Grade: F — Major Red Flags
Framework: Schilit *Financial Shenanigans* + Beneish M-Score + forensic accounting principles
Data: SEC EDGAR 10-K (Filed 2026-03-02, FY ended December 31, 2025) + Yahoo Finance
Auditor: KPMG LLP — Unqualified opinion with going concern emphasis
One-line verdict: EchoStar's 10-K discloses going concern doubt. The filing states the company and "certain of our subsidiaries, currently do not have the necessary cash on hand, projected future cash flows or committed financing to fund our obligations over the next twelve months, which raises substantial doubt about our, and certain of our subsidiaries, ability to continue as a going concern." The company lost $14.5B in FY2025 on $15.0B revenue, carries $30.1B in debt against $3.0B cash, has negative interest coverage (-0.06x), burns free cash flow (-$1.7B annually), and is betting its survival on selling spectrum to AT&T ($22.65B) and SpaceX ($17B) — transactions that require FCC approval and may not close. The Altman Z-Score of -3.87 confirms extreme financial distress.
| Metric | Result |
|---|---|
| Red Flags | **5** (AR outpacing revenue, CFFO < NI 3 years, cash 10% of debt, intangibles 600% of equity, negative FCF after acquisitions) |
| Watch Items | **2** (negative FCF, negative interest coverage) |
| Checks Completed | **18/18** |
| Beneish M-Score | **-4.10** (clean — no manipulation signal) |
| F-Score | **1.78** (elevated manipulation probability 0.66%) |
| Altman Z-Score | **-3.87** (extreme distress) |
| Auditor | KPMG LLP — Unqualified opinion with going concern emphasis |
A Spectrum Company Facing Forced Liquidation
EchoStar is no longer primarily an operating telecom company. Per the filing, in the third quarter of 2025, the FCC "made it clear that it viewed our spectrum as being underutilized and deemed our continued ownership of such spectrum licenses inconsistent with the public interest, and that we must sell a material amount of spectrum licenses or face a wide-ranging license revocation."
The result: two forced spectrum sales that dominate the company's future.
AT&T Transaction: EchoStar agreed to sell its 3.45-3.55 GHz and 600 MHz spectrum licenses to AT&T for $22.65B in cash. The closing is "expected to occur in the first half of 2026" and requires FCC and DOJ approval. Per the filing, "we are not obligated to consummate the AT&T Transactions if the Closing Purchase Price...is less than $18.6 billion."
SpaceX Transaction: EchoStar agreed to sell 50 MHz of AWS-4 and H-Block spectrum to SpaceX for $17B, paid partly in SpaceX Class A stock at $212/share (up to $8.5B). The Spectrum Acquisition Closing "is expected to occur on or about November 30, 2027."
If these transactions close, the proceeds would retire the majority of EchoStar's $30.1B debt. If they do not close — due to regulatory denial, conditions, or deal failure — the company faces going concern risk.
The 18-Point Screening
Revenue Quality
| # | Check | Result | Detail |
|---|---|---|---|
| A1 | DSO Change | PASS | DSO 31 days, +3 days YoY |
| A2 | AR vs Revenue Growth | FAIL | AR outpaced revenue 2 consecutive years |
| A3 | Revenue vs CFFO | PASS | Revenue -5.2%, CFFO -107.9% |
Revenue declined 5.2% to $15.0B from $15.8B. AR grew while revenue shrank — for two consecutive years — triggering the A2 flag. DSO increased from 24 to 31 days. In a pay-TV and wireless business with monthly billing, rising DSO could indicate deteriorating collections or changing customer mix.
Expense Quality
| # | Check | Result | Detail |
|---|---|---|---|
| B1 | Inventory vs COGS | PASS | Inventory -16.4% vs COGS -5.5% |
| B2 | CapEx vs Revenue | PASS | CapEx -34.3% vs revenue -5.2% |
| B3 | SG&A Ratio | PASS | SG&A/Gross Profit = 61.4% |
| B4 | Gross Margin | PASS | 25.8%, +0.2pp, stable |
CapEx dropped 34.3% — consistent with the filing's disclosure that EchoStar "began the abandonment and decommission process for certain portions of our 5G Network" in August 2025. The company is no longer building out its own wireless network; it is transitioning to a "Hybrid MNO" model where AT&T provides base stations and spectrum while EchoStar operates the core and billing.
Cash Flow Quality
| # | Check | Result | Detail |
|---|---|---|---|
| C1 | CFFO vs Net Income | FAIL | CFFO < Net Income 3 consecutive years |
| C2 | Free Cash Flow | WATCH | FCF negative (-$1.7B) |
| C3 | Accruals Ratio | PASS | -33.5%, low accruals |
| C4 | Cash vs Debt | FAIL | Cash $3.0B covers only 10% of $30.1B debt |
C1 — Three years of CFFO lagging net income. But this metric is distorted by massive non-cash losses. The $14.5B net loss includes enormous impairment charges on spectrum licenses and 5G network assets. CFFO was -$99M — essentially zero — reflecting a business that generates barely enough cash to cover operations before capital expenditures.
C4 — Cash covers only 10% of debt. $3.0B against $30.1B. The debt includes $3.5B in 11.75% Senior Secured Notes due 2027 (secured by 600 MHz licenses), $9.8B in Seller Notes (secured by AWS-4 licenses), and various other tranches. The filing discloses that EchoStar "elected not to make interest payments on a certain portion of our long-term senior notes on their respective scheduled due dates" during Q2/Q3 2025, making payments only within the 30-day grace period.
Balance Sheet
| # | Check | Result | Detail |
|---|---|---|---|
| D1 | Goodwill + Intangibles | FAIL | Intangibles $34.6B = 600% of equity |
| D2 | Leverage | WATCH | Interest coverage = -0.06x |
| D3 | Soft Asset Growth | PASS | Other assets -7.1% vs revenue -5.2% |
| D4 | Asset Impairment | PASS | Write-offs normal |
D1 — Intangibles at 600% of equity. The $34.6B in intangible assets consists almost entirely of FCC spectrum licenses. These are real assets with quantifiable market value — the AT&T and SpaceX transactions collectively value the spectrum at approximately $39.65B — but they dwarf the $5.8B equity base.
D2 — Negative interest coverage. Operating income is negative, meaning the business cannot cover interest expenses from operations. The company is surviving on spectrum sales proceeds and grace periods.
Acquisition Risk & Manipulation Score
| # | Check | Result | Detail |
|---|---|---|---|
| E1 | Serial Acquirer FCF | FAIL | FCF after acquisitions negative 3 years |
| E2 | Goodwill Surge | PASS | Intangibles -12% YoY |
| F1 | Beneish M-Score | PASS | -4.10 (clean) |
Key Risks from the 10-K
1. Going Concern — Explicitly Stated
The filing's Risk Factors lead with: "We, and certain of our subsidiaries, currently do not have the necessary cash on hand, projected future cash flows or committed financing to fund our obligations over the next twelve months." This is the most severe risk disclosure a public company can make.
2. FCC Regulatory Risk — Spectrum Revocation Threat
The FCC forced these transactions by threatening license revocation. The September 8, 2025 letter from the FCC confirmed certain buildout obligations were satisfied, but the forced sale of spectrum assets fundamentally altered the company's business strategy.
3. Transaction Completion Risk
Both the AT&T ($22.65B) and SpaceX ($17B) transactions require FCC and DOJ approval. If either fails to close, EchoStar lacks the cash to service its debt. Per the filing, the SpaceX transaction depends on SpaceX's credit agreement to fund interim debt service of approximately $2B through November 2027.
4. Controlled Company
Per the filing: "We are controlled by one principal stockholder who is our Chairman, President and Chief Executive Officer." Charlie Ergen controls EchoStar through his equity ownership.
Summary
Grade: F. Going concern doubt, extreme leverage, negative operating cash flow.
EchoStar is not a traditional operating company to be evaluated on earnings quality — it is a spectrum asset liquidation vehicle. The $39.65B in pending spectrum sales to AT&T and SpaceX dwarf the company's $5.8B equity and could transform the balance sheet if completed. But transaction risk is real, and the company's operating businesses (DISH pay-TV, wireless) are in structural decline.
The M-Score is clean (-4.10), confirming no manipulation. The problem is existential: can the company survive long enough to close the deals?
**Disclaimer**: This report is based on EchoStar's FY2025 10-K filed with SEC EDGAR on March 2, 2026. This is NOT investment advice.
Data: SEC EDGAR 10-K + Yahoo Finance
Auditor: KPMG LLP (Unqualified opinion with going concern emphasis)
Fiscal year ended: December 31, 2025