EchoStar Corporation (ECHO) Earnings Call Transcript & Summary

Greetings, and welcome to the EchoStar Corporation Q2 2026 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce [ Jeff Blum, ] acting Chief Legal Officer and Secretary. Thank you. You may begin.

Good afternoon. I'm here with Charlie Ergen; Paul Orban, our CFO; and John Swieringa, our COO. We will begin with opening remarks from Charlie, followed by a question-and-answer session. We ask that any participant producing a report not identify other participants or their firms in such reports. We also do not allow audio recordings. All statements we make during this call, other than statements of historical fact, constitute forward-looking statements made pursuant to the safe harbor provided by the Securities Reform Act of 1995. These forward-looking statements involve known and unknown risks, uncertainties and other factors that could cause our actual results to be materially different from historical results and from any future results expressed or implied by the forward-looking statements. For a list of those factors and risks, please refer to our annual report on Form 10-K for the fiscal year ended December 31, 2025, and our 10-Q filed today and our subsequent filings made with the SEC. This information and supplemental materials relating to today's call will be posted on our Investor Relations website. All cautionary statements we make during the call should be understood as being applicable to any forward-looking statements we make wherever they appear. You should carefully consider the risks described in our reports and should not place any undue reliance on any forward-looking statements. We assume no responsibility for updating any forward-looking statements. We refer to OIBDA and free cash flow during this call, the comparable GAAP measure and a reconciliation for OIBDA is presented in our earnings release and in the case of free cash flow in our Form 10-Q as filed today with the SEC. With that, I'll turn it over to Charlie.

Thank you, Jeff. We're just going to take questions. But before we take questions, I just want to give a few opening comments. As you all know, August 1, we had a $1.5 billion bond maturity for Hughes Corporation. We had discussions with the bondholders, but weren't able to come up with a workable solution. So we filed Chapter 11 bankruptcy this morning for Hughes. I want to make just a couple of points on that. One is it's just filing is strictly limited to the Hughes entities, does not include EchoStar Corporation or other non-Hughes subsidiaries or even Hughes international entities. Second, we have first [indiscernible] motions this afternoon in front of the court to ensure that Hughes continues to operate in a normal course of business, and that means we're paying our employees. We're delivering for customers and channel partners as usual, and we expect to fulfill all ongoing forward commitments to our vendors. And third, we don't know how long bankruptcy we'll take before we can emerge restructured. As a result of the litigation that is expected in this, we won't take questions on Hughes, but I would refer you in -- you are referring to the press release, there's a link to our filing that I think, lays out chapter verse -- the details there. So with that, we'll take questions.

[Operator Instructions] And your first question comes from David Barden with New Street Research.

I guess I wanted to start with Charlie. No one probably knows better than you the discount to which EchoStar trades to its remaining portfolio of assets and SpaceX. Now that you've got the AT&T money, it would seem a logical thing to start buying back stock. And if not, why not? And what would be the priority for that capital next?

Yes. Thanks, David, for the question. I think the way -- first of all, you will see in the 10-K, 10-Q, I guess, that we did increase the authorization. The Board [indiscernible] increase the authorization from up to $5 billion of buyback. So it's Obviously, 1 of the things that we look at based on our capital structure is 1 of the things we look at, I would say, first and foremost, we look at investing in our business. So we look at our existing business -- businesses to invest in and the opportunities there. And then EchoStar Capital now under the leadership of [ Tom Collin, ] we look at other things we can we can look at, which could include our own company. And then after that -- if we can't find anything there, then you get work all the way down to paying dividends. So we've been a good steward of capital for a lot of years, and I hope we'll continue to do that.

Your next question comes from Brent Penter with Raymond James.

A couple for me. First 1 to follow up on David's question, you mentioned EchoStar Capital, and that was folded under the corporate development arm. Does that represent any change in philosophy about how you're investing at EchoStar Capital? And any change to the list of kind of opportunities you gave back in November last year.

Yes, Brent. No, really no change other than it's probably a little bit more efficient since we're gone under 1 roof and probably move a little bit faster just because we're like literally in the same area in the company and obviously, Tom comes through wealth of experience in long term in the industry, not just at EchoStar.

Okay. Got it. And then on the SpaceX transaction, given where the SpaceX market cap is today compared to the $400 billion valuation, it was when you signed the deals. The implied value is obviously much higher. How do you size the expected tax payment today? And then are you doing any hedging on that? Or have you all had any discussions with SpaceX about alternative ways that you could structure those deals to reduce or delay those taxes?

Yes. Brent, those are all good questions. The I guess the way I try to answer your question is we still are of mind that the cost of of finalizing the liquid -- the termination of our wireless network and our tax liabilities in that $5 billion to $7 billion range. The we don't know the answer on where we're going to be there. It could be a little higher, a little lower than that. A, obviously, there's litigation on the termination of the network. And they're obviously -- we don't know where SpaceX will be in the future. But we know that -- and we know that there's things like 1033 exchanges and things that can reduce tax liability. So we're in that $5 billion to $7 billion range in terms of what we think it's going to be, but that includes our wireless network termination. So that -- but we're not -- again, we're a good steward of capital. So we're looking at everything and how we can make sure that we take care of capital the best way.

Okay. Got it. And then how are you all thinking about Boost Mobile strategically? And if you wanted to engage in any kind of M&A or partnerships in that business, how restrictive are the NSA and [ MSA ] contracts with T-Mobile and AT&T and changing control provisions there?

Well, I wouldn't get -- I can't get into actual contracts. But I talked about Boost in general. One is we haven't -- as management, we haven't cracked the code on how to be successful in the -- to the level we'd like to in the wireless business. We -- in general, we've treaded water for 4 years now. We were slightly cash positive in the quarter, but we did lose subscribers. But having said that, the -- we have new leadership with [indiscernible] who joined us 4 or 5 months ago, and he's certainly taking a fresh approach. We think we have some strategic initiatives going forward that will reinvigorate that part of our business. . In general, we're not -- we -- all of our businesses have to run at a profit long term. And they have to have a right to exist because we -- everybody is only as good as their last quarter. So we like the business. We're disappointed that we haven't done better in it. It's a great challenge for us. But it's strategically important for us. And we do have a fair amount of flexibility in our -- contractually to whether it be M&A or partnering with people and we'll continue to see if we can figure out how to be productive there.

Your next question comes from Sebastiano Petti with JPMorgan.

Charlie, just maybe going back to David Barden's question, just I mean why increase the buyback from $2 billion to $3 billion, but yet be out of the market? I mean is there anything like that is precluding EchoStar from buying back stock currently in the market? And then maybe just a follow-up, thinking about the remaining assets, particularly AWS-3. I mean how are you thinking about that now on the other side of the auction and perhaps maybe time line? And I think would there be any debt that would need to be paid off from the sale of the AWS-3 spectrum at this point?

We do have some restrictions in our -- on buying back stock in our bond indentures. So I don't know how public those are, but we do have some restrictions. The way I would look -- Sebastiano, the way I'd look at EchoStar, or the way I look at it or I think the way we look at it is that having closed the AT&T transaction, right? And putting $2.4 billion into an escrow for the closing down of our network that is mandated by the FCC and put that $2.4 billion aside, we have about -- when you look at the total company, we have about $14 billion or $15 billion in cash. We have that $5 billion to $7 billion liability in our opinion, going forward, which includes the $2.4 billion. And then we have -- still have -- we have Boost, which we haven't shown we can is -- certainly a valuable company or potentially a valuable company. And we have -- our traditional video business, which continues [indiscernible] cash. And then in addition to that, we have 261.8 million shares of SpaceX. And obviously, you can figure out at least publicly what the value of that is. And then we have spectrum -- still a solid spectrum position of AWS-3, CBRS, 700 megahertz, et cetera, that you could take a stab at in terms of evaluation. And we have -- excluding Hughes, which is obviously in the restructuring process today and which will ultimately get sorted out, we have about $5 billion of cash -- I mean, of debt. And we have an almost $8 billion of debt, that SpaceX transaction will pay at closing. And then we have [ $1.9 billion ] of convert debt at this point is in the money, would convert. So you end up with a company that's cash-rich, not much debt. You can -- it were pretty easy to to look at the value. And then obviously, the conglomerate discount that people get to the marketplace or the lack of confidence in management or whatever the the discount rate is, that's how you value the company. And then going forward, we're going to -- as we always have, look for opportunity and manage the business in a respectable fashion. This year is interesting because we're -- unfortunately, a lot of focus is really just cleaning up the network shutdown and now cleaning some of that up to the courts just because we know the choice but to do that. And and then getting in a position to focus our company on moving forward with all the opportunities that we have. And then in addition to that, that pivot to an asset, a cash-rich company. There's a pivot. Every company is going through the pivot to AI and how it affects your business. And our company wasn't built for AI. We didn't know anything about it years ago. And so we have to pivot. And in a funny sort of way, there's a restructuring going on within EchoStar to say how do we take advantage of that paradigm shift of how AI changes businesses, the way businesses operate. And I think a lot of our success in the future will be dependent on how well we do with that. And it's certainly way too early to tell we're going to do with that. But culturally, our team is excited about it and very focused on it.

Your next question comes from Walter Piecyk with LightShed.

Just a question on the DBS prepackaged proceedings. I know bidders could still obviously potentially emerge during this process. But assuming that you end up being the kind of stocking horse bidder for the -- and the winter of those assets, just thoughts on like what you do with the radios. Has there been any appetite in the market for the redeployment of those radios for like a wholesale forth network? And any other assets that you might end up effectively still owning at the end of that reorg?

It would be -- Walt, it would be way premature to speculate on that. I mean, I think that the -- you can see our stocking [indiscernible bid, I think, was potentially $300 million, somewhat less than that because of cash on hand. So you can hypothesize that there's not -- that at least in our opinion, there's not a lot of liquidation value there. So I think it's relatively immaterial in the scheme of things when you look at the other assets that we have.

Got it...

I think -- and Walt, [indiscernible] off there. I think the more important thing, the way I would look at it is that we're a unique company in the sense that -- and we -- in the sense that we have mobility through Boost. We have a lot of broadband relationships, not the least of which is due to SpaceX and we have video. And so we know connectivity pretty well, and connectivity is going to take a lot of different shapes for customers, but most customers are going to need WiFi, broadband, whether that be through a cable or satellite, probably maybe some people with both. People still have video needs, and we're uniquely positioned to do that. And because it looks to me like in terms of an actual network, the Big 3 network have done a good job of building a pretty big moat around their businesses. And we kind of play with 1 foot in that business as well. So the real key is the knowledge base we have, the fact that we play in a lot of different places in the connectivity field. I think it will be helpful for us going forward. We have to prove it, of course.

You did also in the re-auction of the DE stuff. Do you have plans to bid in the upcoming C-band auction and -- or does anything you've -- any deal that you have with the FCC, where obviously, you've committed to sell your existing spectrum, does that prohibit you from bidding and upcoming auctions or even secondary market transactions for spectrum?

Yes. The auction rules aren't out for the C-band auction, but we would anticipate that we would not be prevented from participating. And we participated, I think, in every auction since since the first one. We don't -- I don't think -- we -- actually, first one was a satellite auction we participated. But the first test 1 we did not participate in, but we participated in 1 after that. So I don't think we'll be prevented. Whether it would make any sense for us to participate given where we are. That's a whole different question, and we certainly haven't analyzed that. Secondary market transactions, if there was something that we thought was strategic important that would enhance the value of our company, we would look at it.