Stock-Based Compensation

12 Months Ended

Dec. 31, 2024

Stock-Based Compensation

Stock-Based Compensation

14.Stock-Based Compensation

Stock Incentive Plans

We maintain stock incentive plans to attract and retain officers, directors and key employees. Stock awards under these plans include both performance/market and non-performance based stock incentives. As of December 31, 2024, we had outstanding under these plans stock options to acquire 13.6 million shares of our Class A common stock and 91 thousand restricted stock units and awards. Stock options granted on or prior to December 31, 2024 were granted with exercise prices equal to or greater than the market value of our Class A common stock at the date of grant and with a maximum term of approximately ten years. We account for forfeitures as they are incurred. While historically we have issued stock awards subject to vesting, typically at the rate of 20% per year, certain stock awards have been granted with immediate vesting and certain other stock awards vest only upon the achievement of certain company-specific subscriber, operational and/or financial goals. In addition, the Ergen 2020 Performance Award is subject to the achievement of specified stock price targets. As of December 31, 2024, we had 21.7 million shares of our Class A common stock available for future grant under the stock incentive plans.

Exchange Offer. On March 4, 2024, we commenced a tender offer to eligible employees (which excludes our co-founders and the non-employee members of our Board of Directors) to exchange eligible stock options (which excludes the Ergen 2020 Performance Award) for new options as detailed in our Schedule TO filed March 4, 2024 with the Securities and Exchange Commission (the “Exchange Offer”), to, among other things, further align employee incentives with the current market. The Exchange Offer expired on April 1, 2024 and we accepted for exchange approximately 7 million stock options. As a result of the Exchange Offer, during the second quarter of 2024, the exercise price of approximately 6 million new stock options, affecting approximately 1,000 eligible employees, was adjusted to $14.04.

Stock Award Activity

Our stock option activity was as follows:

	For the Year Ended December 31, 2024
	Options	Weighted- Average Exercise Price		Aggregate Intrinsic Value (in thousands)		Weighted- Average Remaining Contractual Life
Total options outstanding, beginning of period (1)	16,087,146	$	55.48
Granted (2)	7,055,206	$	14.43
Exercised	(315,595)	$	14.16
Forfeited and cancelled (3)	(9,267,724)	$	41.58
Total options outstanding, end of period	13,559,033	$	44.58	$	59,949	7.32
Performance/market based options outstanding, end of period (4)	4,300,088	$	84.39
Exercisable, end of period	3,606,304	$	43.15	$	13,075	6.18

(1) The beginning of period weighted-average exercise price for the year ended December 31, 2024 of $55.48 does not reflect the Exchange Offer, which occurred subsequent to December 31, 2023.

(2) Includes approximately 6 million stock options granted in connection with the Exchange Offer.

(3) Includes approximately 7 million stock options cancelled in connection with the Exchange Offer.

(4) These stock options are included in the caption “Total options outstanding, end of period.” See discussion of the 2017 LTIP, 2019 LTIP, 2022 Incentive Plan and Ergen 2020 Performance Award below.

We realized tax benefits from stock awards exercised as follows:

	For the Years Ended December 31,
	2024		2023		2022
	(In thousands)
Tax benefit from stock awards exercised	$	2,150	$	1,384	$	573

Our restricted stock unit and award activity was as follows:

	For the Year Ended
	December 31, 2024
	Restricted Stock Units/Awards	Weighted- Average Grant Date Fair Value
Total restricted stock units/awards outstanding, beginning of period	48,645	$	98.78
Granted	342,602	$	16.60
Vested	(293,001)	$	22.78
Forfeited and cancelled	(7,018)	$	101.09
Total restricted stock units/awards outstanding, end of period	91,228	$	34.08

The following table summarizes additional information about our stock options and restricted stock units and awards:

	For the Years Ended December 31,
	2024		2023		2022
	(In thousands, except per share amounts)
Stock options:
Weighted-average grant date fair value of options granted	$	14.43	$	22.28	$	53.20
Intrinsic value of options exercised	$	2,275	$	—	$	98
Restricted stock units and awards:
Weighted-average grant date fair value of units and awards granted	$	16.60	$	17.50	$	40.06
Fair value of units and rewards vested	$	6,469	$	9,926	$	2,212

Long-Term Performance-Based Plans

2017 LTIP. On December 2, 2016, we adopted a long-term, performance-based stock incentive plan (the “2017 LTIP”). The 2017 LTIP provided stock options, which were subject to vesting based on certain company-specific subscriber and financial performance conditions. Awards were initially granted under the 2017 LTIP as of January 1, 2017. Exercise of the stock awards was contingent on achieving these performance conditions by December 31, 2020, however, none of the performance conditions were achieved. This plan will expire on January 1, 2027 which as of December 31, 2024, would result in the cancellation of 429,037 stock options.

2019 LTIP. On August 17, 2018, we adopted a long-term, performance-based stock incentive plan (the “2019 LTIP”). The 2019 LTIP provides stock options, which vest based on certain company-specific subscriber, operational and/or financial performance conditions. Vesting of the stock awards is contingent on achieving these conditions by December 31, 2023.

Although no awards vest until the Company attains the performance conditions described above, compensation related to the 2019 LTIP will be recorded based on management’s assessment of the probability of meeting the performance conditions. If the performance conditions are probable of being achieved, we will begin recognizing the associated non-cash, stock-based compensation expense on our Consolidated Statements of Operations and Comprehensive Income (Loss) over the estimated period to achieve the performance condition.

During the years ended December 31, 2023 and 2022, we determined that 85% and 89%, respectively, of the 2019 LTIP performance conditions were probable of achievement. As a result, non-cash, stock-based compensation expense was recorded for the years ended December 31, 2023 and 2022, as indicated in the table below titled “Non-Cash, Stock-Based Compensation Expense Recognized.” As of December 31, 2023 and 2022, approximately 78% and 75%, respectively, of the 2019 LTIP awards had vested.

2022 Incentive Plan. On December 30, 2021, we adopted a performance-based incentive plan (the “2022 Incentive Plan”). The 2022 Incentive Plan provides stock options, which vest based on certain company-specific operational and/or financial performance conditions. Awards were initially granted under the 2022 Incentive Plan as of February 1, 2022. Exercise of the stock awards is contingent on achieving these conditions by December 31, 2026.

Although no awards vest until the Company attains the performance conditions described above, compensation related to the 2022 Incentive Plan will be recorded based on management’s assessment of the probability of meeting the performance conditions. If the performance conditions are probable of being achieved, we will begin recognizing the associated non-cash, stock-based compensation expense on our Consolidated Statements of Operations and Comprehensive Income (Loss) over the estimated period to achieve the performance condition.

During each of the years ended December 31, 2024, 2023 and 2022, we determined that 100% of the 2022 Incentive Plan performance conditions were probable of achievement. As a result, non-cash, stock-based compensation expense was recorded for the years ended December 31, 2024, 2023 and 2022 as indicated in the table below titled “Non-Cash, Stock-Based Compensation Expense Recognized.” As of December 31, 2024, 2023 and 2022, approximately 33%, 17% and 33%, respectively, of the 2022 Incentive Plan awards had vested.

Ergen 2020 Performance Award. On November 4, 2020, our Executive Compensation Committee of the Board of Directors approved an award to Charles W. Ergen, our Chairman, of long-term performance-based options (the “Ergen 2020 Performance Award”) to purchase up to 4,385,962 shares of EchoStar’s Class A common stock. The award is subject to the achievement of specified EchoStar Class A common stock price targets during the approximate ten-year period following the date of grant. The award was granted on November 6, 2020 and will expire on February 6, 2031.

Although no awards will vest until the market conditions are satisfied, as of December 31, 2020, we began recording non-cash, stock-based compensation expense for each vesting tranche based on the estimated achievement date of the specified stock price target. The valuation and probability of achievement for each tranche is determined using a Monte Carlo simulation. The same Monte Carlo simulation is used as the basis for determining the expected achievement date. As the probability of achievement is factored in as part of the Monte Carlo simulation, the expense for these tranches will be recognized concurrently over each tranche’s estimated achievement date even if some or all of the options never vest. If the related milestone for a tranche is achieved earlier than is expected, all unamortized expense for such tranche will be recognized immediately.

Non-cash, stock-based compensation expense was recorded for the years ended December 31, 2024, 2023 and 2022, as indicated in the table below titled “Non-Cash, Stock-Based Compensation Expense Recognized.” As of December 31, 2024, 2023 and 2022, approximately 20% of the Ergen 2020 Performance Award awards had vested.

The non-cash, stock-based compensation expense associated with these awards was as follows:

	For the Years Ended December 31,
Non-Cash, Stock-Based Compensation Expense Recognized (1)	2024		2023		2022
	(In thousands)
2022 Incentive Plan	$	1,149	$	7,346	$	19,088
2019 LTIP		—		(1,903)		(97)
Ergen 2020 Performance Award		10,816		12,308		12,308
Other employee performance awards		—		462		4,502
Total non-cash, stock-based compensation expense recognized for performance based awards	$	11,965	$	18,213	$	35,801

(1) “Non-Cash, Stock-Based Compensation Expense Recognized” includes actual forfeitures.

Estimated Remaining Non-Cash, Stock-Based Compensation Expense	2022 Incentive Plan		Ergen 2020 Performance Award
	(In thousands)
Expense estimated to be recognized during 2025	$	1,087	$	7,639
Estimated contingent expense subsequent to 2025		161		9,274
Total estimated remaining expense over the term of the plan	$	1,248	$	16,913

Given the competitive nature of our business, small variations in subscriber churn, gross new subscriber activation rates and certain other factors can significantly impact subscriber growth. Consequently, while it was determined that achievement of certain other company-specific subscriber, operational and/or financial performance conditions were not probable as of December 31, 2024, that assessment could change in the future.

Of the 13.6 million stock options and 91 thousand restricted stock units and awards outstanding under our stock incentive plans as of December 31, 2024, the following awards were outstanding pursuant to our performance based stock incentive plans:

	As of December 31, 2024
Performance Based Stock Options	Number of Awards	Weighted- Average Grant Price
2022 Incentive Plan	154,257	$	14.64
2019 LTIP	208,024	$	60.37
2017 LTIP	429,037	$	165.32
Ergen 2020 Performance Award	3,508,770	$	78.98
Total	4,300,088	$	84.39

Stock-Based Compensation

Total non-cash, stock-based compensation expense for all of our employees is shown in the following table for the years ended December 31, 2024, 2023 and 2022 and was allocated to the same expense categories as the base compensation for such employees:

	For the Years Ended December 31,
	2024		2023		2022
	(In thousands)
Cost of services	$	1,376	$	2,610	$	6,511
Selling, general and administrative		35,007		48,904		76,483
Total non-cash, stock-based compensation	$	36,383	$	51,514	$	82,994

As of December 31, 2024, our total unrecognized compensation cost related to our non-performance based unvested stock awards was $51 million and will be recognized over a weighted-average period of approximately 3.2 years. Share-based compensation expense is recognized based on stock awards ultimately expected to vest.

Valuation

The fair value of each stock option granted (excluding the Ergen 2020 Performance Award) for the years ended December 31, 2024, 2023 and 2022 was estimated at the date of the grant using a Black-Scholes option valuation model with the following assumptions:

	For the Years Ended December 31,
Stock Options	2024							2023							2022
Risk-free interest rate		3.58	%	-		4.49	%		3.58	%	-		4.61	%		1.35	%	-		4.02	%
Volatility factor		37.10	%	-		46.39	%		34.30	%	-		41.25	%		32.67	%	-		34.84	%
Expected term of options in years		3.3		-		6.7			4.1		-		6.6			4.1		-		6.0
Fair value of options granted	$	5.15		-	$	12.40		$	7.40		-	$	7.77		$	5.97		-	$	9.27

While we currently do not intend to declare dividends on our Class A common stock, we may elect to do so from time to time. Accordingly, the dividend yield percentage used in the Black-Scholes option valuation model was set at zero for all periods. The Black-Scholes option valuation model was developed for use in estimating the fair value of traded stock options which have no vesting restrictions and are fully transferable. Consequently, our estimate of fair value may differ from other valuation models. Further, the Black-Scholes option valuation model requires the input of highly subjective assumptions. Changes in these subjective input assumptions can materially affect the fair value estimate.

We will continue to evaluate the assumptions used to derive the estimated fair value of our stock options as new events or changes in circumstances become known.