Marketable Investment Securities, Restricted Cash and Cash Equivalents, and Other Investment Securities

3 Months Ended

Mar. 31, 2024

Marketable Investment Securities, Restricted Cash and Cash Equivalents, and Other Investment Securities

Marketable Investment Securities, Restricted Cash and Cash Equivalents, and Other Investment Securities

4.Marketable Investment Securities, Restricted Cash and Cash Equivalents, and Other Investments

Our marketable investment securities, restricted cash and cash equivalents, and other investments consisted of the following:

	As of
	March 31,		December 31,
	2024		2023
	(In thousands)
Marketable investment securities:
Current marketable investment securities:
Strategic - available-for-sale	$	149	$	144
Strategic - trading/equity		56		7,799
Other		237		179
Total current marketable investment securities		442		8,122
Restricted marketable investment securities (1)		21,640		19,772
Total marketable investment securities		22,082		27,894
Restricted cash and cash equivalents (1)		88,663		89,107
Other investments, net:
Equity method investments (2)		86,988		126,179
Cost method investments		5,648		3,448
Fair value method investments		39,198		39,198
Total other investments, net		131,834		168,825
Total marketable investment securities, restricted cash and cash equivalents, and other investments, net	$	242,579	$	285,826

(1) Restricted marketable investment securities and restricted cash and cash equivalents are included in “Restricted cash, cash equivalents and marketable investment securities” on our Condensed Consolidated Balance Sheets.

(2) This change primarily resulted from the Sale and Transfer of Assets to EchoStar. See Note 1 for further information.

Marketable Investment Securities

Our marketable investment securities portfolio may consist of debt and equity instruments. All equity securities are carried at fair value, with changes in fair value recognized in “Other, net” within “Other Income (Expense)” on our Condensed Consolidated Statements of Operations and Comprehensive Income (Loss). All debt securities are classified as available-for-sale and are recorded at fair value.

We report the temporary unrealized gains and losses related to changes in market conditions of marketable debt securities as a separate component of “Accumulated other comprehensive income (loss)” within “Stockholders’ Equity (Deficit),” net of related deferred income tax on our Condensed Consolidated Balance Sheets. The corresponding changes in the fair value of marketable debt securities, which are determined to be company specific credit losses are recorded in “Other, net” within “Other Income (Expense)” on our Condensed Consolidated Statements of Operations and Comprehensive Income (Loss). See Note 2 for further information.

Current Marketable Investment Securities – Strategic

Our current strategic marketable investment securities portfolio includes and may include strategic and financial debt and/or equity investments in private and public companies that are highly speculative and have experienced and continue to experience volatility. As of March 31, 2024, this portfolio consisted of securities of a small number of issuers, and as a result the value of that portfolio depends, among other things, on the performance of those issuers. The fair value of certain of the debt and equity securities in this portfolio can be adversely impacted by, among other things, the issuers’ respective performance and ability to obtain any necessary additional financing on acceptable terms, or at all.

Current Marketable Investment Securities - Other

Our current other marketable investment securities portfolio includes investments in various debt instruments including, among others, commercial paper, corporate securities and United States treasury and/or agency securities.

Commercial paper consists mainly of unsecured short-term, promissory notes issued primarily by corporations with maturities ranging up to 365 days. Corporate securities consist of debt instruments issued by corporations with various maturities normally less than 18 months. U.S. Treasury and agency securities consist of debt instruments issued by the federal government and other government agencies.

Restricted Cash, Cash Equivalents and Marketable Investment Securities

As of March 31, 2024 and December 31, 2023, our restricted marketable investment securities, together with our restricted cash and cash equivalents, included amounts required as collateral for our letters of credit and trusts.

Other Investments, net

We have strategic investments in certain debt and/or equity securities that are included in noncurrent “Other investments, net” on our Condensed Consolidated Balance Sheets.  Our debt securities are classified as available-for-sale and are recorded at fair value.  Generally, our debt investments in non-publicly traded debt instruments without a readily determinable fair value are recorded at amortized cost.  Our equity investments where we have the ability to exercise significant influence over the investee are accounted for using the equity method of accounting. Certain of our equity method investments are detailed below.

NagraStar L.L.C.  We own a 50% interest in NagraStar L.L.C. (“NagraStar”), a joint venture that is our primary provider of encryption and related security systems intended to assure that only authorized customers have access to our programming.  The three main technologies NagraStar provides to its customers are microchips, set-top box software, and uplink computer systems. NagraStar also provides end-to-end platform security testing services.

Invidi Technologies Corporation.  We own a 35% interest in Invidi Technologies Corporation (“Invidi”), an entity that provides proprietary software for the addressable advertising market.  Invidi contracts with multichannel video programming distributers to include its software in their respective set-top boxes and DVRs in order to deliver targeted advertisements based on a variety of demographic attributes selected by the advertisers.  Invidi has also developed a cloud-based solution for internet protocol-based platforms.

We also hold investments that are not accounted for using the equity method of accounting, which are measured at fair value.  Investments in equity securities without readily determinable fair values are accounted for at cost, less impairment, and adjusted for observable price changes for identical or similar investments of the same issuer.

Our ability to realize value from our strategic investments in securities that are not publicly traded depends on, among other things, the success of the issuers’ businesses and their ability to obtain sufficient capital, on acceptable terms or at all, and to execute their business plans.  Because private markets are not as liquid as public markets, there is also increased risk that we will not be able to sell these investments, or that when we desire to sell them we will not be able to obtain fair value for them.

Fair Value Measurements

Our investments measured at fair value on a recurring basis were as follows:

	As of
	March 31, 2024								December 31, 2023
	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
	(In thousands)
Cash equivalents (including restricted)	$	136,678	$	107,317	$	29,361	$	—	$	347,976	$	304,410	$	43,566	$	—
Debt securities (including restricted):
U.S. Treasury and agency securities	$	8,013	$	8,013	$	—	$	—	$	7,567	$	7,567	$	—	$	—
Commercial paper		6,100		—		6,100		—		7,500		—		7,500		—
Corporate securities		7,527		—		7,527		—		4,705		—		4,705		—
Other		386		—		237		149		323		—		179		144
Equity securities		56		56		—		—		7,799		7,799		—		—
Total	$	22,082	$	8,069	$	13,864	$	149	$	27,894	$	15,366	$	12,384	$	144

As of March 31, 2024, restricted and non-restricted marketable investment securities included debt securities of $22 million with contractual maturities within one year. Actual maturities may differ from contractual maturities as a result of our ability to sell these securities prior to maturity.

Derivative Instruments

We had the option to purchase certain of T-Mobile’s 800 MHz spectrum licenses from T-Mobile at a fixed price pursuant to the License Purchase Agreement, as defined and detailed in our Annual Report on Form 10-K for the year ended December 31, 2023. This instrument met the definition of a derivative and was valued based upon, among other things, our estimate of the underlying asset price, the expected term, volatility, the risk free rate of return and the probability of us exercising the option. As of March 31, 2024 and December 31, 2023, the derivative’s fair value was zero on our Condensed Consolidated Balance Sheets. All changes in the derivative’s fair value were recorded in “Other, net” on our Condensed Consolidated Statements of Operations and Comprehensive Income (Loss). See the table below.

We did not exercise the option to purchase the 800 MHz spectrum licenses pursuant to the License Purchase Agreement, which expired on its own terms on April 1, 2024. As a result, the Amended Final Judgment, as defined and detailed in our Annual Report on Form 10-K for the year ended December 31, 2023, requires T-Mobile to auction the spectrum licenses. We expected to take part in this auction, but T-Mobile has unilaterally barred our participation.

We accounted for our option to purchase certain T-Mobile’s 800 MHz spectrum licenses under the License Purchase Agreement as a Level 3 instrument within the fair value hierarchy.

Gains and Losses on Sales and Changes in Carrying Amounts of Investments and Other

“Other, net” within “Other Income (Expense)” included on our Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) is as follows:

	For the Three Months Ended
	March 31,
Other, net:	2024		2023
	(In thousands)
Marketable and non-marketable investment securities - realized and unrealized gains (losses)	$	(870)	$	(308)
Sale of Assets to EchoStar - realized gains (losses)		128,788		—
Derivative instruments - net realized and/or unrealized gains (losses)		—		(28,961)
Gains (losses) related to early redemption of debt		—		49
Equity in earnings (losses) of affiliates		(708)		(1,451)
Other		132		150
Total	$	127,342	$	(30,521)