Stock-Based Compensation

12 Months Ended

Dec. 31, 2024

11.Stock-Based Compensation

Stock Incentive Plans

EchoStar maintains stock incentive plans to attract and retain officers, directors and key employees. Our employees participate in the EchoStar stock incentive plans. Stock awards under these plans include both performance and non-performance based stock incentives. Many of our employees work on projects associated with our business and projects associated with EchoStar’s business and other operations of EchoStar. Stock options, restricted stock units and non-cash stock-based compensation expense are included below only for employees who devote 50% or more of their time to our business. For each employee, a change in status in relation to the 50% threshold is reflected as a transfer to or from another EchoStar subsidiary that is not part of DISH DBS. As of December 31, 2024, EchoStar had outstanding under these plans stock options to acquire 3.1 million shares of EchoStar’s Class A common stock and 91 thousand restricted stock units and awards associated with our employees. Stock options granted on or prior to December 31, 2024 were granted with exercise prices equal to or greater than the market value of EchoStar’s Class A common stock at the date of grant and with a maximum term of approximately ten years. EchoStar accounts for forfeitures as they are incurred. While historically EchoStar has issued stock awards subject to vesting, typically at the rate of 20% per year, certain stock awards have been granted with immediate vesting and certain other stock awards vest only upon the achievement of certain EchoStar-specific subscriber, operational and/or financial goals. As of December 31, 2024, EchoStar had 21.7 million shares of its Class A common stock available for future grant under the stock incentive plans.

Exchange Offer. On March 4, 2024, EchoStar commenced a tender offer to eligible employees to exchange eligible stock options for new options as detailed in its Schedule TO filed March 4, 2024 with the Securities and Exchange Commission (the “Exchange Offer”), to, among other things, further align employee incentives with the current market. The Exchange Offer expired on April 1, 2024 and EchoStar accepted for exchange approximately 7 million stock options. As a result of the Exchange Offer, during the second quarter of 2024, the exercise price of approximately 3 million new stock options associated with our employees, affecting approximately 580 eligible employees, was adjusted to $14.04.

Stock Award Activity

EchoStar stock option activity associated with our employees was as follows:


	For the Year Ended December 31, 2024
	Options	Weighted- Average Exercise Price		Aggregate Intrinsic Value (In thousands)		Weighted-Average Remaining Contractual Life
Total options outstanding, beginning of period (1)	3,288,033	$	65.81
Granted (2)	2,568,496	$	14.23
Exercised	(91,701)	$	14.04
Forfeited, cancelled and transferred (3)(4)	(2,658,428)	$	53.12
Total options outstanding, end of period	3,106,400	$	35.52	$	—	7.71
Performance-based options outstanding, end of period (5)	576,696	$	104.17
Exercisable at end of period	743,045	$	32.90	$	—	6.22

(1)	The beginning of period weighted-average exercise price for the year ended December 31, 2024 of $65.81 does not reflect the Exchange Offer, which occurred subsequent to December 31, 2023.

(2)	Includes approximately 3 million stock options granted in connection with the Exchange Offer.

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

(4)	Certain of these stock options include options that were granted to individuals who transferred to and/or from another EchoStar subsidiary not a part of DISH DBS.

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

We realized tax benefits from stock awards exercised as follows:


	For the Years Ended December 31,
	2024		2023		2022

	(In thousands)
Tax benefit from stock awards exercised	$	152	$	871	$	206

EchoStar restricted stock unit and award activity associated with our employees was as follows:


	For the Year Ended December 31, 2024
	Restricted Stock Units/Awards	Weighted-Average Grant Date Fair Value
Total restricted stock units/awards outstanding, beginning of period	3,978	$	120.95
Granted	74,375	$	16.59
Vested	(16,291)	$	81.84
Forfeited, cancelled and transferred (1)	29,166	$	93.53
Total restricted stock units/awards outstanding, end of period	91,228	$	34.08

(1)	Certain of these restricted stock units/awards include restricted stock units/awards that were granted to individuals who transferred to and/or from another EchoStar subsidiary not a part of DISH DBS.

The following table summarizes additional information about EchoStar stock options and restricted stock units and awards associated with our employees:


	For the Years Ended December 31,
	2024		2023		2022

	(In thousands, except per share amounts)
Stock options:
Weighted-average grant date fair value of options granted	$	14.23	$	34.42	$	66.92
Intrinsic value of options exercised	$	643	$	—	$	61

Restricted stock units and awards:
Weighted-average grant date fair value of units and awards granted	$	16.59	$	17.18	$	84.56
Fair value of units and rewards vested	$	235	$	4,030	$	874

Long-Term Performance-Based Plans

2017 LTIP. On December 2, 2016, EchoStar adopted a long-term, performance-based stock incentive plan (the “2017 LTIP”). The 2017 LTIP provided stock options, which were subject to vesting based on certain EchoStar-specific subscriber and financial performance conditions. Awards were initially granted under the 2017 LTIP as of January 1, 2017. Exercise of the stock awards was contingent on achieving these performance conditions by December 31, 2020, however, none of the performance conditions were achieved. This plan will expire on January 1, 2027 which as of December 31, 2024, would result in the cancellation of 297,645 stock options.

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

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

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

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

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

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

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


	For the Years Ended December 31,
Non-Cash, Stock-Based Compensation Expense Recognized (1)	2024		2023		2022

	(In thousands)
2022 Incentive Plan	$	1,151	$	5,573	$	15,024
2019 LTIP		—		(1,631)		(131)
Other employee performance awards		—		281		3,711
Total non-cash, stock-based compensation expense recognized for performance-based awards	$	1,151	$	4,223	$	18,604

(1)

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


Estimated Remaining Non-Cash, Stock-Based Compensation Expense	2022 Incentive Plan

	(In thousands)
Expense estimated to be recognized during 2025	$	1,087
Estimated contingent expense subsequent to 2025		161
Total estimated remaining expense over the term of the plan	$	1,248

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

Of the 3.1 million stock options and 91 thousand restricted stock units and awards outstanding under the EchoStar stock incentive plans associated with our employees as of December 31, 2024, the following awards were outstanding pursuant to the performance based stock incentive plans:


	As of December 31, 2024
Performance-Based Stock Options	Number of Awards	Weighted-Average Grant Price
2022 Incentive Plan	115,730	$	14.67
2019 LTIP	163,321	$	59.22
2017 LTIP	297,645	$	163.64
Total	576,696	$	104.17

Stock-Based Compensation

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


	For the Years Ended December 31,
	2024		2023		2022

	(In thousands)
Cost of services	$	1,155	$	2,240	$	5,817
Selling, general and administrative		10,006		12,018		34,915
Total non-cash, stock-based compensation	$	11,161	$	14,258	$	40,732

As of December 31, 2024, our total unrecognized compensation cost related to the non-performance based unvested stock awards was $26 million and will be recognized over a weighted-average period of approximately 3.3 years. Share-based compensation expense is recognized based on stock awards ultimately expected to vest.

Valuation

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


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

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

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

DISH DBS CORP 10-K