it. The other part of it is we're selling some additional ancillary services which adds to the ARPU. For example, repair services, people don't want their unit down and are willing to pay extra money to have quick repair services and we sell tokens for extra capacity. So there's a whole bunch of little things that add $1 or $2 to our ARPU for these subscribers which is very good money because the costs against that are very little.

Understand. And as you think about more people returning back to work obviously this COVID period caused very different demand patterns than what you've seen in the past with respect to the time of day. And as people go back to work and perhaps they stepped up their plan because they were using a lot more capacity if you see a shift back to normal patterns where people are more heavily using the service say after 5:00 p.m. do you still have the right amount of capacity in the way that you've metered it out, so that you can -- you won't be forced to drop people from the plan?

Yes. It's one of those things that's evolving all the time and it's very difficult as Mike mentioned earlier to predict exactly what will happen, when in terms of the demand. So, we are constantly adjusting the plans and adjusting the allocation of bits to the different plans and to the different subs to try to maintain a balance between customer satisfaction and capacity, the number of subs that we -- and this is a process that's going on every day as we evolve. And we just have to see what -- how this come back to normal develops. And it probably won't develop the way we think it will like everything else about COVID that has been there, but it's something we try to optimize continuously.

Understand. Shifting to the enterprise market and if we can set aside OneWeb and as a standalone and then look at the balance of the enterprise business, it appears that for the past couple of years, the enterprise revenues and installations have been struggling. As we come out of COVID, do you see any prospects for the enterprise business, putting up a year of growth, again excluding the OneWeb business?

Yes. The answer is yes. And we have been reasonably, pleasantly surprised and excited about what's happening in that market. We're suddenly seeing major corporations wanting to either expand the breadth of the services we offer today, our brand-new customers, our brand-old customers and brand news requirements. And if you look at the enterprise business for us, you've got the United States and you've got the rest of the world. The United States is primarily with the Fortune 1,000 companies, using -- for the access technology using primarily terrestrial technologies. Internationally, like we mentioned about India and Brazil and many of the other countries in Far East, it's primarily satellite-driven still. And our dominance in our VSAT technology gives us a very, very high market share in those areas. And both internationally and domestically, we expect 2021 to be a good year.

Great. And back to OneWeb, can you give us any sense of how much of that $250 million you had burned through prior to the chapter 11 bankruptcy? And how do you see that rollout progressing for the balance over 2021?

This is a brand-new $250 million after bankruptcy. When they went bankrupt, we had to terminate the old contract and we got paid for all the work we had done at that time. And so we started off after bankruptcy from zero and this is a brand-new $250 million from that time for the next three years.

And will it be equally distributed over the next three years, or is it upfront loaded?

Well, I think the first two years will take most of it and then there'll be probably six months' worth of stuff left in the third year. And then it goes fairly linearly because we ship gateways to 42 sites all over the world almost on an equal timing basis.

Got it. And one question for Anders on the failed small sats. Have you been able to trace back the cause of those failures to payload design issues or were these simply bus-related issues?

They weren't payload related at all. The -- we had an issue relating to the propulsion system, which -- because of the orbit that our filing specifies and where sort of ride share and standard launch vehicle leave you off in the SSO orbits, we have to change our altitude and our inclination. And in both instances, the propulsion system onboard the spacecraft malfunctioned.

And you indicated that you will look for a force majeure in order to replace those satellites and continue testing. And were you able to get any testing done with the satellites prior to their failure?

Well only one failed completely. The other one we're still in communications with and are running tests across it right now. So -- but the third satellite, which is due to go up on a ride share mission right now in June, it's of a completely different design from both the bus, the propulsion system, but it does have the same radio payload. So the payloads on the first two satellites were operational and were working fine.

Understand. All right. Thanks very much.

Thanks, Chris.

[Operator Instructions] Your next question comes from the line of Ric Prentiss from Raymond James. Your line is open.

Hey, guys. Thanks for taking a couple of follow-up questions. I want to follow Chris' line there on OneWeb. I think there had also been some discussion that maybe you could be a distribution or services or some other kind of partner besides just the equipment. Can you elaborate if there's other potential for working with OneWeb what it might entail?

Yes, absolutely. We are a service provider all over the world. And in the different service offerings that we have we expect to be leasing depending on the market requirements some capacity from OneWeb and bundling it into the other services we offer to our existing customers and new customers.

And when can that start given the OneWeb timing for their constellations to go up?

Well their constellations -- as soon as their constellations are up and tested we'll start. We've got customers today who love to have us not only offer the GEO services we normally offer, but to offer LEO services and combined LEO/GEO services. So we -- as we've said in the past we think a LEO/GEO combination is a great way to address the markets that our customers are in because they have strengths for different applications. So as soon as they're ready we'll be ready to lease capacity, especially, in the markets where we have service companies like India, Brazil, Europe, Africa, Middle East.

And obviously, Bharti is one of the ones that helped bring OneWeb out of bankruptcy as well as the UK government. What time frame do you think that constellation will be ready to help you do bundling in India say for instance?

I think approximately two years from now.

And other topic, I want to make sure obviously, we're finally out of the quiet period from the RDOF auction. You guys didn't get much there. ViaSat didn't get any, but SpaceX did get a lot. Can you just share with us kind of your thoughts on what happened in the RDOF auction and how that impacts the future dynamics?

Well, I think, SpaceX got what about $80 million a year for 10 years. And in the scheme of things it sounds like a big number, but it's not really that big, right? If you look at the number of subs that it will help them subsidize, I think, the number of different calculations comes to like 40,000 subs a year somewhere in that region. So we have 1.5 million subs up already. So 40,000 a year -- I wish we had it, but it's not an overwhelming number either in the scheme. They've got to be looking for like one million subs or something like that. So 40,000 a year isn't going to be that big a deal.

Okay.

I think they got a favorable ruling from the FCC, which impacted our -- we didn't think the FCC was going to give that kind of a favorable ruling but they did. And that's probably where we maybe didn't do as well as we could have.

Okay. And then one for Dave. You had mentioned I think the 10-K mentions, a limited number of enterprise customers are filing bankruptcy. Can you help us understand kind of sizing that risk and what might be and how you've kind of already positioned the bad debt reserve?

Yes. I mean, we're fully reserved on that and that was really earlier in the year in the midst of COVID. I mean you obviously have OneWeb. You've obviously got Global Eagle. It was a customer. So there's a number of retail customers. We're working with those customers going through the bankruptcy process and fully reserved. And hopefully we end up being over-reserved that we get some proceeds out of the final conclusion. But we're pretty comfortable in all the positions on the companies that have filed bankruptcy. It slowed some growth that impacted revenue recognition for a while and certainly some of those customers downsized their orders from us. But I don't know that we've lost one entirely among those various customers that filed.

And also the India AGR ruling got resolved. How was that reserve? And how is that going to play forward over the next 10 years?

Good question. There's still a lot of rulings to come down from the India DoT and Supreme Court. We believe that we are fully reserved for it and hopeful. I can't say optimistic, but hopeful that we get some rulings in our favor that indicate that we're over-reserved. But right now we're under-reserved. And if we've got to pay it out under the most current rulings you got to be paid out over 10 years.

Okay. Thanks for the follow-up guys.

There are no further questions. I'll now turn the call back to Terry Brown for closing remarks.

Okay. Thank you everybody for joining today and we look forward to talking to you next time.

That concludes today's conference call. Thank you everyone for joining. You may now disconnect.