Echostar's CEO Discusses Q2 2012 Results - Earnings Call Transcript

Echostar Corporation (SATS)

Q2 2012 Earnings Call

August 8, 2012 1:30 pm ET

Executives

Deepak Dutt – Vice President, Investor Relations

Dean A. Manson – Executive Vice President, General Counsel and Secretary

Michael T. Dugan – President and Chief Executive Officer

Pradman P. Kaul – President and Chief Executive Officer, Hughes Communications, Inc.

Kenneth G. Carroll – Executive Vice President and Chief Financial Officer

Analysts

Amy Yong – Macquarie Research Equities

Chris Quilty – Raymond James & Associates, Inc.

Adam Spielman – PPM America

Presentation

Operator

Good afternoon everyone. My name is Sara, and I’ll be the conference operator today. At this time, I’d like to welcome you all to the EchoStar Corporation Q2 2012 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) Thank you.

I’d now like to turn the call over to your host Mr. Deepak Dutt, Vice President of Investor Relations. You may begin your conference.

Deepak Dutt

Thank you, operator, and good day, everybody. Welcome to EchoStar’s second quarter 2012 earnings call.

I’m joined today by Mike Dugan, our CEO; Ken Carroll, CFO; 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, Executive Vice President, General Counsel and Secretary; and Tom McElroy, 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 phones 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 A. Manson

Thank you, Deepak, and hello, 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 risks and factors, please refer to our Annual Report on Form 10-K and our quarterly report on Form 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

Thank you, Dean. We will start with comments by Mike Dugan. Mike?

Michael T. Dugan

Thanks, Deepak, and welcome everybody to today’s call. We’re all pleased to have delivered a solid quarter and I’d like to highlight some important events. First a few financial highlights. Second quarter 2012 revenue was $806 million, a 38% increase over revenue of $584 million in the second quarter of 2011.

Net income attributable to EchoStar shareholders was $35.7 million compared to $18.5 million for the second quarter of 2011. Earnings per share on a fully diluted basis rose to $0.41 from $0.21 in the second quarter of 2011. From a liquidity perspective, we once again ended the quarter in strong financial shape with $1.6 billion in cash and marketable securities.

Now for a few recent highlights from our different businesses. EchoStar XVII, our Ka-band satellite built by Space Systems/Loral was successfully launched by Arianespace. The Ariane 5 rocket lifted off July 5, 2012 at from Europe's space port in French Guiana. The rocket left the space craft in a geosynchronous transfer orbiting shortly thereafter it was successfully placed into its permanent geosynchronous orbital slot of 107.1 degrees west. All deployments and transfer orbit operations have been completed successfully and payload in orbit tests have progressed nicely.

We expect to begin commercial operations by the end of September. The Satellite with JUPITER high throughput technology will enable to use fourth gen satellite Internet service, which is designed to dramatically increase Internet browsing performance and support high-bandwidth applications such as video and music.

HughesNet Gen4 customers will be able to obtain faster speeds and a very high download capacity, so they can experience Internet access at its fullest. Hughes new order input continued a strong pace in Q2. We have significant orders in our North American enterprise business including National Oilwell Varco, Row 44, ConocoPhillips, Blockbuster and Xplornet.

Key orders in the international business were received from the outset Camelot, Telemar Brazil and other entities in India. This strong order activity result in a healthy non-consumer order backlog of $960 million at the end of second quarter of 2012. These also ended the quarter with approximately 626,000 subscribers on the U.S. consumer sale.

Our Brazilian subsidiary was awarded an orbital slot in an auction conducted in August last year by Anatel, the Brazilian telecom regulator. We've since completed the prerequisites and executed the license agreement with Anatel on May 4. We’re currently at an advanced stage of negotiations with potential partners for a joint venture to provide DTH service and are looking forward to expanding our business in one of the fastest growing regions in the world.

Our ESS business secured significant orders from Harris CapRock Government Services and Americom Government Services. These bring the contract backlog in our Satellite Services business from satellites in orbit and under construction to $1.8 billion as of the end of second quarter, thus continuing our strong visibility into future revenues.

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