EchoStar reported its worst revenue performance since acquiring Hughes in 2011 (revenues down 12% y/y), as consumer, equipment, and international all registered double-digit declines. AEBITDA declined ~19% but beat the consensus estimate by 13% (best upside performance since Q2’21).
Equipment stumble? Following two straight quarters of record equipment sales, equipment dropped 44% sequentially and 25% y/y, including a $19 million decrease in sales to “a certain North American customer.” We are now forecasting equipment sales to decline 9% in 2023 vs. a prior assumption of flat sales;Since turning negative in Q4’21, service growth has registered a steepening decline for five straight quarters, culminating in EchoStar's first-ever double-digit service decline. Assuming a timely launch of Jupiter-3, service revenues could return to growth as soon as Q2’24.
While still on track to ship to Florida in June, Jupiter-3 faces an especially crowded fall launch manifest that includes several high-priority government launches. We are now forecasting the satellite to enter service in Q4 (previously Q3), resulting in higher sub losses and a steeper service decline.
Putting aside lumpy Q1 equipment sales, the enterprise business continues to perform well, reporting a 3% improvement in service revenues, a 38% increase in orders (B2B of ~1.3x), and a 23% increase in the backlog to $1.6 billion;Having just announced its plan to build the Lyra constellation in February (28 S-band satellites), management let it slip that its next-generation constellation will be comprised of ""hundreds of large-size satellites ""delivering 5G wideband services and material revenues beginning in 2027.”
We are lowering our revenue and AEBITDA estimates for both 2023 and 2024 by 1-3%, primarily to reflect the delayed launch of Jupiter-3.