Echostar Corporation ( SATS)

Q3 2011 Earnings Call

November 7, 2011 1:30 pm ET

Executives

Deepak Dutt – Investor Relations

Dean Manson – Senior Vice President, General Counsel & Secretary, Hughes

Michael T. Dugan – President and Chief Executive Officer

Pradman P. Kaul – Director

David J. Rayner – Chief Financial Officer

Anders Johnson – President

Paul Orban serves – Senior Vice President and Controller

Analysts

Amy Yong – Macquarie

Jason Bazinet – Citigroup

Michael Gertsner – MSD Capital

Christopher Little – Longfellow Capital

Kenneth Miller – Nokomis Capital

Presentation

Operator

Good afternoon. My name is Adrian, and I will be your conference operator today. At this time, I would like to welcome everyone to the EchoStar Corporation Q3 2011 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks there will be a question and answer session. (Operator Instructions) Deepak Dutt, Vice President, Investor Relations, you may begin your conference.

Deepak Dutt

Thank you, operator and a good day everyone. Welcome to EchoStar’s third quarter 2011 earnings call. I’m joined today by Mike Dugan, our CEO, Dave Rayner, CFO, and assistance of Ken Carroll, Pradman Kaul, President of Hughes, Mark Jackson, President of EchoStar Technologies, Anders Johnson, President of EchoStar Satellite Services, Grant Barber, CFO of Hughes, Dean Manson, General Counsel, and Paul Orban, Controller.

As you know, we invite media to participate in listen-only mode on the call and ask that you not identify participants or their firms in your reports. We also do not allow audio taping, which we ask that you respect. Let me now turn this over to Dean Manson for the Safe Harbor disclosure. Dean?

Dean Manson

Thank you, Deepak and good day everyone. All statements we make during this call that are not statements of historical facts, constitute forward-looking statements, which 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 such forward-looking statements. For a list of those factors, please refer to the front of our 10-Q.

All cautionary statements that we make during this 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 undue reliance on any forward-looking statements. We assume no responsibility for updating any forward-looking statements.

Let me now turn it back to Deepak.

Deepak Dutt

Yeah. Thank you, Dean. And we will now start with comments by Mike Dugan. Mike?

Michael T. Dugan

Thank you, Deepak. Welcome everybody to today’s call. We are pleased to have delivered a solid third quarter with Hughes results now included for the fourth quarter. While revenue increased significantly from last year, as would be expected with the inclusion of Hughes, it was somewhat dampened by the continued weak sales to DISH Network. Equipment sales to DISH in Q3 were down about 14% from last year, but were at 25% improvement over Q2.

Even with the DISH decline, EchoStar continues to see improved sales from other customers and we’ll talk about that in a little bit. We reported a net loss for the quarter as compared to net income for last year primarily as a result of higher interest expenses related to the Hughes acquisition, as well as tax provisions related to tax gains on our TerraStar investment.

As many of you are aware, we closed on the Hughes transaction on June 8 of this year. Their strong North American consumer service business combined with global presence in over a 100 countries greatly enhances our growth opportunities in the coming years. These attributes combined with our existing satellite expertise and fleet presence, our set-top box technology, Sling and Move networks capabilities, all make for a very powerful combination.

Integration activity is well underway with the objectives of accelerating growth in our company and improved profitability.

Now, let's address a few other highlights. On September 29 EchoStar Satellite was launched successfully on schedule and we expect it will be placed in service in the near future all testing to date has been extremely positive.

We also have two satellites currently under construction, EchoStar 16 and Jupiter-1. EchoStar 16 is a BSS satellite scheduled for launch second half of 2012 and it will be leased to DISH Network. Construction of Jupiter-1, our new high-throughput KA band satellite is progressing very well and on schedule spacecraft thermal black testing is in process, the project in total is on schedule and we expect to launch in the first half of 2012. We will use Jupiter to expand and enhance our Hughes’ net consumer subscriber broadband Internet service in North America and to service future enterprise customers.

Hughes’ new order input continue at a strong pace in Q3 significant orders in North American business included Murphy Oil, the Social Security Administration, the US Government Education Training Network or GETN, Friday (inaudible) and various other orders from Defense and Intelligent Agency.

Key International orders were from the African Development Bank, Avanti, BP, Telemar Brazil, and SCP, Mexico. This strong order activity resulted in the non-consumer order backlog of $1.1 billion going into Q4. In addition, we had another $1.1 billion of contract to backlog in our ESS business thus continuing our strong visibility into future revenues. Hughes also ended the quarter with 12% growth in its consumer base over the end of third quarter last year.

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