Q4 2022 EchoStar Corp Earnings Call

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Good day and thank you for standing by welcome to the Echostar Corporation Conference call for fourth quarter 2022 results.

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Please be advised that today's conference is being recorded I would now like to hand, the conference over to your speaker today.

Jerry Brown. Please go ahead.

Thank you.

Good day, everybody and welcome to our earnings call for the fourth quarter of 2022, I'm joined today by Amit Akkerman, our CEO and president.

Our chief operating officer.

Dean Manson, our chief legal officer, and Jeffrey bogs, our interim Chief Accounting Officer.

As usual, we invite media to.

Participate in a listen only mode on the call and ask that you not identify participants or their firms in your report.

We also do not allow audio recording which we ask that you respect.

Let me now turn the call over to Dean for the Safe Harbor disclosure.

Thank you Terry.

All statements we make during this call other than statements of historical fact constitute forward looking statements made pursuant to the safe Harbor provided by the private Securities Litigation Reform Act of 1095.

These forward looking statements involve known and unknown risks uncertainties and other factors that could cause our actual results to be materially different from historical results and from any future results expressed or implied by the forward looking statements.

For a list of those factors and risks please refer to our annual report on Form 10-K for the year ended December 31, 2022 filed yesterday with the SEC all cautionary statements we make during the call should be understood as being applicable to any forward looking statements. We make wherever they appear you should carefully consider the risks described in our report and should not place any undue.

Due reliance on any forward looking statements, we assume no responsibility for updating any forward looking statements.

We refer to adjusted EBITDA. During this call the comparable GAAP measure and reconciliation there too are presented in our earnings release I'll now turn the call over to Amit.

Thank you Dean and good day everyone.

We have had an exciting fourth quarter in December 2022, Craftsman coal analysis retirement.

And we would like to thank him for his 50 years of service.

This announcement signals the start of a new era as we align the company for success in a changing industry.

As of January one 2023, Pollo <unk> assumed a new chief operating officer role that was established to lead all market facing global activities.

Congratulations to you Paul.

We remain enthusiastic about our future and believe that under a more streamlined management.

And operating structure, we will drive efficiencies synergies and greater growth.

We continue our search for a chief financial Officer, and will keep you informed of our progress.

As for our agenda for the call today first we will provide a brief overview of financial activities from the fourth quarter after that we will.

Discuss our business strategy, which includes the three parallel work streams that are called horizon.

And our progress on all three.

We'll then move to question and answer session.

Let's start with our financials.

Our revenue in the quarter on our fourth quarter of 2022 was $500 million up slightly compared to the same period of prior year.

On a full year basis, we achieved $12 million of growth.

This in spite of the fact that for the full year of 2022.

We faced competition from Sterling.

Which brought significant capacity to the market.

We did not have access to the benefits of our upcoming Jupiter three system.

The revenue increase in the fourth quarter was primarily the result of growth in our enterprise business, while our consumer broadband business has been impacted by capacity constraints and other factors.

We have continued to increase revenue by capitalizing on enterprise and government opportunities.

Both domestically and internationally.

This is consistent with my statements in prior earnings calls regarding our continued focus on diversification of the business.

Alright, just the EBITDA in the fourth quarter was $164 million, an increase of 3% from last year, primarily driven by lower sales and marketing expense associated with our consumer broadband business.

Continue to focus on managing our costs in line with the change in revenue mix to preserve our ability to generate cash in.

In the fourth quarter, we saw continued momentum in our enterprise business.

$195 million new orders.

Our 2022 orders increased 41% compared to the same period last year.

Most enterprise orders are recognized over several years, creating a long and a stable revenue stream.

We remain excited about opportunities within the enterprise market to market that we believe will continue to allow us to better diversify our business, both domestically and internationally and provide cash generation through low capital investment and a scalable operating leverage.

Capital expenditures in the quarter were $77 million compared to $86 million in Q4 of last year.

The decrease was primarily due to lower spend on Jupiter three satellite program and consumer premise equipment.

Free cash flow defined as adjusted EBITDA minus Capex was $87 million during the quarter and $330 million in 2022.

We ended the quarter with $1 7 billion of cash and marketable securities.

This is post purchasing approximately $90 million of our own stock in 2022.

I remain excited about the strength of our balance sheet as it affords us the flexibility to explore investment opportunities that could foster growth, which remains a key component of our business and strategy.

Let me now turn the call over to Paul who will provide some additional specifics on the quarter and our horizon, one and two activities.

Thank you Tony.

As a reminder, horizon one is our near term priority to maximize current services and operations, while managing costs as we prepare for the launch of the Jupiter three Echostar 21 satellite.

To that end, we continue to focus on operational efficiencies and yield optimization of our north American satellite capacity in.

In 2022.

Restructuring our portfolio of consumer service offerings to better align with market demand.

Provisioning additional capacity for our customers.

And then to continue to optimize our service plans in 2023 as we await the launch of the Jupiter three service.

The changes in our service plans have resulted in a natural shift towards higher capacity higher price plans for our customers improving our foods, while delivering an enhanced customer experience.

Additionally, we remain focused on improving our cost structure.

The appointment of additional automation improved processes and supply efficiencies of course without compromising the end user experience.

In the third quarter of 2022, we launched Hughesnet fusion.

Adding support for legacy applications to the traditional views that satellite service, which is optimized to support high speed applications like video and.

Use that fusion utilizes a unique data handling software to seamlessly combining our satellite service with a terrestrial wireless service, providing an exceptional internet experience.

Positive survival effect.

You said service plans, but he is our future plans.

<unk> been well received by existing and new subscribers and we expect the service to help attract new customers and reduce churn while improving our.

Although we continue to see competitive pressures within the underserved market. We address we believe the combination of our optimized service plans and use that fusion service should help combat competition.

Moving to our North America enterprise business in the fourth quarter, we signed a $9 million managed service contract with a new customers utilize our secure broadband connectivity.

We also received extensions from three retailers value of approximately $5 million, each and continue to see success with contracts and deployments in the retail petroleum and energy markets.

In our <unk> program deliveries on production gateways continue to plan.

As of the end of 2022, we have shipped 32 gateways and expect to complete the total complement of 44 gateways in 2023 and.

In line with our committed schedule and customer expectations.

Additionally, we have shipped more than 12000 satellite subscriber modules for inclusion in one way of turbines.

We also executed a contract to deliver seven by 24 operational support for the <unk> network that includes development of advanced AI management capabilities or the one web ground infrastructure.

Our government business ended the year with record revenues, although the business is still a relatively small scale. It has been growing through the development of network security management tools for Vod applications and evolving technologies, such as terrestrial in Baiji MTS networks.

As part of our streamlined management structure.

We merged our defense and civil government business groups into one cohesive unit to drive efficiencies and expand opportunities for growth in the future.

Now to our international operations, we continue to allocate additional capacity to address a wide range of enterprise applications to close the digital in the box.

In Mexico, we added broadband and fiber backhaul locations for Cfe Telecom.

As well as connectivity services to a major bank.

In Colombia, we increased bandwidth to the 670 <unk> schools in.

In Brazil, we expanded the scope of our services agreement with a major telecommunications provider to deliver internet at approximately 1600 schools.

With regards to our Hughesnet service in Latin America, we remain focused on adding high value subscribers.

Which is lowering churn, while optimizing yield on our existing Latin American capacity to increase profitability and cash generation.

In terms of the Jupiter equipment sales given our system equipment sale.

Significant orders from around the World in Mexico, a major oil producer of ordered an upgrade from your existing new system and signed a multiyear support here.

Africa, a leading telecommunications service provider upgraded our Jupiter system to support network expansion and LTE backhaul connectivity.

We also received a sizable order for V NAND terminals to support machine to machine communications.

In the Middle East and Telecommunications service provider order and additional redundant Jupiter gateway to enhance their service offerings.

Now, let me focus on horizon two activities.

These include our efforts to bring Jupiter three into service for expansion of our service in North and South America, as well as growing and diversifying our global enterprise.

I am pleased to report that the Jupiter three satellite is in the final stages of assembly and launch.

Which is expected to occur in the second quarter of 2023.

As many of you know in November of 2022, we entered into an amended agreement with <unk> the manufacturer of the salary.

To secure compensation for past delays entered realigning remedies to incentivize Max are to complete the program expeditiously.

The compensation provided for relief on approximately 14 may or payments grew in orbit racing and more than 44 of the $5 million plus interest on deferred in orbit incentive payouts.

The amendment requires <unk> to paying liquidated damages in the event of further delay.

Also Max are going to enter into an agreement with us where we will provide certain products or services <unk> XR. During 2023 for payments that will deliver us a margin of at least 30 Meg.

In preparation for the launch of Jupiter three the team is focused on developing service plans with higher speeds more data capacity and the extension of our Hughesnet fusion plan for the ultimate high speed low latency satellite Internet experience.

We believe the market is eager for these robust offerings and we plan to have a highly competitive suite of services to meet a variety of our customers' needs once Jupiter three of our service.

Horizon. Two also has a strong focus on our global enterprise business that includes the government sector. We plan to leverage our business connectivity managed services portfolio, our hybrid Leo Geo business solutions, and our own manufactured products to pursue growth.

Increased participation in this market segment is a key element of our diversification strategy.

Which includes improving our operational scale with potential small acquisition, which we will continue to explore.

Now, let me turn the call back over to Amit.

Thank you Paul.

I would like to provide an update on horizon, three which is our strategy to expand into new markets around the world through both organic innovation as well as potential acquisitions.

One significant area of progress is around our S band opportunities you probably saw a recent press release announcing our agreement with Astra digital to begin construction of our global mobile satellite service network. The 28th satellite Leo Constellation is primarily targeting Iot services, which we believe is a.

Vast untapped opportunity the constellation will provide a commercial service that would provide us with a platform for ongoing market development and is a measure next step in terms of building our S band license portfolio.

Some of you may recall that in the second quarter of 2021, we launched our third nano satellite known as <unk> III with the primary mission to bring into use our series one <unk> filings. This mission was successfully completed in the third quarter of 2021 satellite provided us with the ability to test a wide range.

<unk> of potential <unk> applications and services, which we used in the design phase of our Leo constellation.

During the first quarter of 2023, we lost contact with <unk> and our continuing efforts to re establish communication, regardless of the outcome or Leo constellation satellites will substitute for EG three in 2024, well in advance of the ITU required deadline in 2026.

We have also been working to expand our Laura Nguyen activities Laura for long range is a low power wide area.

Device connectivity.

For the Internet of things.

Last year, we initiated hybrid <unk> satellite.

Terrestrial Lora services over the Echostar 21 satellite in Europe to create the first Pan European Lora enabled network.

During the fourth quarter, we completed an initial commercial deployment of our hybrid <unk> satellite and terrestrial lower our services in Mexico.

And we are currently testing similar services in the U S. These activities will be supported shortly thereafter with our new Leo constellation.

Is going to be a very exciting time for the Lora and satellite Iot ecosystem as we aggressively drive satellite Iot capabilities forward globally.

Regarding our <unk> activities, the Leo constellation will serve as a foundation for engineering <unk> narrow band NTN based capabilities building on three GPP release 17 and beyond.

We remain engaged with <unk> ecosystem partners at all levels of the value chain in support of our goal of engineering, a truly transformative wide band Leo based <unk> capability.

For Horizon two we in addition to our S band activities. We are actively evaluating other opportunities for new avenues of organic and inorganic growth.

We'll share more details as all of these efforts and plans solidify let me now turn it over to the operator to start the Q&A session.

As a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again please.

Please standby, while we compile the Q&A roster.

Our first question comes from Ric Prentiss with Raymond James Your line is now open.

Thanks, Good morning, good afternoon, everyone.

Hi, Dara.

Alright.

Hey couple of questions first let's start with Jupiter three glad to see the timing firming up here.

We're in the final stages.

Can you help us understand have you got a launch date yet and.

Do you think we should assume cumulatively can go in service.

Yes, Rick.

Yes, we have.

Made arrangements for launching.

We are not announcing a date at this time, but we have a large set up on the Spacex Falcon heavy.

And.

So with that we would expect in Q3 to bring.

To bring our services into.

Market.

The system, we have is already been deployed in the United States is ready to go.

And the actual technology has been deployed in several customers already so we're very certain of our.

To rapidly deploy the network once we get the satellite.

Similar question asked a little.

One of your peers out there how fast they think they would fill up their next generation satellites launching how fast do you think you'll be able to fill the spurt up I think it probably implies a horizon two and horizon three and then when we think about capacity I think you have about $1 2 million subs today, how should we think about that.

<unk> added capacity and cheaper too.

In relative terms.

Okay, well as far as the <unk>.

Bill time, we're estimating about two to three years, which would be typical of what we've seen in the past.

We expect similar sorts of consumption of the capacity as far as the actual sub numbers I don't think were prepared to give you a specific number I think understand our plan with the capacity is to optimize our yield. So it really goes in two dimensions growing subscribers of course. It is one is the $1 one dimension, but the other meds.

And of course as ARPA as we improve these plans and improve the capabilities for the customers. We have seen in the past that the customers are willing to pay more so we would expect our overall revenue.

Our key objective here at our yield for that capacity to be our main focus.

Okay, and then shifting gears to the Rio project that you talked about.

How did you come up with why 28 satellites in the constellation how should investors think about what the capital commitment is over how many years to launch this Rio project.

Yes.

Rick.

The system was designed based on the original filing of our Syrian one application and rights.

This.

This design was already in the registration in the filing and we're just completing that.

And so but what it does provide a complete coverage.

Of the globe.

Even with.

With several visitations per day.

Even in parcel deployment, even from his very first first starts.

First launch is launching batches in the very first one actually does provide complete coverage of the globe and as the additional satellites come on in that visitation rate increases.

We think is perfectly.

Adequate and capable for.

A wide range of Iot services and anything.

Related and beyond.

In terms of our cost structure. This is a second generation system for us and is a stepping stone towards our main goal and ambition to build a.

The leading white than perhaps the only wideband <unk> system to follow.

We have been working on so you should assume that this is a.

The incremental capital expenditure, but certainly not at the level that would prevent us from being able to materialize our larger system.

Okay.

We have speculated maybe this 28 Leo satellite project could be something done for $100 million to $200 million total was that within the realm of reasonable or my low there are high there.

Oh.

It would be not too far from the ballpark I think that those numbers are.

Close to where our head is in our planets.

Okay.

In the ballpark.

And then the final question for me.

Obviously, you mentioned that.

The 28, Leo satellite as a steppingstone X generation to either not the ultimate wideband one.

Maybe you can give us your thoughts on it came up briefly on the on the dish call earlier today, that's sort of a busy earnings day about directed device, how do you view director device market.

Allied communications with smartphone linkage that market is seems ripe, but also seems early and somewhat confusing to investors out there can you walk us through a little bit about how you see directed device opportunities.

Yes.

First of all we believe the director devices.

<unk>.

The fundamental opportunity is a very large opportunity and I think it is a game changing opportunity.

But we also believe that the very first initial steps of messaging oldie and variety of.

Qualities and capabilities is the initial step that is the.

Thats, a probably smaller steps.

Not fully activating all the capabilities, which we think are exciting a true <unk> system.

Which will have a natural use of your smartphone similar to what you would use.

Alright.

Trust Real network is what our ambitions are and I think that's where the game changing capability will come.

Still.

A few years away, but but it's something that we're working on and we believe that.

There is not room for too many of those out there and certainly we hope to be.

I expect to be the leading provider of that capability, but in the interim obviously there will be.

And messaging based service to device and we are able to demonstrate it and looked at today in some of our systems.

You will see some of those commercial offerings in the market in the near future.

Great. Thanks, very much so.

Please standby for our next question.

Yeah.

Okay.

Our next question comes from Chris Quilty with Quilty analytics. Your line is now open.

Thank you.

Congrats on finally, moving forward with the <unk> constellation.

Now that it's out there I got more detailed questions.

Maybe just start with a couple of technical things.

In terms of what orbit.

You intend to use.

This system have cross links and when you think about the.

There is existing competition out there theres a lot of companies adding.

Constellation's, where do you see this fitting in terms of its capability obviously.

Distinct in that low Ross.

Base Communications layer and what eventually led you to that path.

Versus in other protocol.

Alright. So there are several questions in there, Chris and I will try to it.

Are some first of all we have had quite a bit of experience with lower or we have been.

Providing a lot of service over in Europe for quite some time now.

Provided now we are able to provide commercial services in Mexico, we are experimenting with lora.

Over United States, We believe the just a narrow band Iot market in itself.

By end of this negative will be more than $10 billion annually. So theres quite a bit of room and this is not even all of the different applications and use cases that have been identified so I think that in itself is a very large market and has room for multiple operators to be there and as I mentioned.

The way we.

The capability of our system are specified in our filing in.

We have made for serious ones. So some of those you can actually find.

In public domain, we've not disclosed anything more than what's in public domain regarding the capabilities of that system.

That's primarily for.

Competitive reasons, we'd like to have that more guarded at this point.

But we think the system is quite capable of providing a.

Superior Iot services now having said that this is.

Again considered just won a step a significant step towards the tools, taking full advantage of our.

<unk> spectrum capabilities and that requires building a much more capable system.

And with with this step we will gain.

A tremendous amount of knowledge about the performance of the <unk> G. MTN and remember that this is a standard was just recently finalized there has not been many or any.

Just some out there.

Used it.

We are an engineering company with deep deep heritage and understanding of satellite systems and engineering links and capabilities.

We want to make sure that we.

We have a system that we can absolutely perfect our understanding of the standards and remove any sort of limitations of bugs that may be there.

To ensure that the big system that we're working on will ultimately be.

Our fully effective and maximally.

Proficient.

So that's the way, we think about it and we fully understand that others are also working on Iot I think the market is large enough for all of that but also as I said, we are looking to a step beyond that.

And go to a wideband system.

Got you and.

How do you intend to go to market.

Correct.

<unk> sale partnerships.

Look we are exploring all of those at this point, we have not really given any more specifics today, we are working in partnerships.

In the markets that I mentioned.

But clearly.

For our largest system with different geographies.

It is our intention to maximize our access to market through multiple routes. So youll see us probably.

It will take different approaches in different markets, but.

So the access to market has not been a limitation for us.

Demand has been.

Robust in terms of partnership and wanting to sell their services.

Got you and just one question on <unk>.

The existing service with the new fusion product.

Is that a service that you offer even as Jupiter three comes out.

In the future and obviously has a lot more capability.

<unk> fusion still become necessary or is fusion a way for you to actually expand your addressable market because you can basically reserve some satellite capacity to use the fusion.

And then the second question is if in fact fusion becomes a much bigger part of the mix on a go forward basis does it in any way impact.

The overall margin profile since you're reselling somebody else's service.

Well, okay. So on the first question.

We see fusion as a key new technology.

So that augments, what we already do today.

And if you look at our customer sat there is a lot of customers.

But the standard Geo services are a good fit and we think thats the predominant number of them most of them in their applications.

<unk> drifted over towards primarily streaming video and video applications. So we see that high speed.

<unk>.

Hey, Jupiter three will provide his primary.

Support.

But if you look at the fusion customers that have late insensitive applications, we see that as really the answer that allows them to get the benefits of both a geo and and the low latency terrestrial now what happens I think primarily for customers is is that as we.

We look at Rolling this out further we expect to get.

A fair amount of our market coverage, there and so we think it will really be a good premium service for customers.

Great.

Any material margin impact.

Well that remains to be seen a little bit on the percentages.

These days we are buying.

Capacity.

From other players.

That is a lower margin.

Then are you there.

Our own assets or Shanghai.

Limited capital investment, we make to get that so so that might tend to balance out.

Alright, if I may.

Add also to that.

So we are expecting a significant churn improvement that we have seen it already.

<unk>.

From a fusion product so while diffusion of product may on as bill of material.

Costs in gross margin.

Not provide as much.

Margin as you would get from using only our own products, we see a significant improvement in churn, which compensates for that margin dropped. So net net we think of that.

It's an incredible product and we have received.

Fantastic Receptiveness from the marketplace so far.

Alright.

Great quarter, and let us know when you got a launch date.

Absolutely will we are anxiously waiting ourselves and I think we're making great progress there.

Inching forward everyday and listen we have been we have had a great year, thanks to Paul and the team we have had a great year.

In a market that we were on their hand, it simply because of a lack of capacity in a brand new system shows up with.

No no no traffic on it.

And for the first time ever in a satellite industry introduces the term unlimited.

Although he is no longer limited now.

That limitation is being placed in our prices have been raised and capacities have been used but during the year that we had the maximum.

Hit headwind I think we delivered a a.

The growth year, both on revenue and EBITDA and I think.

We are excited about what the Jupiter three shows up.

How we can much more effectively compete.

Okay sounds good thank you.

Please standby for our next question.

Our next question comes from Michael Rollins with Citi. Your line is now open.

Thanks, just a couple questions first I'm curious is your green lighting some of these projects and looking at other <unk>.

Projects to leverage your assets and capabilities.

What are the average payback period that you're targeting for those investments including.

The constellation for the spend that you were describing earlier.

And then the second question is just a capital allocation question as you have.

These different investment opportunities now in front of you.

Should investors expect a deliberate change in capital allocation.

And pausing the buyback activity just provide more financial flexibility.

Over the next 12 to 24 months as Youre thinking about the different options.

Right. So a common question is will the simpler ones. The answer is we believe.

The investments we are about to make and we are making are.

It creates even improve our.

Financial position in terms of.

Margins and returns in an over the horizon that typically put associated with capital investments in this industry. This industry, obviously the capital investments are made.

A few years in advance and there's no way to change that however, we believe.

The margins associated in our models.

With any new investments would.

It would be at least as good as what we have historically done and potentially significantly better.

Otherwise, we wouldn't be going there and second is related to our share buyback.

We when we stop the share buyback because we believe.

We are able to in the longer term, we are able to generate significantly additional.

Performance and gains beyond buying our own shares and we do have use cases for our capital and we will have demands on our capital that we think would serve to shareholders' best.

That's why we.

Stop the share buyback, even though we absolutely believe that our share price is.

Grossly undervalued, we think we still are better off and our shareholders will all better off.

Allowing us to use that capital to develop the business and put the business in a much faster growth trajectory.

Thank you.

Please standby for our next question.

Our next question comes from Ric Prentiss with Raymond James Your line is now open.

Thanks.

I have two follow up questions I could.

Continuing along the <unk>.

<unk> here.

When the 10-K it talks about.

The SPN terrestrial as well as satellite authorizations in Europe , Mexico, and Chile and in the process for applying additional authorizations.

How should we think about what other regions of the world.

S band might be.

Benefit to you and who do you see as the most significant other operators or other companies that have spanned out there.

Hi, Rick it's Dean.

So.

Of regions of the World.

We're really focusing on that from a commercial perspective.

Which are the regions that are going to be the most central to.

Most customers at the earliest stages of the project until we have a worldwide approach to what the market access and we're well underway with that.

Yes.

Bolstered significantly by the top priority position that we enjoy at the ITU level with the theory on one filing.

The cornerstone of the effort and market access.

So largely follow the deployment of this new system. The three carry on one system that we have satellite to actually land traffic and jurisdictions.

We'll find that we'll get more and more market access.

Sure I think in terms of the competition and it will probably vary from one region to the next but we feel like with the with our technology and with the right that we do.

We have for the ICU.

We're very well positioned to be the leader.

Okay.

Within the U S. Specifically I think.

The company does have some some AWS spectrum that has a similar ban.

Youre right as far as being able to do something in the U S with Eurosport.

Yes, we're not at a point right now, where we're making announcements or public statements on that but but there are there are multiple directions that we can go with that.

Okay.

And.

I think you also mentioned that.

Enterprise has continued to grow as a percent of.

Of the revenues at Hughes.

42%, including the most recent.

Quarter.

How should we think about where enterprise goes over time as far as a mix.

Yes, Rick.

Well, if you look at it I think.

The.

Last year in <unk>.

We look forward next year or two we see the enterprise business continuing to grow and of course, we have the.

Consumer business waiting for our new Jupiter three satellite system, so that mix probably.

A little hard to project going forward, because we expect to see both segments grow going forward I think can give you a specific number on that.

Okay, and obviously enterprises grow those consumer has been under pressure with consumer can grow. So theres no set kind of goal of trying to get consumer and enterprise to a 60 40 70, 30, 50 50 kind of mix there is no set.

Target from that standpoint.

Not at this point now.

And one just mundane question.

On the corporate side and the financials.

Corporate costs.

Of overhead came in a little higher than we were anticipating that I think had some environments out there about what the right level of corporate overhead is.

As you have queues and Jews growing in DSS, maybe getting larger too over time.

Are you at the right level or is this the level. This quarter that we should think about it was the annual level or how should we think about run rating corporate overheads.

Yes, Rick Rick This is Terry yes, we did see a little uptick there and just to remind you. In addition to the corporate expenses that does include a lot of our corporate development activities.

<unk> with the new projects, we're doing around us brand.

So there was some generally increases in there, but also seeing a little bit of activity associated with <unk>.

With our new project so.

I think that level that we're at is obviously, we will do we do everything we can to keep the.

At the levels we're at.

But I think thats an okay.

Run rate going forward here into the near future.

But Rick mentioned that from my own business philosophy perspective.

We're not adding management overhead if thats what your concern is.

Or maybe you shown up at the corporate level.

But it is not adding.

Additional management and in fact, if anything.

<unk>.

No.

Since I joined the business, we have significantly streamlined.

Our management and reporting.

Lies in order to make sure we have a more of a flatter organization as evidenced by the fact that we have today, we have Paul.

Representing the entire globe.

Phone side of the house and so forth. So there is some numbers there, but definitely they're not corporate overhead as we traditionally referred to them.

Gotcha, and then final one for me to wrap it up.

The DSS business, which is all albeit very small.

See a noticeable uptick in EBIT.

We had been thinking there might be some fall off at some point in the DSS business, how should we think about what's in the ESF a line item and what the trend lines are for that small kind of residual segment.

Yes, Rick Terry here, so, yes, we've seen a real nice uptick.

Our business.

Still the business is primarily.

Third party what are you seeing on the 105 in Arco nine satellites. So.

Made a lot of progress there in terms of selling additional capacity there.

If you are towards the end of 2022.

So look I think we're the plan is the key product.

Levels hopefully increase it.

<unk> continued to increase it a bit here as we go into 2023.

Yes, So look I think we're in a pretty good level.

What we saw in Q4.

Okay very good look forward to seeing you all soon take care have a good day.

Thanks, Rick.

Please standby for next question.

Our next question comes from Chris Quilty with Quilty analytics. Your line is now open.

Okay. Terry since you brought up the segment reporting I got to say I was hoping that with the 10-K, we might get some better segment reporting and how it is broken down today, but I guess given that Dave just left there is probably a pretty heavy lift without and CFO , but.

When we think about the business going forward when we take something like the S band.

Constellation getting on Orbitz is that Paul and the SaaS or if youre building equipment for it in the Hughes segment that sold out through the.

Yes that segment I mean.

Is there a way that we can think about the business on a go forward basis of how youre going to organize it into.

Enterprise versus consumer or.

Some other structure.

Does the current structure I mean, theres a lot buried within the Hughes segment.

In terms of other business lines that we really can't see.

And would love to get a little bit more visibility on that which I think would help with investors in your valuation.

Chris we understand that'd be appreciate your point of view and we agree with it.

We have a business that.

Is in transition.

But what you have seen first of all the growth of our enterprise business.

You see I've heard about our.

Aspirations and goals to make a significant business out of our S band and new enter new.

Era of growth through that and we're also looking at M&A.

M&A through other arms of our enterprise business unrelated to the S band I think and I think 2023 will be a year of I.

I guess transition for us as we can.

Going to move forward with this horizon, two and horizon three in horizon, one which is an optimization of what we have had as you've seen we've done a good job in keeping the short run, but horizon, two and three which.

We are working on in 2023 kind of shaped the business going forward in a significantly different way, we expect and as a result of that it would be imprudent for us to go ahead and introduce additional segment details just to come and change them nine months later.

I think you would want us to get our act together.

Be more definitive with what we are planning to do and how we are progressing.

And then provide additional detail we do intend to do that just take us some time to get it right.

And yes, not having a CFO , perhaps something to do with it but I don't really honest I think that is the driver I think the driver is that even with our CFO . Our business is changing we need to know what is relevant how much of our attention is going to be focused on one of your multiple avenues of growth.

And development and we are focused on all of them in.

We'll find out this year, which ones are most applicable for the investors and we do intend to make additional disclosures of that information.

I'll hold you to it I heard 2024, new segment reporting.

So second question did you give any guidance that I missed around capex for this year, obviously, you've got the Jupiter three program tailing off there is no new satellite program in the bucket.

I think on their call last week <unk> had said they expect CPE related capex to be up three fold.

Once the satellite launches is that a.

Reasonable assumption that youre going to be shipping so many damn terminals that the CPE or sorry, the capex isn't going to really see a falloff in 'twenty three.

I think you should expect our capex to be similar to what you are seeing and they should not expect us to be vastly different and thats because of the combination of.

Offsetting effects.

<unk>.

Some of the Capex that we typically have had to pay for Jupiter three we won't have to pay.

That satellite much of that Capex has been paid for.

But.

On the other hand, you will see us.

Acquire additional customers significantly additional customers eating up some of that Capex savings.

So all in all we're not expecting a disrupted a step function change in our capex on a.

On an annual basis, I mean don't hold me too and every dollar of that but not seen.

No way, we are we are stating that our capex is going to have.

Kevin.

Impressive jump of any kind.

Got you and where does the ground segment sit today I think are you building in what does it like eight.

Ways in their Q V band.

New technology have you been able to do any testing on that.

Yes.

Chris.

With that Catherine.

Over 18 sites installed.

A number of different combinations and locations and our network is we have a cloud architecture.

Except for two sites that are ultimately installed.

And we've been able to test.

Some of these sites on an existing capacity we have on.

Echo nine so.

So we are pretty far along and all of that process. We are very sure of the actual technology as I mentioned earlier, we've actually deployed in this configuration for two other customers. So so we have a lot of operating experience on it as well.

Now wait a second one was the <unk> launch you actually had Q V band on Echo 19.

So we had.

Yes.

<unk>.

We've not been able to test in that fashion, but we got good.

Laboratory testing of that so we're pretty sure how that and elaborate as well.

Gotcha.

A question that Rick asked them.

About the enterprise and consumer mix brought up the question which is.

If I just think about Jupiter three as a platform.

Is the emphasis is going to be able to reserve more of that capacity for enterprise customers.

And do you think of enterprise and things like IFC or when I look at North America with.

17, and Viasat three.

A market, where you will continue to serve it from a distance.

Well I think two things one for Jupiter three.

In Latin America, South America, we're optimizing the capacity.

Revealed so they are we expect to continue to add additional enterprise significant additional enterprise business. So the blend of the consumer versus enterprise will vary over time, depending on where we think our best yield is.

North America, we still anticipate having applications for our capacity.

In the.

The enterprise space. So we're we just consumer.

But we're still working on those opportunities have nothing at this point that relay.

Alright, that's it for me thanks, guys.

Thanks, Chris.

At this time I show no further questions I would now like to turn the conference back to Terry Brown for closing remarks.

Yes, we'd just like to thank everybody for joining us today and looking forward to talking to you again soon thank you.

Okay.

This concludes today's conference call. Thank you for participating you may now disconnect.

Okay.

[music].

[music].

Good day and thank you for standing by welcome to the Echostar Corporation Conference call for fourth quarter 2022 results at this time all participants are in a listen only mode. After the speaker's presentation, there will be a question and answer session.

To ask a question during the session you want each press star one one on your telephone you will then hear an automated message advising the Oregon does raise.

To withdraw your question. Please press star one one again please.

Be advised that today's conference is being recorded.

I would now like to hand, the conference over to your Speaker today Terry Brown. Please go ahead.

Thank you.

Good day, everybody and welcome to our earnings call for the fourth quarter of 2022, I'm joined today by Amit Akkerman, our CEO and President Paul <unk>, Our Chief operating officer.

Dean Manson, our chief legal officer, and Jeffrey bogs, our interim Chief Accounting Officer.

As usual, we invite media to participate in a listen only mode on the call and ask that you not identify participants or their firms in your report.

We also do not allow audio recording which we ask that you respect.

Let me now turn the call over to Dean for the Safe Harbor disclosure.

Thank you Terry.

All statements we make during this call other than statements of historical fact constitute forward looking statements made pursuant to the safe Harbor provided by the private Securities Litigation Reform Act of 1995.

These forward looking statements involve known and unknown risks uncertainties and other factors that could cause our actual results to be materially different from historical results and from any future results expressed or implied by the forward looking statements for a list of those factors and risks. Please refer to our annual report on Form 10-K for the year ended December 31 2020.

Two filed yesterday with the SEC all cautionary statements we make during the call should be understood as being applicable to any forward looking statements. We make wherever they appear you should carefully consider the risks described in our report and should not place any undue reliance on any forward looking statements. We assume no responsibility for updating any forward looking statements we refer.

To adjusted EBITDA during this call the comparable GAAP measure and reconciliation there too are presented in our earnings release I'll now turn the call over to Hamid.

Thank you Dean and good day everyone.

We have had an exciting fourth quarter in December 2022, PRASM KOL analysis retirement.

And we would like to thank him for his 50 years of service.

This announcement signals the start of a new era as we align the company for success in a changing industry.

As of January one 2023, Pollo <unk> assumed a new chief operating officer role that was established to lead all market facing global activities. Congrats.

Congratulations to you Paul.

We remain enthusiastic about our future and believe that under a more streamlined management.

And operating structure, we will drive efficiencies synergies and greater growth.

We continue our search for a chief financial Officer, and will keep you informed of our progress.

As for our agenda for the call today first we will provide a brief overview of our financial activities from the fourth quarter after that we will.

Discuss our business strategy, which includes the three parallel work streams that are called Horizons and our progress on all three.

We'll then move to question and answer session.

Let's start with our financials.

Our revenue in the quarter on our fourth quarter of 2022 was $500 million up slightly compared to the same period of prior year.

On a full year basis, we achieved $12 million of growth.

This in spite of the fact that for the full year of 2022.

We faced competition from installing.

Which brought significant capacity to the market.

We did not have access to the benefits of our upcoming Jupiter three system.

The revenue increase in the fourth quarter was primarily the result of growth in our enterprise business, while our consumer broadband business has been impacted by capacity constraints and other factors we.

We have continued to increase revenue by capitalizing on enterprise and government opportunities.

Domestically and internationally.

This is consistent with my statements in prior earnings calls regarding our continued focus on diversification of the business.

Alright, adjusted EBITDA in the fourth quarter was $164 million, an increase of 3% from last year, primarily driven by lower sales and marketing expense associated with our consumer broadband business.

Continue to focus on managing our costs in line with the change in revenue mix to preserve our ability to generate cash in.

In the fourth quarter, we saw continued momentum in our enterprise business.

$195 million new orders.

Our 2022 orders increased 41% compared to the same period last year.

Most enterprise orders are recognized over several years, creating a long and a stable revenue stream.

We remain excited about opportunities within the enterprise market to market that we believe will continue to allow us to better diversify our business, both domestically and internationally and provide cash generation through low capital investment and a scalable operating leverage.

Capital expenditures in the quarter were $77 million compared to $86 million in Q4 of last year.

The decrease was primarily due to lower spend on Jupiter three satellite program and consumer premise equipment.

Free cash flow defined as adjusted EBITDA minus Capex was $87 million during the quarter and $330 million in 2022.

We ended the quarter with $1 $7 billion of cash and marketable securities.

This is post purchasing approximately $90 million of our own stock in 2022.

I remain excited about the strength of our balance sheet as it affords us the flexibility to explore investment opportunities that could foster growth, which remains a key component of our business and strategy.

Let me now turn the call over to Paul who will provide some additional specifics on the quarter and our horizon, one and two activities.

Thank you Tony.

As a reminder, horizon one is our near term priority to maximize current services and operations, while managing costs as we prepare for the launch of the Jupiter three Echostar 24 satellite.

To that end, we continue to focus on operational efficiencies and yield optimization of our north American satellite capacity in.

In 2022.

Restructuring our portfolio of consumer service offerings to better align with market demand.

Provisioning and additional capacity for our customers.

And then to continue to optimize our service plans in 2023 as we await the launch of the <unk>.

The changes in our service plans have resulted in a natural shift towards higher capacity higher price plans for our customers improving our foods, while delivering an enhanced customer experience.

Additionally, we remain focused on improving our cost structure through the appointment of additional automation improved processes and supply efficiencies of course without compromising the end user experience.

In the third quarter of 2022, we launched Hughesnet fusion.

Adding support for latency sensitive applications to the traditional Hughesnet satellite service, which is optimized to support high speed applications like video and.

Use that fusion utilizes a unique data handling software to seamlessly combining our satellite service with the terrestrial wireless service, providing an exceptional internet experience.

Sponsored reliable effect.

The Houston service plans, but as our future plans.

It's been well received by existing and new subscribers and we expect the service to help attract new customers and reduce churn while improving our.

Although we continue to see competitive pressures within the underserved market. We address we believe the combination of our optimized service plans and use that fusion service should help combat competition.

Moving to our North American enterprise business in the fourth quarter, we signed a $9 million managed service contract with a new customer to utilize our secure broadband connectivity.

We also received extensions from through retailers valued at approximately $5 million, each and continue to see success with contracts and deployments in the retail petroleum and energy markets.

In our <unk> program deliveries on production gateways to continue this plan.

As of the end of 2022, we have shipped 32 gateways and expect to complete the total complement of 44 gateways in 2023 and.

In line with our committed schedule and customer expectations.

Additionally, we have shipped more than 12000 satellite subscriber modules for inclusion in one of our terminals.

We also executed a contract to deliver seven by 24 operational support for one we have a network that includes development of advanced AI management capabilities for the Onewest ground infrastructure.

Our government business ended the year with record revenues, although the business is still a relatively small scale. It has been growing through the development of network security management tools for Vod applications and evolving technologies, such as terrestrial in Baiji MTN networks.

As part of our streamlined management structure.

We merged our defense and civil government business groups into one cohesive unit to drive efficiencies and expand opportunities for growth in the future.

Now to our international operations, we continue to allocate additional capacity to address a wide range of enterprise applications to close the digital divide.

In Mexico, we added broadband and fiber backhaul locations for Cfe telecom as well as connectivity services to a major bank.

In Colombia, we increased bandwidth to the 670 antiquated schools in.

In Brazil, we expanded the scope of our services agreement with a major telecommunications provider to deliver internet of approximately 1600 rule schools.

With regards to our Hughesnet service in Latin America, we remain focused on adding high value subscribers.

Which is lowering churn, while optimizing yield on our existing Latin American capacity to increase profitability and cash generation.

In terms of the Jupiter equipment sales given our system equipment sale.

Significant orders from around the World in Mexico, a major oil producer ordered an upgrade from your existing new system and signed a multi year support agreement yet.

In Africa, a leading telecommunications service provider upgraded their Jupiter system to support network expansion and LTE backhaul connectivity.

We also received a sizable order for V NAND terminals to support machine to machine communications.

In the release and telecommunications service provider order and additional redundant Jupiter gateway to enhance their service offerings.

Now, let me focus on horizon two activities. These.

These include our efforts to bring Jupiter three into service for expansion of our services in North and South America, as well as growing and diversifying our global enterprise offerings.

I am pleased to report that the Jupiter three satellite into the final stages of Assembly in March which.

Which is expected to occur in the second quarter of 2023.

As many of you know in November of 2022, we entered into an amended agreement with <unk> the manufacturer of the salary.

To secure compensation for past delays as our realigned remedies to incentivize <unk> to complete the program expeditiously.

The compensation provided for relief on approximately 14 may of payments grew in orbit, raising and more than $44 $5 million plus interest on deferred in orbit incentive payments.

The amendment requires maxpharma paying liquidated damages in the event of further delay.

Also macro agreed to enter into an agreement with us where we will provide certain products or services <unk>. During 2023 for payments that will deliver us a margin of at least $30 million.

In preparation for the launch of Jupiter three the team is focused on developing service plans with higher speeds more data capacity and the extension of our Hughesnet fusion plan for the ultimate high speed low latency satellite Internet experience.

We believe the market is eager for these robust offerings and we plan to have a highly competitive suite of services to meet a variety of our customers' needs once Jupiter three of our service.

Horizon. Two also has a strong focus on our global enterprise business that includes the government sector. We plan to leverage our business connectivity managed services portfolio, our hybrid Leo Geo business solutions, and our own manufactured products to pursue growth.

Increased participation in this market segment is a key element of our diversification strategy.

Which includes improving our operational scale with potential small acquisition, which we will continue to explore.

Now, let me turn the call back over to Amit.

Thank you Paul.

I would like to provide an update on horizon, three which is our strategy to expand into new markets around the world through both organic innovation as well as potential acquisitions.

One significant area of progress is around our S band opportunities you probably saw a recent press release announcing our agreement with Astral digital to begin construction of our global it's been mobile satellite service network. The 28th satellite Leo Constellation is primarily targeting Iot services, which we believe is a.

Vast untapped opportunity the constellation will provide a commercial service that will provide us with a platform for ongoing market development and is a measured next step in terms of building our S band license portfolio.

Some of you may recall that in the second quarter of 2021, we launched our third nano satellite known as <unk> III with the primary mission to bring into use our series one <unk> filings. This mission was successfully completed in the third quarter of 2021 satellite provided us with the ability to test a wide range.

<unk> of potential <unk> applications and services, which we used in the design phase of our Leo constellation.

During the first quarter of 2023, we lost contact with <unk> and our continuing efforts to establish communication, regardless of the outcome or Leo constellation satellites will substitute for <unk> three in 2024, well in advance of the ITU required deadline in 2026.

We have also been working to expand our lower raw land activities Laura for long range is a low power wide area.

Device connectivity.

For the Internet of things.

Last year, we initiated hybrid S band satellite.

Terrestrial Lora services over the Echostar 21 satellite in Europe to create the first Pan European Lora enabled network.

During the fourth quarter, we completed an initial commercial deployment of our hybrid <unk> satellite and terrestrial lower our services in Mexico.

And we are currently testing similar services in the U S. These activities will be supported shortly thereafter with our new Leo constellation.

It is going to be a very exciting time for the Lora and satellite Iot ecosystem as we aggressively drive satellite Iot capabilities forward globally.

Regarding our <unk> activities, the Leo constellation will serve as a foundation for engineering <unk> narrow band NTN based capabilities building on three GPP release 17 and beyond.

We remain engaged with <unk> ecosystem partners at all levels of the value chain in support of our goal of engineering, a truly transformative white band Leo based <unk> capability.

Our horizon three in addition to our S band activities. We are actively evaluating other opportunities for new avenues of organic and inorganic growth, we will share more details as all of these efforts and plans solidified let me now turn it over to the operator to start the Q&A session.

As a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again please.

Please standby, while we compile the Q&A roster.

Our first question comes from Ric Prentiss with Raymond James Your line is now open.

Thanks, Good morning, good afternoon, everyone.

Alright. Thanks.

Alright.

Couple of questions first let's start with Jupiter three glad to see the timing firming up here.

In the final stages.

Can you help us understand have you got a launch date, yet and won't do you think we should assume Jupiter three can go in service.

Okay.

Yes, Rick.

We have.

<unk> made arrangements for launching.

We are not announcing a date at this time, but we have a large set up on the Spacex Falcon heavy.

And.

So with that we would expect in Q3 to bring.

To bring our services into.

Market.

The system, we have is already been deployed in the United States is ready to go.

The actual technology has been deployed at several customers already so we're very certain of.

Our ability to rapidly deploy the network once we get the satellite.

Similar question what.

One of your peers out there how fast they think they would fill up their next generation satellites launching how fast do you think youll be able to fill the spurt up I think it probably implies horizon, two and horizon three and then when we think about capacity I think we have about $1 2 million subs today, how should we think about that.

<unk> added capacity and cheaper to three it could be in relative terms.

Okay, well as far as the <unk>.

Time, we're estimating about two to three years, which would be typical of what we've seen in the past.

We expect similar sorts of consumption of the capacity as far as the actual sub numbers I don't think we're prepared to give you a specific number I think understand our plan with the capacity is to optimize our yield. So it really goes in two dimensions growing subscribers of course is one is the $1 one dimension, but the other dimension.

And of course as ARPA as we prove these plans and improve the capabilities for the customers. We have seen in the past that the customers are willing to pay more so we would expect our overall revenue.

Our key objective here at our yield for that capacity to be our main focus.

Okay, and then shifting gears to the Rio projects that we've talked about.

<unk>.

How did you come up with why 28 satellites in the constellation how should investors think about what the capital commitment is over how many years to launch this Rio project.

Yes.

Rick.

The system was designed based on the original filing of our Syrian one application and rights.

So.

This design was already in the registration in the filing and we're just completing that.

And so but what it does provide a complete coverage.

Of the globe.

Even with.

With several visitations per day.

Even in parcel deployment, even from his very first starts.

First launch is launching batches in the very first one actually does provide complete coverage of the globe and as the additional satellites come on in that visitation rate increases.

We think is perfect.

Adequate and capable for.

A wide range of Iot services and anything.

Related and beyond.

In terms of our cost structure. This is a second generation system for us and.

As a stepping stone towards our main goal and ambition to build a.

The leading light than perhaps the only wideband <unk> system to follow.

We have been working on so you should assume that this is a incremental.

Incremental capital expenditure, but certainly not at the level that would prevent us from being able to.

Materialize our largest system.

Okay.

We have speculated maybe this 28 Leo satellite projects could be something done for $100 million to $200 million total was that within the realm of reasonable or my low there are high there.

Oh.

It would be not too far from the ballpark I think that those those numbers are.

Close to where our head is in our planets.

Okay split to be in.

In the ballpark.

And then the final question for me.

Obviously, you mentioned that.

The 28, Leo satellite as a steppingstone X generation tool, but not the ultimate wideband one.

Maybe you can give us your thoughts on it came up briefly on the on the dish call earlier today, that's been a busy earnings day about directed device, how do you view director device market.

Allied communications with smartphone linkage that market is ripe.

Right, but it also seems early and somewhat confusing to investors out there walk us through a little bit about how you see directed device opportunities.

Right.

First of all we believe the director devices.

<unk>.

As the fundamental opportunity is a very large opportunity and I think as a game changing opportunity.

But we also believe that the very first initial steps of messaging oldie and variety of.

Qualities and capabilities is the initial step that is the.

So probably smaller steps.

Not fully activating all the capabilities, which we think are exciting a true <unk> system.

Which will have a natural use of.

Of your smartphone similar to what you would use.

Got it.

Trust Real network is what our ambitions are and I think that's where the game changing capability will come.

Still.

No.

A few years away, but but it's something that we're working on and we believe that.

There is not room for too many of those out there and certainly we hope to be.

Expected to be the leading provider of that capability, but in the interim obviously there will be.

And messaging based service to device and we are able to demonstrate it and looked at today in some of our systems.

And I think we will see some of those commercial offerings in the market in the near future.

Great. Thanks, very much so.

Please standby for our next question.

Our next question comes from Chris Quilty with Quilty analytics. Your line is now open.

Thank you.

Congrats on finally, moving forward with the S band constellation.

Now that it's out there I got more detailed questions.

Maybe just start with a couple of technical things.

In terms of what orbit.

Intend to use.

The system have cross links and when you think about the.

There is existing competition out there theres a lot of companies, adding Iot constellations, where do you see this fitting in terms of its capability obviously.

Things in that low Ross.

<unk> communications layer and what eventually led you to that path.

Versus in other protocol.

Alright. So there are several questions in there, Chris and I will try to it.

Are some first of all we have had quite a bit of experience with lower or we have been providing a lot of service over in Europe .

Might some time now.

Provided now we are able to provide commercial services in Mexico, we are experimenting with lora.

Over United States, We believe the just a narrow band Iot market in itself.

By end of this negative will be more than $10 billion annually, so theres quite a bit of room and this is not even.

All of the different applications and use cases that have been identified so I think that in itself is a very large market and has room for multiple operators to be there and as I mentioned.

We.

The capability of our system are specified in our filing in.

That we have made for serious ones. So some of those you can actually find.

In public domain, we've not disclosed anything more than what's in public domain regarding the capabilities of that system, that's well that's primarily for.

Competitive reasons, we'd like to have that more guarded at this point.

But we think the system is quite capable of providing a.

Superior Iot services now having said that this is.

Again consider just one.

A step a significant step towards the full taking full advantage of our <unk>.

<unk> spectrum capabilities and that requires building a much more capable system.

And with this step we will gain.

A tremendous amount of knowledge about the performance of the <unk> G. MTN and remember that this is a standard was just recently finalized there has not been many or any.

Just some out there.

Used it.

We are an engineering company with deep deep heritage and understanding of satellite systems and engineering links and capabilities.

We want to make sure that.

We have a system that we can absolutely perfect our understanding of the standards and remove any sort of limitations of bugs that may be there.

To ensure that the big system that we're working on will ultimately be.

Our fully effective and maximally.

Proficient.

So that's the way, we think about it and we fully understand that others are also working on Iot I think the market is large enough for all of that but also as I said, we are looking to a step beyond that.

And go through a wideband system.

Got you and.

How do you intend to go to market.

Correct.

<unk> sale partnerships.

Look we are exploring all of those at this point, we have not really given any more specifics today, we are working in partnerships.

In the markets that I mentioned.

But clearly.

For our largest system with different geographies.

It is our intention to maximize our access to market through multiple routes. So youll see us probably.

It will take different approaches in different markets, but.

So the access to market has not been a limitation for us.

Demand has been.

Robust in terms of partnership and wanting to sell their services.

Got you and just one question on.

The existing service with the new fusion product.

Is that a service that you offer even as Jupiter three comes out in the future and obviously has a lot more capability.

Fusion still become necessary or is fusion a way for you to actually expand your addressable market because you can basically reserve some satellite capacity to use the little fusion.

And then the second question is if in fact fusion becomes a much bigger part of the mix on a go forward basis does it in any way.

Packed.

The overall margin profile since you're reselling somebody else's service.

Okay. So on the first question.

We see fusion as a key new technology.

Does that augment what we already do today.

And if you look at our customer set as well.

Customers.

The standard Geo services are a good fit and we think thats the predominant number of them most of them in their applications.

<unk> drifted over towards primarily streaming video and video applications. So we see that high speed cable.

<unk>.

Hey, Jupiter three will provide his primary.

Support.

But if you look at the fusion customers that have late insensitive applications, we see that as really the answer that allows them to get the benefits of both a geo and the low latency terrestrial now what happens I think primarily for customers is is that.

We look at Rolling this out further we expect to get.

A fair amount of our market coverage, there and so we think it will really be a good premium service for customers.

Great.

Any material margin impact.

Well that remains to be seen a little bit on the percentages.

Obviously as we are buying.

Capacity.

From other players.

That is a lower margin.

Then our.

Our own assets, but at the same time.

Limited capital investment, we make to get that so so that might tend to balance out.

Alright, if I may.

Add also to that.

So we are expecting a significant churn improvement that we've seen it already.

<unk>.

From fusion product, so while diffusion of products may on as bill of material.

Costs in gross margin.

Not provide as much.

Margin as you would get from using only our own product, we see a significant improvement in churn, which compensates for that margin drop so net net we think of it.

It's an incredible product and we have received.

Fantastic Receptiveness from the marketplace so far.

Great.

Great quarter, and let us know when you got a launch date.

Absolutely will we are anxiously awaiting ourselves and I think we're making great progress there.

Inching forward everyday and listen we have been we have had a great year, thanks to Paul and the team we have had a great year.

In a market that we were on their hand, it simply because of a lack of capacity in a brand new system shows up with.

No no no traffic on it.

And for the first time ever in a satellite industry introduces the term unlimited.

Although he is no longer limited now.

That limitation is being placed in the prices have been raised and capacities have been used but during the year that we had the maximum.

Hit headwind I think we delivered a a growth year, both on revenue and EBITDA and I think we are excited about what the Jupiter three shows up.

How we can.

Much more effectively compete.

Okay sounds good thank you.

Please standby for our next question.

Our next question comes from Michael Rollins with Citi. Your line is now open.

Thanks, just a couple questions first I'm curious as your green lighting some of these projects and looking at.

Other.

Projects to leverage your assets and capabilities.

What are the average payback period that you're targeting for those investments including.

The constellation for the spend that you were describing earlier.

And then the second question is just a capital allocation question as you have.

These different investment opportunities now in front of you.

Should investors expect a deliberate change in capital allocation.

And pausing the buyback activity just provide more financial flexibility over the next 12 to 24 months as youre thinking about the different options.

Right, so what I'll comment that the questions well the.

Simply the ones. The answer is we believe.

The investments we are about to make and we are making are accretive and improve our.

Financial position in terms of <unk>.

Margins and returns in an over the horizon that typically put associated with capital investments in this industry. This industry. Obviously the capital investments are made a few years in advance and there's no way to change that.

However, we believe.

The margins associated in our models.

With any new investments would.

It would be at least as good as what we have historically done and potentially significantly better.

Otherwise, we wouldn't be going there and second is related to our share buyback.

We when we stop the share buyback because we believe.

We are able to longer term, we are able to generate significantly additional.

Performance and gains beyond buying our own shares and we do have use cases for our capital and we will have demands on our capital that we think would serve the shareholders best.

That's why we.

Stop the share buyback, even though we absolutely believe that our share price is grossly undervalued. We think we still are better off and our shareholders will all better off.

Allowing us to use that capital to develop the business and put the business in a much faster growth trajectory.

Thank you.

Please standby for our next question.

Our next question comes from Ric Prentiss with Raymond James Your line is now open.

Thanks.

I have two follow up questions I could.

Continuing along the S band lines.

<unk> here.

In the 10-K it talks about.

The SPN terrestrial as well as satellite authorizations in Europe , Mexico, and Chile and in the process for applying additional authorizations.

How should we think about what other regions of the world.

S band might be.

A benefit to you and who do you see as the most significant other operators or other companies that have <unk> out there.

Hi, Rick it's Dean.

So in terms of regions of the world.

We're really.

Focusing on that from a commercial perspective.

The regions that are going to be the most central to the.

Most customers at the earliest stages of the project until we have a worldwide approach to the market access and we're well underway with that.

Yes.

Bolstered significantly by the top priority position that we enjoy at the ITU level with the theory on one filing.

The cornerstone of the effort and market access.

Largely we follow the deployment of this new system. The three carry on one system that we have satellites to actually land traffic and jurisdictions.

We'll find that we'll get more and more market access.

Sure I think in terms of the competition and it will probably vary from one region to the next but we feel like with the with our technology and with the rates that we do.

We have for the ICU.

We're very well positioned to be the leader.

Okay.

Within the U S. Specifically I think.

The company does have some some AWS spectrum that has a similar ban.

Youre right as far as being able to do something in the U S with Eurosport.

Yes, we're not at a point right now, where we're making announcements or public statements on that but but there are there are multiple directions that we go with that.

Okay.

And.

I think you also mentioned that.

Enterprise has continued to grow as a percent of.

Of the revenues at Hughes.

42% due to the mix.

Quarter.

How should we think about where enterprise goes over time as far as a mix.

Yes, Rick.

Well, if you look at it I think.

The.

Last year and as we look forward next year or two we see the enterprise business continuing to grow and of course, we've had the.

Our consumer business waiting for our new Jupiter three satellite system, so that mix probably.

A little hard to project going forward, because we expect to see both segments grow going forward. So I think KKR specific number on that.

Okay, and obviously enterprises grow this consumer has been under pressure with consumer can grow. So theres no set kind of goal of trying to get consumer and enterprise to a 60 40 70, 30, 50 50 kind of mix there is no set.

Target from that standpoint.

Not at this point now.

And once those mundane question.

On the corporate side and the financials.

Corporate costs.

Of overhead came in a little higher than we were anticipating and I think had some environments out there about what the right level of corporate overhead is.

As you have <unk> and <unk> is growing in the DSS, maybe getting larger too over time.

Are you at the right level or is this the level. This quarter that we should think about it was the annual level or how should we think about run rating corporate overheads.

Yes, Rick Rick This is Terry yes, we did see a little uptick there and just to remind you. In addition to the corporate expenses that does include a lot of our corporate development activities associated with the new projects, we're doing around us band.

So there was some general increases in there, but also seeing a little bit of activity associated with <unk>.

With our new project so.

I think that level that we're at is obviously, we will do we do everything we can to keep the.

At the levels we're at.

I think thats an okay.

Run rate going forward here into the near future.

But Rick mentioned that from my own business philosophy perspective.

We're not adding management overhead if thats what your concern is.

Or maybe you shown up at the corporate level.

But it is not adding.

Additional management and in fact, if anything.

<unk>.

No.

As I joined the business, we have significantly streamlined.

Our management and reporting.

Lies in order to make sure we have a more of a flatter organization as evidenced by the fact that we have here we have Paul.

Representing the entire globe.

Phone side of the house and so forth. So there is some numbers there, but definitely they're not core.

Put overhead has been traditionally refer to them.

Gotcha, and then final one for me to wrap it up.

The DSS business, which is all albeit very small.

See a noticeable uptick in EBIT.

We had been thinking there might be some falloff at some point in the DSS business, how should we think about what's in the ESL a line item and what the trend lines are for that small kind of residual solvents.

Yes, Rick Terry here, so, yes, we've seen a real nice uptick.

Our business.

Still the business is primarily.

Third party what are you seeing on the 105 in Arco nine satellites. So.

Made a lot of progress there in terms of selling additional capacity there.

If you are towards the end of 2022.

So look I think we're the plan is to keep it at those levels hopefully increase it.

<unk> to increase it a bit here as we go into 2023.

Just.

Yes, So look I think we're in a pretty good level.

What we saw in Q4.

Very good look forward to seeing you all soon and take care have a good day.

Thanks, Rick.

Please standby for next question.

Our next question comes from Chris Quilty with Quilty analytics. Your line is now open.

Okay, Terry since you brought up the segment reporting.

I got to say I was hoping that with the 10-K, we might get some better segment reporting and how it's broken down today, but I guess given that Dave just left there is probably a pretty heavy lift without and CFO , but.

When we think about the business going forward when we take something like the S band.

Iteration getting on Orbitz is that all in the SaaS or if youre building equipment for it in the Hughes segment that sold out through the year.

Yes that segment I mean.

Is there a way that we.

And think about the business on a go forward basis, and how youre going to organize it into.

Enterprise versus consumer or.

Some other structure.

Does the current structure I mean, theres a lot buried within the Hughes segment.

Other business lines that we really can't see.

And would love to get a little bit more visibility on that which I think would help with investors in your valuation.

Christy I understand that'd be appreciate your point of view and we agree with it.

We have a business that.

Is in transition.

But what you have seen first of all the growth of our enterprise business.

You see I've heard about our.

Aspiration.

Goes to make a significant business out of our S band and new enter new.

Era of growth through that and we're also looking at M&A.

M&A through other arms of our enterprise business unrelated to the S band I think.

And I think 2023 will be a year of I.

I guess transition for us as we kind of.

Move forward with this horizon, two and horizon, three and horizon, one which is an optimization of what we have had as you've seen we've done a good job in keeping the show running but horizon, two and three which.

We are working on in 2023 kind of shaped the business going forward in a significantly different way, we expect and as a result of that it would be imprudent for us to go ahead and introduce additional segment details just to come and change them nine months later.

I think you would want us to get our act together.

Be more definitive with what we are planning to do and how we are progressing.

And then provide additional detail we do intend to do that it will just take us some time to get it right.

And yes, not having a CFO , perhaps something to do with it but I don't really honestly think that is the driver I think the driver is that even with our CFO . Our business is changing we need to know what is relevant how much of our attention is going to be focused on one of your multiple avenues of growth.

And development and we are focused on all of them in.

We'll find out this year, which ones are most applicable for the investors and we do intend to make additional disclosures of that information.

I'll hold you to it I heard 2024, new segment reporting.

So second question did you give any guidance that I missed around capex for this year, obviously, you've got the Jupiter three program tailing off there is no new satellite program in the bucket.

I think on their call last week, you know Viasat said, they expect from CPE related capex to be up three fold.

Once the satellite launches is that a.

Reasonable assumption that youre going to be shipping so many damn terminals that the CPE or sorry, the capex isn't going to really see a falloff in 'twenty three.

I think you should expect our capex to be similar to what you are seeing and they should not expect us to be vastly different and thats because of the combination of.

Offsetting effects.

<unk>.

Some of the Capex that we typically have had to pay for Jupiter three we won't have to pay.

That satellite much of that Capex has been paid for.

But.

On the other hand, you will see us.

Acquire additional customers significantly additional customers eating up some of that Capex savings.

So all in all we're not expecting a disrupted a step function change in our capex on a.

On an annual basis, I mean don't hold me too and every dollar of that but not seen.

No way, we are we are stating that our capex is going to happen.

Impressive jump of any kind.

Got you and where does the ground segment sit today I think are you building in what does it like eight.

Ways in their Q V band.

New technology have you been able to do any testing on that.

Yes.

Chris.

We cross.

Over 18 sites installed.

A number of different combinations of locations in our network is we have a cloud architecture.

Except for two sites.

We installed.

And we've been able to test some of these sites on an existing capacity we have on.

On the <unk> so.

So we are pretty far along and all of that process. We are very sure of the actual technology as I mentioned earlier, we've actually deployed in this configuration for two other customers. So so we have a lot of operating experience on it as well.

Now wait a second one was the <unk> launch could you actually had Q V band on Echo 19.

No we had.

Yes <unk>.

We've not been able to test in that fashion, but we got good.

Laboratory testing of that so we're pretty sure of how that will operate as well.

Gotcha.

A question that Rick asked.

About the enterprise and consumer mix brought up the question which is.

If I just think about Jupiter three as a platform.

Is the emphasis is going to be able to reserve more of that capacity for enterprise customers and do you think of enterprise and things like IFC.

Or when I look at North America, with Ses 17, and Viasat three.

That's a market where you will continue to serve it from a distance.

Well I think two things one for Jupiter three.

Latin America, South America, we're optimizing the capacity.

Revealed so there we expect to continue to add additional enterprise significant additional enterprise business. So the blend of the consumer versus enterprise will vary over time, depending on where we think our best yield is north.

In North America, we still anticipate having applications for our capacity in.

In the enterprise space, so it won't be just consumer.

We're still working on those opportunities have nothing at this point that relay.

Alright, that's it for me thanks, guys.

Thanks, Chris.

At this time I show no further questions I would now like to turn the conference back to Terry Brown for closing remarks.

Yes, we'd just like to thank everybody for joining us today.

Looking forward to talking to you again soon thank you.

Okay.

This concludes today's conference call. Thank you for participating you may now disconnect.