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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.  20549
 
FORM 10-K 

(Mark One) 
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2020.
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: 001-33807
 
EchoStar Corporation
(Exact name of registrant as specified in its charter) 
Nevada
 
26-1232727
(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)
706-4000
Not Applicable
(Registrant’s telephone number, including area code)(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Class A common stock
 $0.001 par value
The NASDAQ Stock Market LLC
(Title of each class)(Name of each exchange on which registered)
SATS
(Ticker symbol)
 
Securities registered pursuant to Section 12(g) of the Act: None
 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes No
 
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yes No
 
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

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. Yes No
 
As of June 30, 2020, the aggregate market value of Class A common stock held by non-affiliates of the registrant was $1.3 billion based upon the closing price of the Class A common stock as reported on the NASDAQ Global Select Market as of the close of business on that date.
 
As of February 11, 2021, the registrant’s outstanding common stock consisted of 46,011,533 shares of Class A common stock and 47,687,039 shares of Class B common stock, each $0.001 par value.


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DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s definitive Proxy Statement to be filed in connection with its 2021 Annual Meeting of Shareholders are incorporated by reference in Part III.


Table of Contents

TABLE OF CONTENTS
 
   
  
   
   
  
   
   
  
   
   
  
   
 
 
F-1



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DISCLOSURE REGARDING FORWARD LOOKING STATEMENTS

This Annual Report on Form 10-K (“Form 10-K”) 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, 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,” “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-K and represent management’s current views and assumptions.  Forward-looking statements are not guarantees of future performance, events or results and involve potential known and unknown risks, uncertainties and other factors, many of which may be beyond our control and may pose a risk to our operating and financial condition.  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 our ability to operate and control our satellites, operational and environmental risks related to our owned and leased satellites, and risks related to our satellites under construction;
our ability, and the ability of third parties with whom we engage in order to operate our business, to operate as a result of the COVID-19 pandemic;
our ability to implement and/or realize benefits of our investments and other strategic initiatives;
legal proceedings relating to the BSS Transaction or other matters that could result in substantial costs and material adverse effects to our business;
risks related to our foreign operations and other uncertainties associated with doing business internationally;
risks related to our dependency upon third-party providers; and
risks related to our human capital resources.
 
Other factors that could cause or contribute to such differences include, but are not limited to, those discussed in Part I, Item 1A. Risk Factors and Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations of this Form 10-K and those discussed in other documents we file with the Securities and Exchange Commission (“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 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.
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PART I
 
ITEM 1.     BUSINESS
 
OVERVIEW
 
EchoStar Corporation (which, together with its subsidiaries, is referred to as “EchoStar,” the “Company,” “we,” “us” and “our”) is a holding company that was organized in October 2007 as a corporation under the laws of the State of Nevada and has operated as a separately traded public company from DISH Network Corporation (“DISH”) since 2008. 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. Our Class A common stock is publicly traded on the NASDAQ Global Select Market (“NASDAQ”) under the symbol “SATS.”
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.

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 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 industries and communities globally 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 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, 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.

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 (together with DISH, “DISH Network”) and our 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 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 one 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”).
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In connection with the BSS Transaction, we and DISH Network agreed to indemnify each other against certain losses with respect to breaches of certain representations and covenants and certain retained and assumed liabilities, respectively. Additionally, we and DISH and certain of our and their subsidiaries (i) entered into certain customary agreements covering, among other things, matters relating to taxes, employees, intellectual property and the provision of transitional services; (ii) terminated certain previously existing agreements; and (iii) amended certain existing agreements and entered into certain new agreements pursuant to which we and DISH Network will obtain and provide certain products, services and rights from and to each other.

The BSS Transaction was structured in a manner intended to be tax-free to us and our stockholders for U.S. federal income tax purposes and was accounted for as a spin-off to our shareholders as we did not receive any consideration. 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 all periods presented in our accompanying Consolidated Financial Statements and notes thereto in Item 15 of this Form 10-K (“Accompanying Consolidated Financial Statements”).

See Note 5 in our Accompanying Consolidated Financial Statements for further detail of our discontinued operations.

The Accompanying Consolidated Financial Statements have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”).  All amounts reference results from continuing operations unless otherwise noted and are expressed in thousands of U.S. dollars, except share and per share amounts and unless otherwise noted. Additionally, certain prior period amounts have been adjusted to conform to the current period presentation.

BUSINESS STRATEGIES
 
Capitalize on domestic and international demand for broadband services.  We intend to capitalize on the domestic and international demand for satellite-delivered broadband internet services and enterprise solutions by utilizing, among other things, our industry expertise, technology leadership, increased satellite capacity, access to spectrum resources, licenses and high-quality, reliable service to drive growth in consumer subscribers and enterprise customers. We also 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 market share, increase our satellite capacity, expand into new markets, obtain new 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.
 
Expand satellite capacity and related infrastructure.  During 2020, we continued the design and construction of a new, next-generation, high throughput geostationary satellite, with an expected launch in the second half of 2022, that is primarily intended to provide additional capacity for our HughesNet satellite internet service (the “HughesNet service”) in North, Central and South America as well as enterprise services. We expect that our expertise in the identification, acquisition and development of satellite spectrum and orbital rights and satellite operations, together with our increased satellite capacity and existing, acquired or developed infrastructure, will continue to provide opportunities in domestic and international markets to enhance services to our existing and additional customers. We intend to continue to provide services to a broad customer base, including providers of satellite-delivered broadband, corporate communications and government services.

Continue to selectively explore new domestic and international strategic initiatives. 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 markets and new customers, broaden our portfolio of services, products and intellectual property and strengthen our relationships with our customers. For example, our joint ventures with Al Yah Satellite Communications Company PrJSC (“Yahsat”) enable us to provide satellite broadband services across Africa, the Middle East and southwest Asia and expand our broadband internet services and enterprise solutions in Brazil.

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Continue development of S-band and other hybrid spectrum resources.  We intend to continue to explore the development and deployment of S-band technologies that we expect will reduce the cost of satellite communications for internet of things, machine-to-machine communications, public protection, disaster relief and other end-to-end services worldwide and the integration of our products and services into new global, hybrid networks that leverage multiple satellites and terrestrial technologies. We believe we remain in a unique position to deploy a mobile satellite service (“MSS”) and complementary ground component (“CGC”) network in the European Union and its member states (“E.U.”), the United Kingdom (“U.K.”) and other European countries through our EchoStar XXI satellite, which was placed into service in November 2017, and the EUTELSAT 10A payload.  We have positioned ourselves to continue to develop the S-band spectrum globally by acquiring Sirion Global Pty Ltd., which we have renamed EchoStar Global Australia Pty Ltd (“EchoStar Global”), which holds global S-band non-geostationary satellite spectrum rights for MSS. Additionally, we entered into a contract with Tyvak Nano-Satellite Systems, Inc. for the design and construction of S-band nano-satellites. We launched two nano-satellites in the third quarter of 2020. Following launch, both nano-satellites experienced technical anomalies that precluded them from fulfilling their intended regulatory milestone missions. We intend to seek milestone relief due to these force majeure events. We expect to launch our third nano-satellite in 2021.  Our nano-satellites are designed to facilitate our continued growth in the global S-band market and enable us to leverage our acquisition of EchoStar Global. In addition, in Mexico we hold licenses for S-band MSS and terrestrial services.
 
Develop improved and new technologies.  Our engineering capabilities provide us with the opportunity to develop and deploy cutting edge technologies, license our technologies to others and maintain a leading technological position in the industries in which we are active. 

BUSINESS SEGMENTS

HUGHES SEGMENT
 
Our Products and Services
 
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 across wholesale and retail 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. We 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, as well as working with the customer regarding collection of pre-petition amounts.
 
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 the U.S. continues to be constrained where we are nearing or have reached maximum 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.

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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% ownership interest in that subsidiary. 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, we 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 service in North, Central and South America as well as enterprise broadband services. Maxar Space, LLC (formerly Space Systems/Loral, LLC), 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 in the second half of 2022. Further delays or impediments 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 Corporate and Other in our segment reporting.

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, in September 2015, we entered into 15-year agreements with affiliates of Telesat Canada for Ka-band capacity on the Telesat T19V satellite 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.

Our Customers
 
Our enterprise customers include, but are not limited to, lottery agencies, gas station operators, aircraft connectivity providers and companies with multi-branch networks that rely on satellite or terrestrial networks for critical communication across wide geographies. Most of our enterprise customers have contracts with us for the services they purchase. Our Hughes segment also designs, provides and installs gateway and terminal equipment to customers for other satellite systems and provides satellite ground segment systems and terminals for other satellite systems, including mobile system operators. Developments toward the launch of next-generation satellite systems, including LEO, MEO and geostationary systems, could provide additional opportunities to drive the demand for our equipment, hardware, technology and services.

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Our Competition
 
Our industry is highly competitive.  As a global provider of network technologies, products and services, our Hughes segment competes with a large number of telecommunications service providers, which puts pressure on prices and margins.  To compete effectively, we emphasize our network quality, customization capability, offering of networks as a turnkey managed service, position as a single point of contact for products and services and competitive prices.
 
In our consumer broadband satellite technologies and internet services markets, we compete against traditional telecommunications and wireless carriers, other satellite internet providers, as well as digital subscriber line (“DSL”), fiber and cable internet service providers offering competitive services in the markets we seek to serve.  Cost, speed and accessibility are key determining factors in the selection of a service provider by the consumer.  In addition, government subsidies, such as the FCC’s Rural Development Opportunity Fund can have the effect of subsidizing the growth of our wired, wireless and satellite competitors. Our primary satellite competitor in our North American consumer market is ViaSat Communications, Inc., which is owned by ViaSat, Inc. (“ViaSat”).  ViaSat has also announced plans to enter the South and Central American consumer markets.  We seek to differentiate ourselves based on the ubiquitous availability of our service, quality, proprietary technology, and distribution channels.
 
In our enterprise markets, we compete against providers of satellite-based and terrestrial-based networks, including fiber, DSL, cable modem service, multiprotocol label switching and internet protocol-based virtual private networks.

Our principal competitors for the supply of very-small-aperture terminal satellite networks are Gilat Satellite Networks Ltd, ViaSat, and ST Engineering iDirect, Inc.  To differentiate ourselves from our competitors, we emphasize particular technological features of our products and services, our ability to customize networks and perform desired development work and the quality of our customer service.  We also face competition from resellers and numerous local companies who purchase equipment and sell services to local customers, including domestic and international telecommunications operators, cable companies and other major carriers.

Manufacturing
 
Certain products in our Hughes segment are assembled at our facilities in Maryland and we outsource a significant portion of the manufacturing of our products to third parties.  We believe that the manufacturing facilities used by our Hughes segment have sufficient capacity to handle current demand.  We adjust our capacity based on our production requirements.  We also work with third-party vendors for the development and manufacture of components that are integrated into our products.  We develop dual sourcing capabilities for critical parts when practical and we evaluate outsourced subcontract vendors on a periodic basis.  Our operations group, together with our engineering group, works with our vendors and subcontractors to reduce development costs, to increase production efficiency, and to obtain components at lower prices.

ESS SEGMENT
 
Our Services
 
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.

Our Customers
 
Our satellite capacity is currently used by our customers for a variety of applications, including:
Fixed Satellite Services (“FSS”).  We provide satellite services to broadcast news organizations, internet service providers and content providers who use our satellites to deliver programming and internet.  Our
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satellites are also used for the transmission of live sporting events, internet access, disaster recovery and satellite news gathering services.
 
Government Services.  We provide satellite and technical services to U.S. government service providers. 
 
Network Services.  We provide satellite services to companies for private networks that allow delivery of video and data services for corporate communications.  Our satellites can be used for point-to-point or point to multi-point communications.
 
Our Competition
 
Our ESS segment competes against larger, well-established satellite service companies, such as Intelsat S.A., SES S.A., Telesat and Eutelsat Communications S.A., in an industry that is characterized by long-term contracts and high costs for customers to change service providers.  Several of our competitors maintain key North American and other international orbital slots that may further limit our ability to compete and offer competitive pricing.

OTHER BUSINESS OPPORTUNITIES

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.

OUR SATELLITE FLEET
 
Our operating satellite fleet as of December 31, 2020 consists of both owned and leased satellites as follows:
Satellite
Segment
Launch Date
Nominal 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
EUTELSAT 10A (“W2A”) (4)
Corporate and OtherApril 200910 E-
EchoStar XXICorporate and OtherJune 201710.25 E15
     
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. (“Hughes Communication”) 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 of the payload as of November 2019.
(3)    We own the Ka-band and Ku-band payloads on this satellite.
(4)    We acquired the S-band payload on this satellite in December 2013. Prior to acquisition, the S-band payload experienced an anomaly at the time of launch and, as a result, is not fully operational.
 
Construction in progress as of December 31, 2020 included our EchoStar XXIV satellite, which is expected to be launched in the second half of 2022, and an S-band nano-satellite expected to be launched in 2021.
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Satellite Anomalies and Impairments
 
Our satellites may experience anomalies from time to time, some of which may have a significant adverse effect on their remaining useful lives, the commercial operation of the satellites or our operating results or financial position. We are not aware of any anomalies with respect to our owned or leased satellites that have had any such significant adverse effect during the year ended December 31, 2020. There can be no assurance, however, that anomalies will not have any such adverse effects in the future. In addition, there can be no assurance that we can recover critical transmission capacity in the event one or more of our satellites were to fail.

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.

We evaluate our satellites for impairment and test for recoverability whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. Certain of the anomalies previously disclosed may be considered to represent a significant adverse change in the physical condition of a particular satellite. However, based on the redundancy designed within each satellite, certain of these anomalies are not necessarily considered to be significant events that would require a test of recoverability.

GOVERNMENT REGULATIONS
 
We are subject to telecommunications regulation by a number of regulatory bodies including the FCC, other U.S. federal and state regulators, the International Telecommunications Union (“ITU”) and regulators in other countries and regions where we hold licenses including the E.U., the U.K., India, Australia and several Latin American countries. In addition, we are also subject to the export control laws and regulations and trade sanctions laws and regulations of the U.S. and other countries with respect to the export of telecommunications equipment and services.  In addition, in the U.S. and some other countries we are subject to country specific approvals of our products. Depending upon the circumstances, non-compliance with applicable legislation or regulations could result in suspension or revocation of our licenses or authorizations, the termination or loss of contracts or the imposition of contractual damages, civil fines or criminal penalties.
 
The following summary of regulations and legislation is not intended to describe all present and proposed government regulation and legislation affecting our business.  Government regulations that are currently the subject of judicial or administrative proceedings, draft legislation or administrative proposals could impact us and our industries to varying degrees.  The FCC and other regulators from time to time initiate proceedings that could adversely impact our satellite operations, including spectrum usage.  We cannot predict either the outcome of these proceedings or proposals or any potential impact they might have on the industry or on our operations.
 
FCC Regulations Applicable to Our Operations
 
FCC Jurisdiction over Satellite and Terrestrial Operations.  Non-governmental bodies, including commercial entities, that use radio frequencies to provide communications services to, from or within the U.S. are subject to the jurisdiction of the FCC under the Communications Act of 1934, as amended (the “Communications Act”).  The Communications Act gives the FCC regulatory jurisdiction over many areas relating to communications operations, including:
 
the assignment of satellite radio frequencies and orbital locations to specific services and companies, the licensing of satellites and earth stations and the granting of related authorizations;
approval for the relocation of satellites to different orbital locations, the replacement of a satellite with another new or existing satellite and the authorization of specific earth stations to communicate with such newly relocated satellites;
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ensuring compliance with the terms and conditions of assignments, licenses, authorizations and approvals;
avoiding harmful interference with other radio frequency emitters; and
ensuring compliance with other applicable provisions of the Communications Act and FCC rules and regulations.

All satellite licenses issued by the FCC are subject to expiration unless extended by the FCC.  Our U.S. FSS licenses generally have 15 year terms.  We hold licenses and authorizations for satellite and earth stations as well as other services.  To obtain and operate under such FCC licenses and authorizations, we must satisfy legal, technical qualification requirements and other conditions including, among other things, satisfaction of certain technical and ongoing due diligence obligations, maintaining bonds, payment of annual regulatory fees and various reporting requirements.

Telecommunications Regulation.  Many of the services we provide are also subject to FCC regulation as telecommunications services.  For certain services in the U.S., we are required to contribute fees, computed as a percentage of our revenue from telecommunications services to the Universal Service Fund (“USF”) to support mechanisms that subsidize the provision of services to low-income consumers, high-cost areas, schools, libraries and rural health care providers.  Current FCC rules permit us to pass this USF contribution through to our customers.  The FCC also requires broadband internet access and internet telephony service providers to comply with the requirements of the Federal Communications Assistance for Law Enforcement Act, which generally requires telecommunications carriers to ensure that law enforcement agencies are able to conduct lawfully-authorized surveillance of users of their services.  In addition, as a provider of interconnected voice over internet protocol services, we are required to abide by a number of rules related to telephony service, including rules dealing with the protection of customer information and the processing of emergency calls.
 
State and Local Regulation
 
We are also regulated by state and local authorities.  While the FCC has preempted many state and local regulations that would impair the installation and use of very-small-aperture terminals and other consumer satellite dishes, our businesses nonetheless are subject to state and local regulation, including, among others, obtaining regulatory authorizations and zoning regulations that affect the ability to install these consumer satellite earth station antennas. In addition, in order to obtain universal service funding, we are subject to being an eligible telecommunications carrier in certain states.
 
International Regulation
 
Foreign Administrations’ Jurisdiction Over Satellite and Terrestrial Operations.  Some of our satellites and earth stations are licensed in foreign jurisdictions.  We also have terrestrial authorizations in foreign jurisdictions.  In order to provide service to a foreign location from our satellites, we are required to obtain approvals from the FCC and foreign administrative agencies.  The laws and regulations addressing access to satellite and terrestrial systems vary from country to country.  In most countries, a license is required to provide our services and to operate satellite systems and earth stations.  Such licenses may impose certain conditions, including implementation and operation of the satellite system in a manner consistent with certain milestones (such as for contracting, satellite design, construction, launch and implementation of service), that the satellite or its launch be procured through a national entity, that the satellite control center be located in national territory, that a license be obtained prior to launching or operating the satellite, or that a license be obtained before interconnecting with the local switched telephone network and we may be subject to penalties or fines for failing to meet such conditions.  Additionally, some countries may have restrictions on the services we provide and how we provide them and/or may limit the rates that can be charged for the services we provide or impose other service terms or restrictions. Furthermore, foreign countries in which we currently, or may in the future, operate may not authorize us access to all of the spectrum that we need to provide service in a particular country.
 
The ITU Frequency and Orbital Location Registration.  The orbital location and frequencies for our satellites are subject to the frequency registration and coordination process of the ITU.  The ITU Radio Regulations define the international rules, regulations and rights for a satellite and associated earth stations to use specific radio frequencies at a specific orbital location.  These rules, which include deadlines for the bringing of satellite networks into use, differ depending on the type of service to be provided and the frequencies to be used by the satellite.  On our behalf, various countries have made and may in the future make, additional filings for the frequency assignments at particular orbital locations that are used or to be used by our current satellite networks and potential
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future satellite networks we may build or acquire.  In the event the international coordination process that is triggered by ITU filings under applicable rules is not successfully completed, or that the requests for modification of the broadcast satellite services plan regarding the allocation of orbital locations and frequencies are not granted by the ITU, we will have to operate the applicable satellite(s) on a non-interference basis, which could have an adverse impact on our business operations.  If we cannot do so, we may have to cease operating such satellite(s) at the affected orbital locations.  We cannot be sure of the successful outcome of these ITU coordination processes.  We make commercially reasonable efforts to cooperate with the filing nation in the preparation of ITU filings, coordination of our operations in accordance with the relevant ITU Radio Regulations and responses to relevant ITU inquiries.

Registration in the United Nations (“UN”) Registry of Space Objects.  The U.S. and other jurisdictions in which we license satellites are generally parties to the UN Convention on the Registration of Objects Launched into Outer Space, which requires a satellite’s launching state to register the satellite as a space object.  The act of registration carries liability for the registering country in the event that the satellite causes third party damage.  Administrations may place certain requirements on satellite licensees in order to procure the necessary launch or operational authorizations that accompany registration of the satellite.  In some jurisdictions, these authorizations are separate and distinct, with unique requirements, from the authorization to use a set of frequencies to provide satellite services.
 
Telecommunications Regulation.  Many of the services we provide are also subject to the regulation of other countries as telecommunications services.  For certain services, we may be required to contribute fees to a universal service or other fund to support mechanisms that subsidize the provision of services to designated groups.  Many countries also impose requirements on telecommunications carriers to ensure that law enforcement agencies are able to conduct lawfully-authorized surveillance of users of their services.  In addition, we are subject to a number of other rules, including rules related to telephony service such as the protection of customer information and processing of emergency calls.
 
Export Control Regulation
 
In the operation of our business, we must comply with all applicable export control and trade sanctions laws and regulations of the U.S. and other countries.  Applicable U.S. laws and regulations include the Arms Export Control Act, the International Traffic in Arms Regulations (“ITAR”), the Export Administration Regulations (“EAR”) and the trade sanctions laws and regulations administered by the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”).
 
The export of certain hardware, technical data, and services relating to satellites and the supply of certain ground control equipment, technical data and services to non-U.S. persons or to destinations outside the U.S. is regulated by the U.S. Department of Commerce’s Bureau of Industry and Security (“BIS”) under the EAR.  In addition, BIS regulates our export of satellite communications network equipment to non-U.S. persons or to destinations outside of the U.S.  The export of other items is regulated by the U.S. Department of State’s Directorate of Defense Trade Controls (“DDTC”) under the ITAR and are subject to strict export control and prior approval requirements.  In addition, we cannot provide certain equipment or services to certain countries subject to U.S. trade sanctions unless we first obtain the necessary authorizations from OFAC.  We are also subject to the Foreign Corrupt Practices Act and similar anti-bribery laws in other jurisdictions that generally prohibit companies and their intermediaries from making improper payments or giving or promising to give anything of value to foreign government officials and other individuals for the purpose of obtaining or retaining business or gaining a competitive advantage.
 
Environmental Regulation
 
We are subject to the requirements of federal, state, local and foreign environmental and occupational safety and health laws and regulations.  These include laws regulating air emissions, waste-water discharge and waste management, most significantly the Resource Conservation and Recovery Act and the Emergency Planning and Community Right-to-Know Act (“EPCRA”).  Under the Resource Conservation and Recovery Act, our Hughes segment is considered a small quantity generator.
 
As required by the EPCRA, we file annual reports with regulatory agencies covering four areas: Emergency Planning, Emergency Release, Hazardous Chemical Storage and Toxic Chemical Release Inventory.  We maintain small quantities of hazardous materials on our premises and, therefore, have relatively modest reporting requirements under the EPCRA.  We are also subject to the requirements of other environmental and occupational
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safety and health laws and regulations.  Additionally, we review the Superfund Amendments and Reauthorization Act Title III regulatory requirements and annually report quantities of onsite material storage using Tier II, state DEQ (Department of Environmental Quality) reporting systems.
 
Our environmental compliance costs, capital and other expenditures to date have not been material, and we do not expect them to be material in 2021.  However, environmental requirements are complex, change frequently and have become more stringent over time.  Accordingly, we cannot provide assurance that these requirements will not change or become more stringent in the future in a manner that could have a material adverse effect on our business and/or environmental compliance costs, capital or other expenditures.

PATENTS AND TRADEMARKS
 
We currently rely on a combination of patent, trade secret, copyright and trademark law, together with licenses, non-disclosure and confidentiality agreements and technical measures, to establish and protect proprietary rights in our products.  We hold U.S. and foreign patents covering various aspects of our products and services.  The duration of each of our U.S. patents is generally 20 years from the earliest filing date to which the patent has priority.  We have granted licenses to use our trademarks and service-marks to affiliates and resellers worldwide, and we typically retain the right to monitor the use of those marks and impose significant restrictions on their use in efforts to ensure a consistent brand identity.  We protect our proprietary rights in our software through software licenses that, among other things, require that the software source code be maintained as confidential information and that prohibit any reverse-engineering of that code.
 
We believe that our patents are important to our business.  We also believe that, in some areas, the improvement of existing products and the development of new products, as well as reliance upon trade secrets and unpatented proprietary know-how, are important in establishing and maintaining a competitive advantage.  We believe, to a certain extent, that the value of our products and services are dependent upon our proprietary software, hardware and other technology remaining trade secrets and/or subject to copyright protection.  Generally, we enter into non-disclosure and invention assignment agreements with our employees, subcontractors and certain customers and other business partners.  Please see Item 3. Legal Proceedings of this Form 10-K for more information.

RESEARCH AND DEVELOPMENT AND ENGINEERING
 
We have a skilled and multi-disciplined engineering organization that develops our products and services.  Our in-house technological capability includes a wide range of skills required to develop systems, hardware, software and firmware used in our products and services. 
 
With respect to hardware development, we have skill sets that include complex digital designs, radio frequency and intermediate frequency analog designs, advanced application-specific integrated circuit designs and sophisticated consumer and system level packaging designs.  We also have extensive experience in developing products for high-volume, low-cost manufacturing for the consumer industry, including dual mode satellite and wireless handsets.
 
As a complement to our hardware development, we have extensive experience in designing reliable, real time, embedded software systems as part of our communication systems and services offerings.  For example, our broadband product line for the enterprise market supports an extensive range of protocols for data communications.  Our engineers have also developed many large turnkey systems for our customers by designing the overall solution, implementing the various subsystems, deploying the entire network and user terminals, integrating and verifying the operational system and ultimately training the customers’ technicians and operators.
 
Costs incurred in research and development activities are generally expensed as incurred. A significant portion of our research and development costs are incurred in connection with the specific requirements of a customer’s order. In such instances, the amounts for these customer funded development efforts are included in Cost of sales - equipment in the Consolidated Statements of Operations in our Accompanying Consolidated Financial Statements.

GEOGRAPHIC AREA DATA AND TRANSACTIONS WITH MAJOR CUSTOMERS
 
For principal geographic area data and transactions with major customers for 2020, 2019 and 2018, see Note 20 in our Accompanying Consolidated Financial Statements.  See Item 1A. Risk Factors for information regarding risks related to our foreign operations.
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HUMAN CAPITAL RESOURCES

Our Human Capital 

As of December 31, 2020, we had approximately 2,400 employees globally; of which approximately 1,800 were located in the U.S. and 600 internationally. We generally consider relations with our employees to be good. Other than approximately 200 of our employees located in Italy and Brazil, none are represented by a union. Our mission is to be a global connectivity provider for people, enterprises and things.

Employee Training and Development

We have a robust ongoing training and development program to enable employees to further refine and develop their skills. These training and development programs include technical programs meant to keep our employees abreast of the latest developments in our industry as well as courses to assist employees in developing their business communications and management skills.

Worker Health and Safety

Our commitment is to provide a safe, healthy and reliable workplace. We provide access to a variety of innovative, flexible, and convenient health and wellness programs. Due to the COVID-19 pandemic, a large portion of our workforce has been working remotely. For the employees coming in to the physical offices, we implemented enhanced safety and security procedures in accordance with state, local and CDC recommendations.

WHERE YOU CAN FIND MORE INFORMATION
 
We are subject to the informational requirements of the Securities Exchange Act of 1934, as amended, and accordingly file an annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements and other information with the SEC.  Our public filings are maintained on the SEC’s internet site at http://www.sec.gov, which contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC.

WEBSITE ACCESS
 
Our Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, may also be accessed free of charge through our website at http://www.echostar.com as soon as reasonably practicable after we have electronically filed such material with, or furnished it to, the SEC.
 
We have adopted a written code of ethics that applies to all of our directors, officers and employees, including our principal executive officer, principal financial officer, principal accounting officer and controller, in accordance with the Sarbanes-Oxley Act of 2002 and the rules of the SEC promulgated thereunder.  Our code of ethics is available on our corporate website at http://www.echostar.com.  In the event that we make changes in, or provide waivers of, the provisions of this code of ethics that the SEC requires us to disclose, we intend to disclose these events on our website.

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INFORMATION ABOUT OUR EXECUTIVE OFFICERS

Furnished in accordance with Item 401(b) of Regulation S-K, pursuant to General Instruction G(3) of Form 10-K.

The following table and information below sets forth the name, age and position with EchoStar of each of our executive officers, the period during which each executive officer has served as such and each executive officer’s business experience during at least the past five years:
NameAgePosition
Charles W. Ergen67Chairman
Michael T. Dugan72Chief Executive Officer, President and Director
David J. Rayner63Executive Vice President, Chief Financial Officer, Chief Operating Officer and Treasurer
Anders N. Johnson63Chief Strategy Officer and President, EchoStar Satellite Services L.L.C.
Pradman P. Kaul74President, Hughes Communications and Director
Dean A. Manson54Executive Vice President, General Counsel and Secretary
 
Charles W. Ergen.  Mr. Ergen has served as our executive Chairman since November 2009 and Chairman of the Board of Directors since our formation in 2007.  Mr. Ergen served as our Chief Executive Officer from our formation in 2007 until November 2009.  Mr. Ergen serves as executive Chairman and has been Chairman of the Board of Directors of DISH since its formation and, during the past five years, has held executive officer and director positions with DISH Network, most recently serving as the Chief Executive Officer of DISH from March 2015 to December 2017. 
 
Michael T. Dugan.  Mr. Dugan has served as our Chief Executive Officer and President since November 2009.  Mr. Dugan has also served as a member of our Board of Directors since our formation in 2007.  Mr. Dugan served as a senior advisor to EchoStar from January 1, 2008 until November 2009.  From May 2004 to December 2007, he was a director of DISH and, from 1990 to 2006, he served in several executive roles at DISH Network, including as President, Chief Operating Officer, Chief Technical Officer and senior advisor. 
 
David J. Rayner.  Mr. Rayner has served as our Executive Vice President, Chief Financial Officer and Treasurer since December 2012 and as our Chief Operating Officer since September 2016. From November 2011 to November 2012, Mr. Rayner served as Chief Financial Officer of Tendril Networks, Inc., a Boulder, Colorado software company.  Mr. Rayner served as our Chief Financial Officer from June 2010 to November 2011 and served as our Chief Administrative Officer from January 2008 to June 2010.  Prior to that, Mr. Rayner served as Executive Vice President of Installation and Service Networks of DISH and previously as Chief Financial Officer of DISH.  Before joining DISH in December 2004, Mr. Rayner served as Senior Vice President and Chief Financial Officer of Time Warner Telecom in Denver, beginning in June 1998.

Anders N. Johnson.  Mr. Johnson has served as President of EchoStar Satellite Services L.L.C. since June 2011 and as our Chief Strategy Officer since September 2016. Before joining EchoStar, Mr. Johnson was most recently at SES World Skies where he served as Senior Vice President of Strategic Satellite Development.  Mr. Johnson joined SES GLOBAL after the combination of GE Americom and SES GLOBAL in 2001.  Prior to SES GLOBAL, Mr. Johnson worked at GE Capital beginning in 1985 in a variety of executive level roles in Satellite Services, Aviation Services and Transportation & Industrial Financing.
 
Pradman P. Kaul.  Mr. Kaul has served as President of Hughes Communications since its formation in February 2006 and as President of Hughes Network Systems, LLC, a wholly owned subsidiary of Hughes Communications (and together with Hughes Communications, “Hughes”) since 2000.  Mr. Kaul has also served as a member of our Board of Directors since August 2011 as well as a member of the board of directors of Hughes Communications from February 2006 until June 2011.  Previously, Mr. Kaul served as the Chief Operating Officer, Executive Vice President and Director of Engineering of Hughes Network Systems, LLC.

Dean A. Manson.  Mr. Manson has served as our Executive Vice President, General Counsel and Secretary since November 2011 and is responsible for all our legal and government affairs. Mr. Manson joined our subsidiary Hughes Network Systems, LLC in 2000 from the law firm of Milbank, Tweed, Hadley & McCloy LLP, where he focused on international project finance and corporate transactions and was appointed General Counsel in 2004.
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There are no arrangements or understandings between any executive officer and any other person pursuant to which any executive officer was selected as such.  Pursuant to the Bylaws of EchoStar, executive officers serve at the discretion of the Board of Directors.

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ITEM 1A.      RISK FACTORS
 
The risks and uncertainties described below are not the only ones facing us. If any of the following events occur or evolve in a way different than expected, our business, financial condition, results of operation, prospects or ability to fund a share or debt repurchase program, invest capital in or otherwise run our business, execute on our strategic plans or return capital to our shareholders could be materially and adversely affected.

RISKS RELATED TO THE COVID-19 PANDEMIC

As the COVID-19 pandemic and its effects continue to develop, it is impossible at this time to predict its ultimate impact on our business. We have set forth some key risks identified to date.

Our operations, and those of our customers, suppliers, vendors, and other third parties with whom we conduct business, including regulatory agencies, have been, and may continue to be, adversely affected by the COVID‑19 pandemic.

The effects of the COVID-19 pandemic have disrupted our and our customers’, suppliers’, vendors’ and other business partners’ and investees’ businesses, and have delayed the manufacture and deployment of our satellites. Disruption to our vendors’ and suppliers’ businesses could adversely impact our supply chain. Additionally, some regulatory bodies have reduced activities and/or temporarily closed their offices which may materially delay the review and/or approval of licenses or authorizations we need to operate our business. We cannot currently estimate or determine the final magnitude of these impacts.

Additionally, many of our subscribers are working remotely or 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. This limitation on capacity may result in our subscribers experiencing slower speeds, which, in turn, could result in higher churn and may negatively affect our business.

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.

Due to the economic downturn arising from the COVID-19 pandemic, a number of our enterprise customers are facing uncertain futures and certain of these customers have filed for bankruptcy protection. When enterprise customers fail or seek reorganization under the bankruptcy laws, we may be obliged to provide services 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.

RISKS RELATED TO OUR BUSINESS OPERATIONS
 
We may pursue acquisitions, dispositions, capital expenditures, the development, acquisition and launch of new satellites and other strategic initiatives to complement or expand our business, which may not be successful and we may lose a portion or all of our investment.
 
Our success may depend on the existence of, and our ability to capitalize on, opportunities to acquire or develop other businesses or technologies or partner with other companies that could complement, enhance or expand our current business, services or products or that may otherwise offer us growth opportunities.  We may pursue a number of strategic initiatives to complement or expand our business.  Any such strategic initiatives may involve a high degree of risk, including, but not limited to, the following:
 
the risks associated with developing and constructing new satellites;
the diversion of our management’s attention away from our existing business onto a strategic initiative;
possible adverse effects on our and our targets’ and partners’ business, financial condition or operating results during the integration process;
exposure to significant financial losses if the strategic initiatives are not successful;
the inability to obtain regulatory approvals in the anticipated time frame, or at all;
the risks associated with complying with regulations applicable to the acquired or developed business or technologies which may cause us to incur substantial expenses;
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the disruption of relationships with employees, vendors or customers; and
the risks associated with foreign and international operations and/or investments or dispositions.
New strategic initiatives may require the commitment of significant capital that would otherwise have been directed to investments in our existing businesses or distributed to shareholders.

We could face decreased demand and increased pricing pressure with respect to our products and services due to competition.
 
Our business operates in an intensely competitive, consumer- and enterprise-driven and rapidly changing environment and competes with a growing number of companies that provide similar products and services to consumer and enterprise customers.  There can be no assurance that we will be able to effectively compete against our competitors due to their significant resources and operating history. Material competitive risks to our business include, but are not limited to, the following:
 
Competition from new or different technology compared to our offerings;
Competition from existing or new competitors entering the same markets we serve;
Government funding for competing products and services, reducing demand for our products and services; and
Competitive pressures to provide enhanced functionality for the same or lower price with each new generation of technology.
 
Our business will be negatively impacted if we fail to adequately anticipate our satellite capacity needs or are unable to obtain satellite capacity.
 
We have made substantial contractual commitments for satellite capacity based on our existing customer contracts and backlog.  If our existing customer contracts were to be terminated prior to their respective expiration dates, we may have insufficient revenue to cover our satellite capacity costs. On the other hand, we may not have sufficient satellite capacity available to meet increases in demand and we may not be able to quickly or easily adjust our capacity to such changes in demand.  At present, until the launch and operation of additional satellites that our systems can utilize, there is limited additional capacity in North America, including within our own fleet of satellites, which could materially and adversely affect our ability to provide services to customers and grow our revenue and business.  Our business could be adversely affected if we are not able to renew our capacity leases at economically viable rates, or if sufficient capacity is not available to us.

We are dependent upon third-party providers for components, manufacturing, installation services and customer support services, and our results of operations may be materially adversely affected if any of these third-party providers fail to appropriately deliver the contracted goods or services.

Our dependence upon third-party providers causes certain risks to our business, including the following:

Components.  A limited number of suppliers manufacture, and in some cases a single supplier manufactures, some of the key components required to build our products. We do not generally maintain long-term agreements with our suppliers or subcontractors for our products. If we change or lose suppliers, we could experience a delay in manufacturing our products, or we may be unable to produce our products at competitive prices and we may be unable to satisfy demand from our customers.
Commodity Price Risk.  Fluctuations in pricing of raw materials can affect our product costs and we may not be able to pass on the increased costs to our customers.
Manufacturing.  While we develop and manufacture prototypes for certain of our products, we use contract manufacturers to produce a significant portion of our hardware.  If these contract manufacturers fail to provide products that meet our specifications in a timely manner or at all, our business could be adversely impacted.
Installation, customer support, and other services.  Some of our products and services utilize a network of third-party service providers.  A decline in levels of service or attention to the needs of our customers could adversely affect our reputation, renewal rates and ability to win and retain customers. In addition, if the agreements for the provision of these services are terminated or not renewed, we could face difficulties replacing these service providers.
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Our foreign operations and investments expose us to risks and restrictions not present in our domestic operations.

Our sales outside the U.S. accounted for 19.6%, 20.4% and 19.2% of our revenue for the years ended December 31, 2020, 2019 and 2018, respectively.  We expect our foreign operations to represent a significant and growing portion of our business.  Our foreign operations involve varying degrees of risk and uncertainties inherent in doing business abroad.  Such risks include:
 
Complications in complying with restrictions on foreign ownership and investment and limitations on repatriation of earnings.  We may not be permitted to be the sole owner of our operations in some countries and may have to enter into partnership or joint venture relationships.  Many foreign legal regimes and/or our contractual arrangements restrict our repatriation of earnings to the U.S. from our subsidiaries and joint venture entities.  Applicable law in such foreign countries may also limit our ability to distribute or access our assets or offer our products and services in certain circumstances.  In such event, we will not have unrestricted access to the cash flow and assets of our subsidiaries and joint ventures.
Regulatory restrictions.  Satellite market access, landing rights and terrestrial wireless rights are dependent on the national regulations established by foreign governments and international non-governmental bodies. Non-compliance with these requirements may result in the loss of the authorizations and licenses to conduct business in these countries, as well as fines, penalties, or other sanctions.
Financial and legal constraints and obligations. Operating pursuant to foreign licenses subjects us to certain financial constraints and obligations, including, but not limited to: (a) tax liabilities that may or may not be dependent on revenue; (b) the regulatory requirements associated with maintaining such licenses, which may be subject to interpretation by foreign courts and regulatory bodies; (c) the burden of creating and maintaining additional entities, branches, facilities and/or staffing in foreign jurisdictions; and (d) regulations requiring that we make certain satellite capacity available for “free” or available at reduced rates.
Compliance with applicable export control laws and regulations in the U.S. and other countries.  We must comply with all applicable export control and trade sanctions laws and regulations of the U.S. and other countries. A violation any export or trade-related regulations could materially adversely affect our business.
Changes in exchange rates between foreign currencies and the U.S. dollar.  Fluctuations in currency exchange rates, recessions and currency devaluations have affected, and may in the future affect, revenue, profits and cash earned from our international businesses.
Regulations may favor state-owned enterprises or local service providers.  Many of the countries in which we conduct business have traditionally had state-owned or state-granted monopolies on telecommunications services that favor an incumbent service provider. We face competition from these favored and entrenched companies in countries that have not liberalized.
 
We may not be able to generate cash to meet our debt service needs or fund our operations.

As of December 31, 2020, our total indebtedness was $2.4 billion.  Our ability to make payments on or to refinance our indebtedness and to fund our operations will depend on our ability to generate cash in the future. If we are unable to generate sufficient cash, we may be forced to take actions such as revising or delaying our strategic plans, reducing or delaying capital expenditures and/or the development, design, acquisition and construction of new satellites, selling assets, restructuring or refinancing our debt or seeking additional equity capital. We may not be able to implement any of these actions on satisfactory terms, or at all.

Covenants in our indentures restrict our business in many ways.
 
The indentures governing the Hughes Satellite Systems Corporation (“HSSC”) 7 5/8% Senior Notes due 2021, 5.250% Senior Secured Notes due August 1, 2026 and 6.625% Senior Unsecured Notes due August 1, 2026 contain various covenants, subject to certain exceptions, that limit HSSC’s ability and/or certain of its subsidiaries’ ability to, among other things:
 
incur additional debt;
pay dividends or make distributions on HSSC’s capital stock or repurchase HSSC’s capital stock;
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allow to exist certain restrictions on such subsidiaries’ ability to pay dividends, make distributions, make other payments, or transfer assets;
make certain investments;
create liens or enter into sale and leaseback transactions;
enter into transactions with affiliates;
merge or consolidate with another company; and
transfer and sell assets.

Failure to comply with these and certain other financial covenants, if not cured or waived, may result in an event of default under the indentures, which could have a material adverse effect on our business, financial condition, results of operations or prospects.  If certain events of default occur and are continuing under the respective indenture, the trustee under that indenture or the requisite holders of the notes under that indenture may declare all such notes to be immediately due and payable and, in the case of the indenture governing our secured notes, could proceed against the collateral that secures the secured notes. If certain other events of default occur, the indentures will become immediately due and payable. Certain of our subsidiaries have pledged a significant portion of our assets as collateral to secure the 5.250% Senior Secured Notes due August 1, 2026.

A natural disaster could diminish our ability to provide service to our customers.

Natural disasters could damage or destroy our ground infrastructure and/or our other or our vendors’ infrastructure, equipment and facilities, resulting in a disruption of service to our customers, which may adversely affect our business.  We currently have backup systems and technology in place to safeguard our antennas and protect our ground infrastructure during natural disasters, but the possibility still exists that our ground infrastructure and/or our other and our vendors’ infrastructure, equipment and facilities could be impacted during a major natural disaster. 
RISKS RELATED TO OUR HUMAN CAPITAL

We rely on key personnel and the loss of their services may negatively affect our businesses.

We believe that our future success depends to a significant extent upon the performance of Mr. Charles W. Ergen, our Chairman, and certain other key executives. The loss of Mr. Ergen or certain other key executives, the ability to effectively provide for the succession of our senior management, or the ability of Mr. Ergen or such other key executives to devote sufficient time and effort to our business could have a material adverse effect on our business, financial condition and results of operations. Although some of our key executives may have agreements relating to their equity compensation that limit their ability to work for or consult with competitors, we generally do not have employment agreements with them. To the extent Mr. Ergen is performing services for both DISH Network and us, his attention may be diverted away from our business and therefore adversely affect our business.

Our business growth and customer retention strategies rely in part on the work of technically skilled employees.

Our response to technological developments depends, to a significant degree, on the work of technically skilled employees. In addition, we have made and will continue to make significant investments in research, development, and marketing for new products, services, satellites and related technologies, as well as entry into new business areas. Investments in new technologies, satellites and business areas are inherently dependent on these technically skilled employees as well. Competition for the services of such employees has become more intense as demand for these types of employees grows. We compete with other companies for these employees and although we strive to attract and retain these employees, we may not succeed in these respects. Additionally, if we were to lose certain key technically skilled employees, the loss of knowledge and intellectual capital might have an adverse impact on business.



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Restrictions on immigration or increased enforcement of immigration laws could limit our access to qualified and skilled professionals, increase our cost of doing business or otherwise disrupt our operations.

The success of our business is dependent on our ability to recruit engineers and other professionals, including those who are citizens of other countries. Immigration laws in the U.S. and other countries in which we operate are subject to legislative and regulatory changes, as well as variations in the standards of application and enforcement due to political forces and economic conditions. It is difficult to predict the political and economic events that could affect immigration laws, or the restrictive impact they could have on obtaining or renewing work visas for our professionals. If immigration laws are changed or if new and more restrictive government regulations are enacted or increased, our access to qualified and skilled professionals may be limited.

RISKS RELATED TO OUR SATELLITES
 
Our ability to operate and control our satellites is subject to risks related to DISH Network’s operation of the BSS Business and third-parties’ operation of satellite operations centers.

In connection with the BSS Transaction, we transferred our satellite operation centers, which are used to monitor and control our satellites, to DISH Network. Therefore, we now are subject to the inherent risks of having a related party operate, maintain and manage these satellite operations centers. In addition, certain of our satellites are operated, maintained and managed by third parties.

Our owned and leased satellites in orbit are subject to significant operational and environmental risks that could limit our ability to utilize these satellites.
 
Satellites are subject to significant operational risks while in orbit. These risks include malfunctions, commonly referred to as anomalies, which have occurred and may occur in the future in our satellites and the satellites of other operators. Any single anomaly could materially and adversely affect our ability to utilize the satellite. Anomalies may also reduce the expected capacity, commercial operation and/or useful life of a satellite, thereby reducing the revenue that could be generated by that satellite, or create additional expenses due to the need to provide replacement or back-up satellites or satellite capacity earlier than planned and could have a material adverse effect on our business. Although we work closely with the satellite manufacturers to determine and eliminate the cause of anomalies in new satellites and provide for redundancies of many critical components in the satellites, we may not be able to prevent the impacts of anomalies in the future.

Meteoroid events, decommissioned satellites, and increased solar activity also pose a potential threat to all in-orbit satellites. We may be required to perform maneuvers to avoid collisions and these maneuvers may prove unsuccessful or could reduce the useful life of the satellite through the expenditure of fuel to perform these maneuvers.

Generally, the minimum design life of each of our satellites is 15 years. We can provide no assurance, however, as to the actual operational lives of our satellites, which may be shorter or longer than their design lives. Our ability to earn revenue depends on the continued operation of our satellites, each of which has a limited useful life.

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. If one or more of our in-orbit uninsured satellites or payloads fail, we could be required to record significant impairment charges for the satellite or payload.
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Our satellites under construction are subject to risks related to construction, technology, regulations and launch that could limit our ability to utilize these satellites, increase costs and adversely affect our business.
 
Satellite construction and launch are subject to significant risks, including delays, anomalies, launch failure and incorrect orbital placement. The technologies in our satellite designs are very complex and difficulties in constructing our designs could result in delays in the deployment of our satellites or increased or unanticipated costs. There can be no assurance that the technologies in our existing satellites or in new satellites that we design, acquire and build will work as we expect, will not become obsolete, that we will realize any or all of the anticipated benefits of our satellite designs or our new satellites, and/or that we will obtain all regulatory approvals required to operate our new or acquired satellites. Launch anomalies and failures can result in significant delays in the deployment of satellites because of the need both to construct replacement satellites, which can take significant amounts of time, and to obtain other launch opportunities. Such significant delays could materially affect our business, our ability to meet regulatory or contractual required milestones, the availability and our use of other or replacement satellite resources and our ability to provide services to customers. In addition, significant delays in a satellite program could give customers who have purchased or reserved capacity on that satellite a right to terminate their service contracts relating to the satellite. We may not be able to accommodate affected customers on other satellites until a replacement satellite is available.
 
Our use of certain satellites is often dependent on satellite coordination agreements, which may be difficult to obtain.

Satellite operators are required to enter into international spectrum coordination agreements with other affected satellite operators and must be approved by the relevant governments. If a required agreement cannot be concluded, we may have to operate the applicable satellite(s) in a manner that does not cause harmful radio frequency interference with the affected satellite. If we cannot do so, we may have to cease operating such satellite(s) at the affected orbital locations.

We may face interference from other services sharing satellite spectrum.
 
The FCC and other regulators have adopted rules or may adopt rules in the future that require us to share spectrum on a basis with other radio services. There can be no assurance that these operations would not interfere with our operations and adversely affect our business.

RISKS RELATED TO OUR PRODUCTS AND TECHNOLOGY
 
Our future growth depends on growing demand for our services.
 
Future demand and effective delivery for our products and services will depend significantly on the growing demand for our services, such as broadband internet connectivity.  If the deployment of, or demand for, our services is not as widespread or as rapid as we or our customers expect, our revenue growth will be negatively impacted.
 
Our business depends on certain intellectual property rights and on not infringing the intellectual property rights of others. 
 
We rely on our patents, copyrights, trademarks, trade secrets, licenses and other agreements to conduct our business. Legal challenges to our intellectual property rights and claims of intellectual property infringement could result in significant monetary liability and require us to change our business practices or limit our ability to compete effectively or could otherwise have a material adverse effect on our business. Even if any such challenges or claims prove to be without merit, they can be time-consuming and costly to defend and may divert management’s attention and resources away from our business.
 
Moreover, we rely in part on technologies developed or licensed by third parties. If we are unable to obtain or retain licenses or other required intellectual property rights from these third parties on reasonable terms, our business could be adversely affected. In addition, we work with suppliers for the development and manufacture of components that are integrated into our products and our products may contain technologies provided to us by these suppliers. We may have little or no ability to determine in advance whether any such technology infringes the intellectual property rights of others, or whether such suppliers have obtained or continue to obtain the appropriate
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licenses or other intellectual property rights to use such technology. Our suppliers may not be required to indemnify us in the event that a claim of infringement is asserted against us, or they may be required to indemnify us only up to a maximum amount. Legal challenges to these intellectual property rights may impair our ability to use the products and technologies that we need in order to operate our business and may have a material adverse effect on our business. See further discussion under Item 1. Business — Patents and Trademarks and Item 3. Legal Proceedings of this Form 10-K.
 
Litigation or governmental proceedings could result in material adverse consequences.
 
We are involved in lawsuits, regulatory inquiries, audits, consumer claims and governmental and other legal proceedings. Some of these proceedings may raise difficult and complicated factual and legal issues and can be subject to uncertainties and complexities. The timing of the final resolutions is typically uncertain. Additionally, the possible outcomes of, or resolutions to, these proceedings could include adverse judgments, settlements, injunctions or liabilities, any of which could require substantial payments or have other adverse impacts on our business.

We are exposed to significant cybersecurity threats and risks.
 
We and third parties with whom we work face a constantly evolving landscape of cybersecurity threats in which hackers and other parties use a complex assortment of techniques and methods to execute cyberattacks. Cybersecurity incidents have increased significantly in quantity and severity and are expected to continue to increase. Additionally, the risk of cyberattacks and compromises will likely increase as we continue to expand our business into other areas of the world outside of North America, some of which are still developing their cybersecurity infrastructure maturity. Should we be affected by a material cyber-related incident, we may incur substantial costs and suffer other material negative consequences.

Our business is subject to varying degrees of regulation that include programs designed to review our protections against cybersecurity threats and risks. If it is determined that our systems do not reasonably protect our partners’ assets and data and/or that we have violated these regulations, we could be subject to enforcement activity and sanctions.

We expect to continue to incur increasing costs in preparing our infrastructure and maintaining it to resist cyberattacks. There can be no assurance that we can successfully detect, deter, prevent or mitigate the effects of cyberattacks, any of which could have a material adverse effect on our business, costs, operations, prospects, results of operation or financial position. Furthermore, the amount and scope of insurance that we maintain against losses resulting from these events may not be sufficient to compensate us adequately for any disruptions to our business or otherwise cover our losses, including reputational harm and negative publicity as well as any litigation liability.  

Compliance with data privacy laws may be costly, and non-compliance with such laws may result in significant liability.

The personal information and data we process and store is increasingly subject to data security and data privacy laws of many jurisdictions. These laws impose a significant compliance burden and complying with them has required us to change our business practices or the functionality of our products and services. Privacy laws and regulations are becoming more complex and onerous, and a data privacy breach could have a material adverse effect on our business.

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If our products contain defects, we could be subject to significant costs to correct such defects and our product and network service contracts could be delayed or cancelled, which could adversely affect our revenue.
 
The products and the networks we deploy are highly complex, and some may contain defects when first introduced or when new versions or enhancements are released, despite testing and our quality control procedures. Defects may also occur in components and products that we purchase from third parties. In addition, many of our products and network services are designed to interface with our customers’ existing networks, each of which has different specifications and utilizes multiple protocol standards. Our products and services must interoperate with the other products and services within our customers’ networks, as well as with future products and services that might be added to these networks, to meet our customers’ requirements. There can be no assurance that we will be able to detect and fix all defects in the products and networks we sell. The occurrence of any defects, errors or failures in our products or network services could materially affect our business.

RISKS RELATED TO THE REGULATION OF OUR BUSINESS

The risk of non-compliance with laws and regulations, including the risk of changes to laws and regulations, could adversely affect our business.

Our business is regulated by numerous governmental agencies and other regulatory bodies, both domestically and internationally. In addition, our international operations are subject to the laws and regulations of many different jurisdictions that may differ significantly from U.S. laws and regulations. Violations of these laws and regulations could result in fines or penalties or other sanctions which could have a material adverse impact on our business. Additionally, our ability to operate and grow our business depends on laws and regulations that govern the frequency bands and/or orbital locations we operate in or may operate in in the future.

These laws and regulations are subject to the administrative and political process and do change from time to time. Our business could suffer a material adverse impact if laws and regulations change and we are not able to adapt to these changes efficiently.
 
Our business depends on regulatory authorizations issued by the FCC and state and foreign regulators that can expire, be revoked or modified, and applications for licenses and other authorizations that may not be granted.
 
Generally, all licenses granted by the FCC and most other countries are subject to expiration unless renewed by the regulatory agency. Our satellite licenses are currently set to expire at various times. In addition, we occasionally receive special temporary authorizations that are granted for limited periods of time (e.g., 180 days or less) and subject to possible renewal. Generally, our licenses and special temporary authorizations have been renewed on a routine basis, but there can be no assurance that this will continue.

RISKS RELATED TO THE BSS TRANSACTION

Certain of our directors and executive officers have interests in the BSS Transaction that may be different from, or in addition to, those of our other stockholders.

Certain of our directors and executive officers have interests in the BSS Transaction that may be different from, or in addition to, the interests of our stockholders generally. Our directors and executive officers who own shares of our common stock participated in the Distribution and the Merger on the same terms as our other stockholders. Additionally, Mr. Ergen, is a director and Chairman of both us and DISH. The EchoStar parties that approved the BSS Transaction, were aware of and considered these interests, among other things, in deciding to approve the terms of the Master Transaction Agreement and the BSS Transaction.






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If the Distribution and the Merger do not qualify as a tax‑free distribution and merger under the Internal Revenue Code of 1986, as amended (the “Code”), then we and/or our stockholders may be required to pay substantial U.S. federal income taxes and under certain circumstances we may have indemnification obligations to DISH Network.

The parties to the BSS Transaction received a tax opinion from their respective counsels as to the tax‑free nature of the transactions. They did not obtain a private letter ruling from the IRS with respect to the Distribution and the Merger and instead are relying solely on their respective tax opinions for comfort that the Distribution and the Merger qualify for tax‑free treatment for U.S. federal income tax purposes under the Code. The failure of any factual representation or assumption to be true, correct and complete, or any undertaking to be fully complied with, could affect the validity of the tax opinions and result in tax liabilities for our shareholders and/or us.

A putative class action lawsuit relating to the BSS Transaction has been filed against us, DISH Network, Mr. Ergen and certain of our officers.

On July 2, 2019, a complaint was filed by purported EchoStar stockholders. See Note 19 in our Accompanying Consolidated Financial Statements for more information about litigation related to the BSS Transaction.

An adverse judgment could result in monetary damages, which could have a negative impact on our liquidity and financial condition.

We may be more susceptible to adverse events as a result of the BSS Transaction.

We have divested the BSS Business and our business will be subject to increased concentration of risks that affect our retained businesses. We are now a smaller, less diversified and more narrowly focused business, which makes us more vulnerable to changing market and economic conditions.

We might not be able to engage in certain strategic transactions because we have agreed to certain restrictions to comply with U.S. federal income tax requirements for a tax‑free spin‑off.

To preserve the intended tax treatment of the Distribution, we have agreed to comply with certain restrictions under current U.S. federal income tax laws for spin‑offs. These restrictions could prevent us from pursuing otherwise attractive business opportunities and/or harm our business, financial results and operations. If these restrictions, among others, are not followed, the Distribution could be taxable to us and possibly our stockholders.

RISKS RELATED TO OUR OWNERSHIP

We are controlled by one principal stockholder who is our Chairman.

Charles W. Ergen, our Chairman, beneficially owns approximately 54% of our total equity securities (assuming conversion of the Class B common stock beneficially owned by Mr. Ergen into Class A common stock and giving effect to the exercise of options held by Mr. Ergen that are either currently exercisable as of, or may become exercisable within 60 days after, February 11, 2021) and beneficially owns approximately 92% of the total voting power of all classes of shares (assuming no conversion of any Class B common stock and giving effect to the exercise of options held by Mr. Ergen that are either currently exercisable as of, or may become exercisable within 60 days after, February 11, 2021).  Through his beneficial ownership of our equity securities, Mr. Ergen has the ability to elect a majority of our directors and to control all other matters requiring the approval of our stockholders.  As a result of Mr. Ergen’s voting power, we are a “controlled company” as defined in the NASDAQ listing rules and, therefore, are not subject to NASDAQ requirements that would otherwise require us to have (i) a majority of independent directors; (ii) a nominating committee composed solely of independent directors; (iii) compensation of our executive officers determined by a majority of the independent directors or a compensation committee composed solely of independent directors; (iv) a compensation committee charter which provides the compensation committee with the authority and funding to retain compensation consultants and other advisors; and/or (v) director nominees selected, or recommended for the Board’s selection, either by a majority of the independent directors or a nominating committee composed solely of independent directors.




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We have potential conflicts of interest with DISH Network due to our common ownership.

Questions relating to conflicts of interest may arise between DISH Network and us in a number of areas relating to our past and ongoing relationships.  Areas in which conflicts of interest between DISH Network and us could arise include, but are not limited to, the following:

Cross directorships and stock ownership.  Charles W. Ergen serves as the Chairman of our and DISH’s board of directors, is employed by both companies and has fiduciary duties to our and DISH’s shareholders.  Mr. Ergen may have actual or apparent conflicts of interest with respect to matters involving or affecting each company.  For example, there is potential for a conflict of interest when we or DISH Network look at acquisitions and other corporate opportunities that may be suitable for both companies.  In addition, some of our directors and officers, including Mr. Ergen, own DISH stock and options to purchase DISH stock. These ownership interests could create actual, apparent or potential conflicts of interest when these individuals are faced with decisions that could have different implications for our company and DISH Network.  
Intercompany agreements with DISH Network.  We have entered into various agreements with DISH Network.  Pursuant to certain agreements, we obtain certain products, services and rights from DISH Network; DISH Network obtains certain products, services and rights from us; and we and DISH Network indemnify each other against certain liabilities arising from our respective businesses. Generally, the amounts paid for products and services provided under the agreements are based on cost plus a fixed margin, which varies depending on the nature of the products and services provided.  Certain other intercompany agreements cover matters such as tax sharing and our responsibility for certain liabilities previously undertaken by DISH Network for certain of our businesses.  We have also entered into certain commercial agreements with DISH Network.  The terms of certain of these agreements were established while we were a wholly-owned subsidiary of DISH and were not the result of arm’s length negotiations.  The allocation of assets, liabilities, rights, indemnifications and other obligations between DISH Network and us under certain agreements with DISH Network may not necessarily reflect what two unaffiliated parties might have agreed to.  Had these agreements been negotiated with unaffiliated third parties, their terms may have been more or less favorable to us.  In addition, DISH Network or its affiliates will likely continue to enter into transactions, including joint ventures, acquisitions, dispositions and other strategic initiatives and transactions, with us or other affiliates.  Although the terms of any such transactions will be established based upon negotiations between us and DISH Network and, when appropriate, subject to approval by a committee of non-interlocking directors or in certain instances non-interlocking management, there can be no assurance that the terms of any such transactions will be as favorable to us or our subsidiaries or affiliates as may otherwise be obtained in negotiations between unaffiliated third parties.
Competition for business opportunities.  DISH Network may have interests in various companies that have subsidiaries or controlled affiliates that own or operate domestic or foreign services that may compete with services offered by our businesses.  We may also compete with DISH Network when we participate in auctions for spectrum or orbital slots for our satellites or other business opportunities. In other auctions, we and DISH Network may be prohibited from participating separately, and cooperating with DISH Network may result in a less favorable outcome for us.
 
We may not be able to resolve any potential conflicts of interest with DISH Network and, even if we do so, the resolution may be less favorable to us than if we were dealing with an unaffiliated party.
 
We do not have any agreements not to compete with DISH Network.  However, many of our potential customers who compete with DISH Network have historically perceived us as a competitor due to our affiliation with DISH Network.  There can be no assurance that we will be successful in entering into any commercial relationships with potential customers who are competitors of DISH Network (particularly if we continue to be perceived as affiliated with DISH Network as a result of common ownership, certain shared management services and other arrangements with DISH Network).
 
It may be difficult for a third party to acquire us, even if doing so may be beneficial to our shareholders, because of our capital structure and certain provisions of the BSS Transaction.
 
Certain provisions of our articles of incorporation and bylaws may discourage, delay or prevent a change in control of our company that a shareholder may consider favorable.  These provisions include the following:
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a capital structure with multiple classes of common stock:  a Class A that entitles the holders to one vote per share; a Class B that entitles the holders to ten votes per share; a Class C that entitles the holders to one vote per share, except upon a change in control of our company in which case the holders of Class C are entitled to ten votes per share; and a non-voting Class D;
a provision that authorizes the issuance of “blank check” preferred stock, which could be issued by our board of directors to increase the number of outstanding shares and thwart a takeover attempt;
a provision limiting who may call special meetings of shareholders; and
a provision establishing advance notice requirements for nominations of candidates for election to our board of directors or for proposing matters that can be acted upon by shareholders at shareholder meetings.
 
As discussed above, Mr. Ergen beneficially owns approximately 54% of our total equity securities and approximately 92% of the total voting power of all classes of shares and such ownership may make it impractical for any third party to obtain control of us.

In addition, pursuant to our articles of incorporation we have a significant amount of authorized and unissued stock that would allow our board of directors to issue shares to persons friendly to current management, thereby protecting the continuity of management, or which could be used to dilute the stock ownership of persons seeking to obtain control of us.

Additionally, in order to preserve the intended tax treatment of the Distribution, we have agreed to comply with certain restrictions under current U.S. federal income tax laws for spin‑offs, including, refraining from engaging in certain transactions that would result in a fifty percent or greater change by vote or by value in our stock ownership. This restriction could discourage third parties from seeking to acquire us.

GENERAL RISKS

Our articles of incorporation designate the Eighth Judicial District Court of Clark County of the State of Nevada as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, employees or agents.

Any person purchasing or otherwise acquiring any interest in any shares of our capital stock shall be deemed to have notice of and to have consented to this provision of our articles of incorporation. This choice of forum provision may limit our stockholders’ ability to bring certain claims, including claims against our directors, officers or employees, in a judicial forum that the stockholder finds favorable and therefore the choice of forum provision may discourage lawsuits or increase costs with respect to such claims.

We may face other risks described from time to time in periodic and current reports we file with the SEC.

ITEM 1B.     UNRESOLVED STAFF COMMENTS
 
None.
 
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ITEM 2.    PROPERTIES
 
Our principal executive offices are located at 100 Inverness Terrace East, Englewood, Colorado 80112-5308 and our telephone number is (303) 706-4000.  The following table sets forth certain information concerning our principal properties related to our Hughes segment (“Hughes”) and EchoStar Satellite Services segment (“ESS”) and to our other operations and administrative functions (“Corporate and Other”) as of December 31, 2020.  We operate various facilities in the United States and abroad.  We believe that our facilities are well maintained and are sufficient to meet our current and projected needs. 
Location
 
Segment(s)
 
Function
Owned:
Englewood, Colorado ESS/Corporate and Other Corporate headquarters and engineering offices
Germantown, Maryland Hughes Hughes corporate headquarters, engineering offices, network operations and shared hubs
Griesheim, Germany Hughes/Corporate and Other Shared hub, operations, administrative offices and warehouse
Leased:
Gilbert, Arizona Hughes Gateways
San Diego, California Hughes Engineering and sales offices
Englewood, ColoradoHughesGateways and equipment
Gaithersburg, Maryland Hughes Manufacturing and testing facilities and logistics offices
Gaithersburg, Maryland Hughes Engineering and administrative offices
Southfield, Michigan Hughes Shared hub and regional network management center
Las Vegas, Nevada  Hughes Shared hub, antennae yards, gateway, backup network operation and control center for Hughes corporate headquarters
Cheyenne, Wyoming Hughes/ESS Satellite access center, gateways and equipment
Barueri, Brazil Hughes Shared hub
Sao Paulo, Brazil Hughes Hughes Brazil corporate headquarters, sales offices and warehouse
Bangalore, India Hughes Engineering office and office space
Gurgaon, India Hughes Administrative offices, shared hub, operations, warehouse, and development center
New Delhi, India Hughes Hughes India corporate headquarters
Milton Keynes, United Kingdom Hughes Hughes Europe corporate headquarters and operations

ITEM 3.     LEGAL PROCEEDINGS

For a discussion of legal proceedings, see Note 19 in our Accompanying Consolidated Financial Statements.

ITEM 4.    MINE SAFETY DISCLOSURES
 
Not applicable.
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PART II

ITEM 5.    MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
 
Market Price of and Dividends on the Registrant’s Common Equity and Related Stockholder Matters
 
Market Information.  Our Class A common stock is publicly traded on the NASDAQ Global Select Market under the symbol “SATS.”
 
Holders.  As of February 11, 2021, there were 46,011,533 shares of our Class A common stock outstanding held by 7,766 holders of record of our Class A common stock, not including stockholders who beneficially own Class A common stock held in nominee or street name. As of February 11, 2021, there were 47,687,039 shares of our Class B common stock outstanding, of which 196,967 shares were held by Charles W. Ergen, our Chairman and 47,490,072 shares were held in trusts and entities established for the benefit of Mr. Ergen’s family.  There is currently no established trading market for our Class B common stock.
 
Dividends.  We have not paid any cash dividends on our common stock in the past two years.  We currently do not intend to declare dividends on our common stock.  Payment of any future dividends will depend upon our earnings, capital requirements, contractual restrictions and other factors the board of directors considers appropriate.  We currently intend to retain our earnings, if any, to support operations, future growth and expansion, although we have repurchased and may, in the future, repurchase shares of our common stock from time to time.  Our ability to declare dividends is affected by the covenants in our subsidiary Hughes Satellite Systems Corporation’s indentures. See further discussion under Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources in this Form 10-K.
 
Securities Authorized for Issuance Under Equity Compensation Plans.  See Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters in this Form 10-K.
 
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
 
Our Board of Directors previously authorized us to repurchase up to $500.0 million of our Class A common stock through and including December 31, 2020. On October 29, 2020, our Board of Directors terminated its prior authorization and authorized us to repurchase, pursuant to its new authorization, up to $500.0 million of our Class A common stock through and including December 31, 2021. Purchases under our repurchase authorization may be made through privately negotiated transactions, open market repurchases, one or more trading plans in accordance with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended, or otherwise, subject to market conditions and other factors. We may elect not to purchase the maximum amount or any of the shares allowable under this program and we may also enter into additional share repurchase programs authorized by our Board of Directors. During the year ended December 31, 2020, we repurchased 1,905,906 shares of our Class A common stock under this program. From January 1, 2021 through February 11, 2021, we repurchased 2,851,841 shares of our Class A common stock under this program.

The following table provides information regarding repurchases of our Class A common stock during the three months ended December 31, 2020:

PeriodTotal Number of Shares (or Units) PurchasedAverage Price Paid Per Share (or Unit)Total Number of Shares (or Units) Purchased as Part of Publicly Disclosed Plans or ProgramMaximum Number (or Approximate Dollar Value) of Shares (or Units) That May Yet Be Purchased under the Plans or Program (1)
October 1 - 31— — — $494,109 
November 1 - 30— $— — 494,109
December 1 - 311,708,907 21.97 1,708,907 456,542
Total1,708,907 $21.97 1,708,907 $456,542 
(1) On October 29, 2019, our Board of Directors authorized us to repurchase up to $500.0 million of our Class A common stock through and including December 31, 2020. Purchases under our repurchase authorization may be made through privately negotiated transactions, open
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market repurchases, one or more trading plans in accordance with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended, or otherwise, subject to market conditions and other factors. We may elect to purchase some or all, or not to purchase the maximum amount or any of, the remaining shares allowable under this program and we may also enter into additional share repurchase programs authorized by our Board of Directors. All shares repurchased reflected in the table above have been converted to treasury shares.

ITEM 6.    SELECTED FINANCIAL DATA
 
The following tables present selected information relating to our consolidated financial condition and results of operations for the past five years.  The selected financial data should be read in conjunction with Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations and our Accompanying Consolidated Financial Statements. Historical financial data presented below may not be indicative of future financial condition.
 For the years ended December 31,
Statements of Operations Data:202020192018
2017(1)
2016
Total revenue (2) (3)
$1,887,907 $1,886,081 $1,762,638 $1,525,155 $1,447,223 
Total costs and expenses1,775,434 1,813,004 1,726,501 1,494,593 1,325,364 
Operating income (loss)$112,473 $73,077 $36,137 $30,562 $121,859 
Net income (loss) from continuing operations attributable to EchoStar common stock$(40,150)$(102,318)$(134,204)$123,188 $43,886 
Basic earnings (losses) per share - continuing operations$(0.41)$(1.06)$(1.39)$1.29 $0.47 
Diluted earnings (losses) per share - continuing operations$(0.41)$(1.06)$(1.39)$1.27 $0.46 

 As of December 31,
Balance Sheet Data:202020192018
2017(1)
2016
Cash and cash equivalents and marketable investments securities$2,534,276 $2,460,054 $3,210,458 $3,245,617 $3,092,881 
Total assets$7,073,352 $7,154,298 $8,661,294 $8,750,014 $9,008,859 
Total debt$2,393,493 $2,389,168 $3,304,079 $3,365,143 $3,358,179 
Total stockholders’ equity$3,607,250 $3,745,553 $4,155,474 $4,177,385 $4,006,805 

 For the years ended December 31,
Cash Flow Data:20202019201820172016
Net cash flows from:     
Operating activities$534,388 $656,322 $734,522 $726,892 $803,343 
Investing activities$(1,142,455)$821,958 $(2,098,480)$(867,932)$(632,199)
Financing activities$(15,620)$(885,311)$(136,563)$72 $1,475,689 

(1)    The 2017 Tax Act increased the complexity of our income tax accounting and resulted in significant adjustments to our deferred income tax accounts in 2017. As a result, our results of operations and balance sheet data for the years ended December 31, 2020, 2019, 2018 and 2017 are not comparable to our results of operations for the year ended December 31, 2016. See Note 15 to our Accompanying Consolidated Financial Statements for further information.
(2)    On January 1, 2018, we adopted Topic 606, Revenue from Contracts with Customers, using the modified retrospective approach. As a result, total revenue for the years ended December 31, 2020, 2019 and 2018 may not be comparable to prior years.
(3)    On January 1, 2019, we adopted Topic 842, Leases, using the modified retrospective approach. As a result, total revenue for the years ended December 31, 2020 and 2019 may not be comparable to prior years.

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ITEM 7.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following Management’s Discussion and Analysis of our Financial Condition and Results of Operations (“Management’s Discussion and Analysis”) should be read in conjunction with our Accompanying Consolidated Financial Statements.  This Management’s Discussion and 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 Discussion and 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.  See Disclosure Regarding Forward-Looking Statements in this Form 10-K for further discussion.  For a discussion of additional risks, uncertainties and other factors that could impact our results of operations or financial condition, see Item 1A. Risk Factors of this Form 10-K.  Further, such forward-looking statements speak only as of the date of this Form 10-K and we undertake no obligation to update them.

EXECUTIVE SUMMARY
 
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 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, 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.

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 (together with DISH, “DISH Network”) and our 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 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 one 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 the BSS Transaction, we and DISH Network agreed to indemnify each other against certain losses with respect to breaches of certain representations and covenants and certain retained and assumed liabilities, respectively. Additionally, we and DISH and certain of our and their subsidiaries (i) entered into certain customary agreements covering, among other things, matters relating to taxes, employees, intellectual property and the provision of transitional services; (ii) terminated certain previously existing agreements; and (iii) amended certain existing agreements and entered into certain new agreements pursuant to which we and DISH Network will obtain and provide certain products, services and rights from and to each other.

The BSS Transaction was structured in a manner intended to be tax-free to us and our stockholders for U.S. federal income tax purposes and was accounted for as a spin-off to our shareholders as we did not receive any
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consideration. 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 years ended December 31, 2019 and 2018, in our Accompanying Consolidated Financial Statements. See Note 5 in our Accompanying Consolidated Financial Statements for further discussion of our discontinued operations.

Highlights from our financial results are as follows:
 
Consolidated Results of Operations for the Year Ended December 31, 2020

 Revenue of $1.9 billion
Operating income (loss) of $112.5 million
Net income (loss) from continuing operations of $(51.9) million
 Net income (loss) attributable to EchoStar common stock of $(40.2) million and basic earnings (losses) per share of common stock of $(0.41)
Earnings before interest, taxes, depreciation and amortization, net income (loss) from discontinued operations and net income (loss) attributable to non-controlling interests (“EBITDA”) of $616.9 million (see reconciliation of this non-GAAP measure in Results of Operations)
 
Consolidated Financial Condition as of December 31, 2020

Total assets of $7.1 billion
Total liabilities of $3.5 billion
Total stockholders’ equity of $3.6 billion
Cash and cash equivalents and marketable investment securities of $2.5 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 across wholesale and retail channels, as well as increasing our 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. We 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, as well as working with the customer regarding collection of pre-petition amounts.

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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 the U.S. continues to be constrained where we are nearing or have reached maximum 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 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% ownership interest in that subsidiary. 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, pursuant to which Bharti will contribute its 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, 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, we 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 service in North, Central and South America as well as enterprise broadband services. Maxar Space, LLC (formerly Space Systems/Loral, LLC), 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 in the second half of 2022. Further delays or impediments 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 Corporate and Other in our segment reporting.

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, in September 2015, we entered into 15-year agreements with affiliates of Telesat Canada for Ka-band capacity on the Telesat T19V satellite 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.
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Our broadband subscribers include customers that subscribe to our HughesNet services in the U.S. and Latin America through retail, wholesale and small/medium enterprise service channels.

The following table presents our approximate number of broadband subscribers:

As of December 31,
202020192018
United States1,189,000 1,239,000 1,231,000 
Latin America375,000 238,000 130,000 
Total broadband subscribers1,564,000 1,477,000 1,361,000 

The following table presents the approximate number of net subscriber additions for each quarter in 2020:

For the Three Months Ended
December 31September 30June 30March 31
United States(27,000)(6,000)(28,000)11,000 
Latin America11,000 43,000 54,000 29,000 
Total net subscriber additions(16,000)37,000 26,000 40,000 

Net subscriber additions in the U.S. decreased in the fourth quarter compared to the third quarter of 2020. Growth of 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 fourth quarter resulted in lower total subscribers, ARPU increased.

In Latin America, we continued to see growth in our subscriber base and ARPU. However, we experienced a decrease in our net subscriber additions in the fourth quarter compared to the third quarter of 2020. This was partly due to fewer subscriber activations, as potential customers reacted to the easing of COVID-19 pandemic restrictions. In addition, net subscriber additions were adversely impacted by a temporary increase in churn due to various factors, including changes we made to our collections processes.

As of December 31, 2020 and 2019, our Hughes segment had $1.3 billion and $1.4 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 December 31, 2020 decreased primarily due to 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.

As of December 31, 2020 and 2019, our ESS segment had contracted revenue backlog of $6.7 million and $11.4 million, respectively. We define contracted revenue backlog for our ESS segment as contracted future satellite lease revenue. Of the total ESS contracted revenue backlog as of December 31, 2020, we expect to recognize $5.4 million of revenue in 2021.
 
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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, LEO networks, MEO systems, balloons and High 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 industries and communities globally 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.

S-Band Strategy

We intend to continue to explore the development and deployment of S-band technologies that we expect will reduce the cost of satellite communications for internet of things, machine-to-machine communications, public protection, disaster relief and other end-to-end services worldwide and the integration of our products and services into new global, hybrid networks that leverage multiple satellites and terrestrial technologies. We believe we remain in a unique position to deploy a MSS and CGC network in the E.U., the U.K. and other European countries through our EchoStar XXI satellite, which was placed into service in November 2017, and the EUTELSAT 10A payload.  We have positioned ourselves to continue to develop the S-band spectrum globally by acquiring Sirion Global Pty Ltd., which we have renamed EchoStar Global which holds global S-band non-geostationary satellite spectrum rights for MSS. Additionally, we entered into a contract with Tyvak Nano-Satellite Systems, Inc. for the design and construction of S-band nano-satellites. We launched two nano-satellites in the third quarter of 2020. Following launch, both nano-satellites experienced technical anomalies that precluded them from fulfilling their intended regulatory milestone missions. We intend to seek milestone relief due to these force majeure events. We expect to launch our third nano-satellite in 2021.  Our nano-satellites are designed to facilitate our continued growth in the global S-band market and enable us to leverage our acquisition of EchoStar Global. In addition, in Mexico we hold licenses for S-band MSS and terrestrial services.

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.

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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. 

We treat cybersecurity risk seriously and are focused on maintaining the security of 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 and systems and review, modify and supplement our defenses through the use of various services, programs and outside vendors. Additionally, we provide resources to assist employees in better securing their home networks and remote connections.  We also maintain agreements with third party vendors and experts 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 our Board of Directors are regularly briefed on cybersecurity matters.

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. We continue to receive information about these breaches from the U.S. government and private security firms, and we use this data to update our defense systems and to investigate our own networks for compromise. We will continue to update our systems as more information comes to light in reference to this adversary and their actions.

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 year ended December 31, 2020 and through February 23, 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.


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RESULTS OF OPERATIONS

Year Ended December 31, 2020 Compared to the Year Ended December 31, 2019

The following table presents our consolidated results of operations for the year ended December 31, 2020 compared to the year ended December 31, 2019:
For the years ended December 31,Variance
Statements of Operations Data (1) 
20202019Amount%
Revenue:    
Services and other revenue$1,682,304 $1,619,271 $63,033 3.9 
Equipment revenue205,603 266,810 (61,207)(22.9)
Total revenue1,887,907 1,886,081 1,826 0.1 
Costs and expenses:
Cost of sales - services and other577,943 561,353 16,590 3.0 
% of total services and other revenue34.4 %34.7 %
Cost of sales - equipment166,435 226,002 (59,567)(26.4)
% of total equipment revenue80.9 %84.7 %
Selling, general and administrative expenses474,912 509,145 (34,233)(6.7)
% of total revenue25.2 %27.0 %
Research and development expenses29,448 25,739 3,709 14.4 
% of total revenue1.6 %1.4 %
Depreciation and amortization525,011 490,765 34,246 7.0 
Impairment of long-lived assets1,685 — 1,685 *
Total costs and expenses1,775,434 1,813,004 (37,570)(2.1)
Operating income (loss)112,473 73,077 39,396 53.9 
Other income (expense):    
Interest income, net39,982 82,352 (42,370)(51.4)
Interest expense, net of amounts capitalized(147,927)(251,016)103,089 (41.1)
Gains (losses) on investments, net(31,306)28,912 (60,218)*
Equity in earnings (losses) of unconsolidated affiliates, net(7,267)(14,734)7,467 (50.7)
Foreign currency transaction gains (losses), net6,015 (11,590)17,605 *
Other, net195 (166)361 *
Total other income (expense), net(140,308)(166,242)25,934 (15.6)
Income (loss) from continuing operations before income taxes(27,835)(93,165)65,330 (70.1)
Income tax benefit (provision), net(24,069)(20,488)(3,581)17.5 
Net income (loss) from continuing operations(51,904)(113,653)61,749 (54.3)
Net income (loss) from discontinued operations— 39,401 (39,401)(100.0)
Net income (loss)(51,904)(74,252)22,348 (30.1)
Less: Net loss (income) attributable to non-controlling interests11,754 11,335 419 3.7 
Net income (loss) attributable to EchoStar Corporation common stock$(40,150)$(62,917)$22,767 (36.2)
Other data:
EBITDA (2)
$616,875 $577,599 $39,276 6.8 
Subscribers, end of period1,564,000 1,477,000 87,000 5.9 
*    Percentage is not meaningful.
(1)    An explanation of our key metrics is included in Explanation of Key Metrics and Other Items.
(2)    A reconciliation of EBITDA to Net income (loss), the most directly comparable U.S. GAAP measure in our Accompanying Consolidated Financial Statements, is included in Results of Operations. For further information on our use of EBITDA, see Explanation of Key Metrics and Other Items.
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The following discussion relates to our continuing operations for the years ended December 31, 2020 and 2019 unless otherwise stated.

Services and other revenue.  Services and other revenue totaled $1.7 billion for the year ended December 31, 2020, an increase of $63.0 million, or 3.9%, as compared to 2019. 

Services and other revenue from our Hughes segment for the year ended December 31, 2020 increased by $69.2 million, or 4.4%, to $1.7 billion compared to 2019.  The increase was primarily attributable to increases in sales of broadband services to our consumer customers of $109.3 million, partially offset by a decrease in sales of services to our enterprise customers of $35.9 million. These variances reflect the negative impact of exchange rate fluctuations of $35.6 million, primarily attributable to our consumer customers.

Services and other revenue from our Corporate and Other segment for the year ended December 31, 2020 decreased by $7.3 million, or 43.0%, to $9.7 million compared to 2019, primarily attributable to a decrease in income from certain real estate previously leased to DISH Network and transferred as part of the BSS Transaction.

Equipment revenue.  Equipment revenue totaled $205.6 million for the year ended December 31, 2020, a decrease of $61.2 million, or 22.9%, as compared to 2019.  The decrease was primarily attributable to $43.2 million related to the bankruptcy of a certain customer and $38.9 million decreased sales to our international enterprise customers, partially offset by $24.7 million increased sales to our domestic enterprise customers. These variances reflect the negative impact of exchange rate fluctuations of $3.5 million, primarily attributable to our enterprise customers.

Cost of sales - services and other.  Cost of sales - services and other totaled $577.9 million for the year ended December 31, 2020, an increase of $16.6 million, or 3.0%, as compared to 2019. The increase was primarily attributable to the corresponding increase in services and other revenue.
 
Cost of sales - equipment.  Cost of sales - equipment totaled $166.4 million for the year ended December 31, 2020, a decrease of $59.6 million, or 26.4%, as compared to 2019. The decrease was primarily attributable to the corresponding reduction in equipment revenue.

Selling, general and administrative expenses.  Selling, general and administrative expenses totaled $474.9 million for the year ended December 31, 2020, a decrease of $34.2 million, or 6.7%, as compared to 2019. The decrease was primarily attributable to expenses related to the license fee dispute in India of $9.4 million in 2019, certain legal proceedings of $25.7 million in 2019, and decreased sales and marketing expenses of $6.4 million in 2020, partially offset by increases in other general and administrative expenses of $7.3 million in 2020.

Depreciation and amortization.  Depreciation and amortization expenses totaled $525.0 million for the year ended December 31, 2020, an increase of $34.2 million, or 7.0%, as compared to 2019.  The increase was primarily attributable to increases in depreciation expense of $21.8 million relating to our customer premises equipment and $13.4 million relating to the depreciation of assets acquired in the Yahsat Brazil JV Transaction of which $7.9 million are related to non-recurring accelerated depreciation of assets that were scheduled for replacement after the Yahsat Brazil JV Transaction.

Impairment of long-lived assets. Impairment of long-lived assets totaled $1.7 million for the year ended December 31, 2020, attributable to an impairment loss related to our nano-satellites which experienced technical anomalies following launch.

Interest income, net.  Interest income, net totaled $40.0 million for the year ended December 31, 2020, a decrease of $42.4 million, or 51.4%, as compared to 2019, primarily attributable to decreases in the yield on our marketable investment securities and lower cash balances.

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Interest expense, net of amounts capitalized.  Interest expense, net of amounts capitalized totaled $147.9 million for the year ended December 31, 2020, a decrease of $103.1 million, or 41.1%, as compared to 2019.  The decrease was primarily attributable to a decrease of $29.0 million in interest expense and in amortization of deferred financing cost as a result of the purchase and maturity in June 2019 of our 6 1/2% Senior Secured Notes due in 2019, a decrease of $66.1 million of interest expense related to the license fee dispute in India, a decrease of $4.1 million related to a certain legal proceeding in 2019 and an increase of $4.8 million in capitalized interest in 2020 relating to the construction of the EchoStar XXIV satellite and its related infrastructure.

Gains (losses) on investments, net.  Gains (losses) on investments, net were $31.3 million in losses for the year ended December 31, 2020, as compared to $28.9 million in gains for the year ended December 31, 2019, a negative change of $60.2 million. The change was primarily attributable to $69.0 million of net negative variances on marketable investment securities compared to 2019, partially offset by an $6.9 million loss in Other Equity Investments in 2020.

Equity in earnings (losses) of unconsolidated affiliates, net. Equity in earnings (losses) of unconsolidated affiliates, net totaled $7.3 million in losses for the year ended December 31, 2020, a decrease in losses of $7.5 million, or 50.7%, as compared to 2019. The decrease in losses was related to decreased losses from our investments in our equity method investees.

Foreign currency transaction gains (losses), net. Foreign currency transaction gains (losses), net totaled $6.0 million in gains for the year ended December 31, 2020, as compared to $11.6 million in losses for the year ended December 31, 2019, a positive change of $17.6 million. The change was due to the net weakening of the U.S. dollar against certain foreign currencies in 2020 compared to 2019.

Income tax benefit (provision), net.  Income tax benefit (provision), net was $(24.1) million for the year ended December 31, 2020, as compared to $(20.5) million for the year ended December 31, 2019. Our effective income tax rate was (86.5)% and (59.8)% for the years ended December 31, 2020 and 2019, respectively. The variations in our effective tax rate from the U.S. federal statutory rate for the year ended December 31, 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 change in net losses that are capital in nature and research and experimentation credits. The variations in our current year effective tax rate from the U.S. federal statutory rate for the year ended December 31, 2019 were primarily due to the increase in our valuation allowance associated with certain foreign losses and by the impact of state and local taxes partially offset by the change in net unrealized gains that are capital in nature and research and experimentation credits.
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Net income (loss) attributable to EchoStar Corporation common stock.  Net income (loss) attributable to EchoStar Corporation common stock was $(40.2) million for the year ended December 31, 2020, as compared to $(62.9) million for the year ended December 31, 2019, a change of $22.8 million as set forth in the following table:
Amounts
Net income (loss) attributable to EchoStar Corporation for the year ended December 31, 2019$(62,917)
Decrease (increase) in interest expense, net of amounts capitalized103,089 
Increase (decrease) in operating income (loss), including depreciation and amortization39,396 
Increase (decrease) in foreign currency transaction gains (losses), net17,605 
Decrease (increase) in equity in earnings (losses) of unconsolidated affiliates, net7,467 
Increase (decrease) in net income (loss) attributable to non-controlling interest419 
Increase (decrease) in other, net361 
Decrease (increase) in income tax benefit (provision), net(3,581)
Increase (decrease) in net income (loss) from discontinued operations(39,401)
Increase (decrease) in interest income, net(42,370)
Increase (decrease) in gains (losses) on investments, net(60,218)
Net income (loss) attributable to EchoStar Corporation for the year ended December 31, 2020$(40,150)

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 Consolidated Financial Statements:
 For the years ended December 31,Variance
 20202019Amount%
Net income (loss)$(51,904)$(74,252)$22,348 (30.1)
Interest income, net(39,982)(82,352)42,370 (51.4)
Interest expense, net of amounts capitalized147,927 251,016 (103,089)(41.1)
Income tax provision (benefit), net24,069 20,488 3,581 17.5 
Depreciation and amortization525,011 490,765 34,246 7.0 
Net loss (income) from discontinued operations— (39,401)39,401 (100.0)
Net loss (income) attributable to non-controlling interests11,754 11,335 419 3.7 
EBITDA$616,875 $577,599 $39,276 6.8 

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EBITDA was $616.9 million for the year ended December 31, 2020, an increase of $39.3 million, or 6.8%, as compared to 2019 as set forth in the following table:
Amounts
EBITDA for the year ended December 31, 2019$577,599 
Increase (decrease) in operating income (loss), excluding depreciation and amortization73,642 
Increase (decrease) in foreign currency transaction gains (losses), net17,605 
Decrease (increase) in equity in earnings (losses) of unconsolidated affiliates, net7,467 
Decrease (increase) in net loss (income) attributable to non-controlling interests419 
Increase (decrease) in other, net361 
Increase (decrease) in gains (losses) on investments, net(60,218)
EBITDA for the year ended December 31, 2020$616,875 

Segment Operating Results and Capital Expenditures

The following tables present our operating results, capital expenditures and EBITDA by segment for the year ended December 31, 2020, as compared to the year ended December 31, 2019:
HughesESSCorporate and OtherConsolidated
Total
For the year ended December 31, 2020   
Total revenue$1,860,834 $17,398 $9,675 $1,887,907 
Capital expenditures355,197 41 53,560 408,798 
EBITDA727,608 7,873 (118,606)616,875 
For the year ended December 31, 2019   
Total revenue$1,852,742 $16,257 $17,082 $1,886,081 
Capital expenditures308,781 — 109,293 418,074 
EBITDA625,660 6,994 (55,055)577,599 

Hughes Segment
 For the years ended December 31,Variance
 20202019Amount%
Total revenue$1,860,834 $1,852,742 $8,092 0.4 
Capital expenditures355,197 308,781 46,416 15.0 
EBITDA727,608 625,660 101,948 16.3 
 
Total revenue was $1.9 billion for the year ended December 31, 2020, an increase of $8.1 million, or 0.4%, as compared to 2019.  Services and other revenue increased primarily due to increases in sales of broadband services to our consumer customers of $109.3 million, partially offset by a decrease in sales of services to our enterprise customers of $35.9 million. These variances reflect the negative impact of exchange rate fluctuations of $35.6 million, primarily attributable to our consumer customers. Equipment revenue decreased primarily due to $43.2 million related to the bankruptcy of a certain customer and $38.9 million decreased sales to our international enterprise customers, partially offset by $24.7 million increased sales to our domestic enterprise customers. These variances reflect the negative impact of exchange rate fluctuations of $3.5 million, primarily attributable to our enterprise customers.

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Capital expenditures were $355.2 million for the year ended December 31, 2020, an increase of $46.4 million, or 15.0%, as compared to 2019, primarily due to increases in expenditures associated with our consumer business and construction of our satellite-related ground infrastructure.

EBITDA was $727.6 million for the year ended December 31, 2020, an increase of $101.9 million, or 16.3%, as compared to 2019 as set forth in the following table: 
Amounts
EBITDA for the year ended December 31, 2019$625,660 
Increase (decrease) in operating income (loss), excluding depreciation and amortization80,562 
Increase (decrease) in foreign currency transaction gains (losses), net13,298 
Increase (decrease) in gains (losses) on investments, net8,770 
Decrease (increase) in net loss (income) attributable to non-controlling interests419 
Increase (decrease) in other, net255 
Decrease (increase) in equity in earnings (losses) of unconsolidated affiliates, net(1,356)
EBITDA for the year ended December 31, 2020$727,608 

ESS Segment
 For the years ended December 31,Variance
 20202019Amount%
Total revenue$17,398 $16,257 $1,141 7.0 
Capital expenditures41 — 41 *
EBITDA7,873 6,994 879 12.6 
*    Percentage is not meaningful

Total revenue was $17.4 million for the year ended December 31, 2020, an increase of $1.1 million, or 7.0%, as compared to 2019, primarily due to an increase in transponder services provided to third parties.
 
EBITDA was $7.9 million for the year ended December 31, 2020, an increase of $0.9 million, or 12.6%, as compared to 2019, primarily due to the increase in overall ESS revenue.

Corporate and Other
 For the years ended December 31,Variance
 20202019Amount%
Total revenue$9,675 $17,082 $(7,407)(43.4)
Capital expenditures53,560 109,293 (55,733)(51.0)
EBITDA(118,606)(55,055)(63,551)*

Total revenue was $9.7 million for the year ended December 31, 2020, a decrease of $7.4 million, or 43.4%, as compared to 2019 which was primarily attributable to a decrease in income from certain real estate previously leased to DISH Network and transferred as part of the BSS Transaction.

Capital expenditures were $53.6 million for the year ended December 31, 2020, a decrease of $55.7 million, or 51.0%, as compared to 2019, primarily due to decreases in satellite expenditures on the EchoStar XXIV satellite.




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EBITDA was a loss of $118.6 million for the year ended December 31, 2020, an increased in loss of $63.6 million as compared to 2019 as set forth in the following table:
Amounts
EBITDA for the year ended December 31, 2019$(55,055)
Decrease (increase) in equity in earnings (losses) of unconsolidated affiliates, net8,823 
Increase (decrease) in foreign currency transaction gains (losses), net4,306 
Increase (decrease) in other, net116 
Increase (decrease) in operating income (loss), excluding depreciation and amortization(7,808)
Increase (decrease) in gains (losses) on investments, net(68,988)
EBITDA for the year ended December 31, 2020$(118,606)

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Year Ended December 31, 2019 Compared to the Year Ended December 31, 2018

The following table presents our consolidated results of operations for the year ended December 31, 2019 compared to the year ended December 31, 2018:
For the years ended December 31,Variance
Statements of Operations Data (1) 20192018Amount%
Revenue:    
Services and other revenue$1,619,271 $1,557,228 $62,043 4.0 
Equipment revenue266,810 205,410 61,400 29.9 
Total revenue1,886,081 1,762,638 123,443 7.0 
Costs and expenses:
Cost of sales - services and other561,353 563,907 (2,554)(0.5)
% of total services and other revenue34.7 %36.2 %
Cost of sales - equipment226,002 176,600 49,402 28.0 
% of total equipment revenue84.7 %86.0 %
Selling, general and administrative expenses509,145 436,088 73,057 16.8 
% of total revenue27.0 %24.7 %
Research and development expenses25,739 27,570 (1,831)(6.6)
% of total revenue1.4