Telesat today announced its financial results for the three-month
period ended March 31, 2020. All amounts are in Canadian dollars
and reported under International Financial Reporting Standards
(“IFRS”) unless otherwise noted.
For the quarter ended March 31, 2020, Telesat
reported consolidated revenue of $209 million, a decrease of 6%
($14 million) compared to the same period in 2019. When adjusted
for changes in foreign exchange rates, revenue declined 5% ($12
million) compared to 2019. Revenue decreases were primarily due to
a reduction of service for one of Telesat’s North American DTH
customers and lower revenue due to the completion of the term for
prepaid services in a customer agreement that was accounted for as
having a significant financing component. These decreases were
partially offset by higher equipment sales and new revenue from
services provided to users impacted by a failure of a competitor’s
satellite in 2019.
Operating expenses for the quarter were $45
million, an increase of $6 million from 2019. Changes in foreign
exchange rates had no impact on operating expenses during the
quarter. Operating expenses, which consist of compensation and
employee benefits, other operating expenses, such as marketing,
general and administration expenses, and cost of sales, increased
because of a higher provision for bad debt, higher in-orbit
insurance expenses, higher professional fees, and higher
compensation expense. Adjusted EBITDA1 was $166 million, a decrease
of 11% ($21 million) or, when adjusted for foreign exchange rates,
a decrease of 10% ($19 million). The Adjusted EBITDA margin1 for
the first quarter of 2020 was 79.6%, compared to 84.2% in 2019.
For the quarter ended March 31, 2020, the net
loss was $278 million, compared to net income of $172 million for
2019. The negative variation for the quarter was principally the
result of non-cash foreign exchange losses in 2020, arising from
the translation of Telesat’s U.S. dollar denominated debt into
Canadian dollars compared to foreign exchange gains in 2019, and
non-cash losses on financial instruments in 2020 compared to gains
in 2019.
“Our first quarter results were consistent with
our expectations at the outset of the year, notwithstanding the
COVID-19 pandemic,” commented Dan Goldberg, Telesat’s President and
CEO. “Although we expect to face some headwinds from the pandemic
throughout the balance of this year and potentially beyond, we
believe that it will be principally from customers serving the
aeronautical and maritime markets, which we estimate (in the
aggregate) represented roughly just 10% of our total 2019 revenue.
Our focus at this time is to support our employees and customers
through the pandemic, ensuring that our staff is healthy and that
we continue to reliably and securely deliver the mission critical
services we provide. I am pleased with and grateful for the
tremendous work the Telesat team is doing in this regard and,
moreover, in the progress we continue to make on our signature
growth initiative, the development of our planned revolutionary Low
Earth Orbit (LEO) satellite constellation.”
Business Highlights
• At March 31, 2020:
- Telesat had contracted backlog2 for
future services of approximately $3.2 billion.
- Fleet utilization was 82% across
Telesat’s fleet.
• Repurposing of C-band
- On February 28, 2020, in the U.S.,
the FCC approved its Report and Order on Expanding Flexible use of
the 3.7 to 4.2 GHz Band, which Report and Order was released on
March 3, 2020. The Report and Order indicated that Telesat could
receive as much as US$344.4 million from the repurposing of C-band
Spectrum. There can be no assurance that Telesat will receive any
proceeds from the FCC process or, if it were to receive proceeds,
the amount or timing of receipt.
Telesat’s quarterly report on Form 6-K for the
quarter ended March 31, 2020, has been filed with the United States
Securities and Exchange Commission (“SEC”) and may be accessed on
the SEC’s website at www.sec.gov.
Conference Call
Telesat has scheduled a conference call on
Thursday, April 30, 2020, at 10:30 a.m. ET to discuss its financial
results for the three month period ended March 31, 2020. The
call will be hosted by Daniel S. Goldberg, President and Chief
Executive Officer, and Andrew Browne, Chief Financial Officer, of
Telesat.
Prior to the commencement of the call, Telesat
will post a news release containing its financial results on its
website (www.telesat.com) under the tab “Investor Relations” and
the heading “News”.
Dial-in Instructions:The toll-free dial-in
number for the teleconference is +1 800 309 1256. Callers
outside of North America should dial +1 647 792 1239. The access
code is 674688 followed by the number sign (#). Please allow
at least 15 minutes prior to the scheduled start time to connect to
the teleconference.
Dial-in Audio Replay:A replay of the
teleconference will be available one hour after the end of the call
on April 30, 2020 until 11:59 p.m. ET on May 14, 2020. To
access the replay, please call +1 800 408 3053. Callers
outside of North America should dial +1 905 694 9451. The
access code is 2151375 followed by the number sign (#).
About Telesat
Backed by a legacy of engineering excellence,
reliability and industry-leading customer service, Telesat has
grown to be one of the largest and most successful global satellite
operators. Telesat works collaboratively with its customers to
deliver critical connectivity solutions that tackle the world’s
most complex communications challenges, providing powerful
advantages that improve their operations and drive growth. Telesat
LEO, our Low Earth Orbit network scheduled to begin service in
2022, will revolutionize global broadband connectivity by
delivering a combination of high capacity, security, resiliency and
affordability with ultra-low latency and fiber-like speeds.
Privately held and headquartered in Ottawa,
Canada with offices and facilities around the world, Telesat’s
principal shareholders are Canada’s Public Sector Pension
Investment Board and Loral Space & Communications Inc. (NASDAQ:
LORL). For more information, visit www.telesat.com.
Contact: |
Michael BolithoTelesat+1.613.748.8828ir@telesat.com |
|
Forward-Looking Statements Safe Harbor
This news release contains statements that are
not based on historical fact and are ''forward-looking statements''
within the meaning of the Private Securities Litigation Reform Act
of 1995. When used in this news release, the words “expect”,
“looking ahead”, “continue”, “planned” and "will", or other
variations of these words or other similar expressions are intended
to identify forward-looking statements and information. Actual
results may differ materially from the expectations expressed or
implied in the forward-looking statements as a result of known and
unknown risks and uncertainties. Detailed information about some of
the known risks and uncertainties is included in the "Risk Factors"
sections of Telesat Canada's Annual Report on Form 20-F for the
fiscal year ended December 31, 2019 and in Telesat Canada’s
Quarterly Report on Form 6-K for the quarter ending March 31, 2020,
both of which can be obtained from the SEC website.
Known risks and uncertainties include but are
not limited to: risks associated with operating satellites and
providing satellite services, including satellite construction or
launch delays, launch failures, in-orbit failures or impaired
satellite performance, the impact of COVID-19 on
Telesat’s business and the economic environment, the ability to
successfully deploy an advanced global LEO satellite constellation,
the availability of government and/or other funding for the LEO
satellite constellation, the receipt of proceeds in relation to the
re-allocation of C-band spectrum, volatility in exchange rates, the
ability to expand our existing satellite utilization and risks
associated with domestic and foreign government regulation. The
foregoing list of important factors is not exhaustive. The
information contained in this news release reflects Telesat's
beliefs, assumptions, intentions, plans and expectations as of the
date of this news release. Except as required by law, Telesat
disclaims any obligation or undertaking to update or revise the
information herein.
Telesat CanadaUnaudited
Interim Condensed Consolidated Statements of (Loss) Income
For the three months ended March 31
(in thousands of Canadian dollars) |
|
2020 |
|
2019 |
|
|
|
|
|
|
|
|
|
Revenue |
|
$ |
208,673 |
|
|
$ |
222,313 |
|
Operating expenses |
|
|
(45,476 |
) |
|
|
(39,120 |
) |
Depreciation |
|
|
(55,607 |
) |
|
|
(62,291 |
) |
Amortization |
|
|
(4,311 |
) |
|
|
(5,664 |
) |
Other operating losses, net |
|
|
(221 |
) |
|
|
(73 |
) |
Operating income |
|
|
103,058 |
|
|
|
115,165 |
|
Interest expense |
|
|
(54,734 |
) |
|
|
(65,082 |
) |
Interest and other income |
|
|
4,252 |
|
|
|
4,675 |
|
(Loss) gain on changes in fair
value of financial instruments |
|
|
(43,772 |
) |
|
|
57,336 |
|
(Loss) gain on foreign
exchange |
|
|
(290,692 |
) |
|
|
70,340 |
|
(Loss) income before tax |
|
|
(281,888 |
) |
|
|
182,434 |
|
Tax recovery (expense) |
|
|
3,800 |
|
|
|
(10,534 |
) |
Net (loss) income
|
|
$ |
(278,088 |
) |
|
$ |
171,900 |
|
|
|
|
|
|
|
|
|
|
Telesat CanadaUnaudited Interim
Condensed Consolidated Balance Sheets
(in
thousands of Canadian dollars) |
|
March 31, 2020 |
|
December 31, 2019 |
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
1,204,670 |
|
$ |
1,027,222 |
Trade and other receivables |
|
|
61,497 |
|
|
64,062 |
Other current financial
assets |
|
|
634 |
|
|
210 |
Prepaid expenses and other
current assets |
|
|
38,755 |
|
|
43,724 |
Total current
assets |
|
|
1,305,556 |
|
|
1,135,218 |
Satellites, property and other
equipment |
|
|
1,464,795 |
|
|
1,458,933 |
Deferred tax assets |
|
|
13,437 |
|
|
12,412 |
Other long-term financial
assets |
|
|
35,022 |
|
|
57,730 |
Other long-term assets |
|
|
8,203 |
|
|
8,264 |
Intangible assets |
|
|
801,515 |
|
|
802,791 |
Goodwill |
|
|
2,446,603 |
|
|
2,446,603 |
Total
assets |
|
$ |
6,075,131 |
|
$ |
5,921,951 |
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
Trade and other payables |
|
$ |
32,327 |
|
$ |
26,247 |
Other current financial
liabilities |
|
|
64,167 |
|
|
38,281 |
Other current liabilities |
|
|
79,308 |
|
|
72,315 |
Current indebtedness |
|
|
26,416 |
|
|
24,408 |
Total current
liabilities |
|
|
202,218 |
|
|
161,251 |
Long-term indebtedness |
|
|
3,986,202 |
|
|
3,688,391 |
Deferred tax liabilities |
|
|
331,023 |
|
|
348,762 |
Other long-term financial
liabilities |
|
|
52,384 |
|
|
42,511 |
Other long-term liabilities |
|
|
434,224 |
|
|
435,711 |
Total
liabilities |
|
|
5,006,051 |
|
|
4,676,626 |
|
|
|
|
|
|
|
Shareholders'
Equity |
|
|
|
|
|
|
Share capital |
|
|
154,895 |
|
|
154,895 |
Accumulated earnings |
|
|
752,967 |
|
|
1,031,055 |
Reserves |
|
|
161,218 |
|
|
59,375 |
Total shareholders'
equity |
|
|
1,069,080 |
|
|
1,245,325 |
Total liabilities and
shareholders' equity |
|
$ |
6,075,131 |
|
$ |
5,921,951 |
|
|
|
|
|
|
|
Telesat CanadaUnaudited Interim
Condensed Consolidated Statements of Cash FlowsFor
the three months ended March 31
(in thousands of Canadian dollars) |
|
2020 |
|
2019 |
Cash flows from operating
activities |
|
|
|
|
|
|
Net (loss) income |
|
$ |
(278,088 |
) |
|
$ |
171,900 |
|
Adjustments to reconcile net
(loss) income to cash flows from operating activities |
|
|
|
|
|
|
Depreciation |
|
|
55,607 |
|
|
|
62,291 |
|
Amortization |
|
|
4,311 |
|
|
|
5,664 |
|
Tax (recovery) expense |
|
|
(3,800 |
) |
|
|
10,534 |
|
Interest expense |
|
|
54,734 |
|
|
|
65,082 |
|
Interest income |
|
|
(4,246 |
) |
|
|
(4,960 |
) |
Loss (gain) on foreign exchange |
|
|
290,692 |
|
|
|
(70,340 |
) |
Loss (gain) on changes in fair value of financial instruments |
|
|
43,772 |
|
|
|
(57,336 |
) |
Share-based compensation |
|
|
2,595 |
|
|
|
3,652 |
|
Loss on disposal of assets |
|
|
221 |
|
|
|
73 |
|
Other |
|
|
(15,147 |
) |
|
|
(27,402 |
) |
Income taxes paid, net of income
taxes received |
|
|
(10,906 |
) |
|
|
(30,958 |
) |
Interest paid, net of interest
received |
|
|
(33,759 |
) |
|
|
(31,320 |
) |
Operating assets and
liabilities |
|
|
2,524 |
|
|
|
21,427 |
|
Net cash from operating
activities |
|
|
108,510 |
|
|
|
118,307 |
|
|
|
|
|
|
|
|
Cash flows used in
investing activities |
|
|
|
|
|
|
Purchase for satellite
programs |
|
|
(888 |
) |
|
|
(1,669 |
) |
Purchase of property and other
equipment |
|
|
(647 |
) |
|
|
(3,215 |
) |
Purchase of intangible
assets |
|
|
(5 |
) |
|
|
(12,500 |
) |
Net cash used in
investing activities |
|
|
(1,540 |
) |
|
|
(17,384 |
) |
|
|
|
|
|
|
|
Cash flows used in
financing activities |
|
|
|
|
|
|
Repayment of indebtedness |
|
|
(6,397 |
) |
|
|
(7,717 |
) |
Payments of principal on lease
liabilities |
|
|
(346 |
) |
|
|
(287 |
) |
Satellite performance incentive
payments |
|
|
(1,765 |
) |
|
|
(2,407 |
) |
Dividends paid on Director Voting
preferred shares |
|
|
— |
|
|
|
(10 |
) |
Government grant received |
|
|
4,009 |
|
|
|
— |
|
Net cash used in
financing activities |
|
|
(4,499 |
) |
|
|
(10,421 |
) |
|
|
|
|
|
|
|
|
|
Effect of changes in exchange
rates on cash and cash equivalents |
|
|
74,977 |
|
|
|
(12,534 |
) |
|
|
|
|
|
|
|
|
|
Increase in cash and cash
equivalents |
|
|
177,448 |
|
|
|
77,968 |
|
Cash and cash equivalents,
beginning of period |
|
|
1,027,222 |
|
|
|
768,433 |
|
Cash and cash
equivalents, end of period |
|
$ |
1,204,670 |
|
|
$ |
846,401 |
|
|
|
|
Telesat’s Adjusted EBITDA margin(1):
|
|
Three months ended March 31, |
(in thousands of Canadian dollars) (unaudited) |
|
2020 |
|
2019 |
|
|
|
|
|
|
|
Net (loss) income |
|
$ |
(278,088 |
) |
|
$ |
171,900 |
|
Tax (recovery) expense |
|
|
(3,800 |
) |
|
|
10,534 |
|
Loss (gain) on changes in fair
value of financial instruments |
|
|
43,772 |
|
|
|
(57,336 |
) |
Loss (gain) loss on foreign
exchange |
|
|
290,692 |
|
|
|
(70,340 |
) |
Interest and other income |
|
|
(4,252 |
) |
|
|
(4,675 |
) |
Interest expense |
|
|
54,734 |
|
|
|
65,082 |
|
Depreciation |
|
|
55,607 |
|
|
|
62,291 |
|
Amortization |
|
|
4,311 |
|
|
|
5,664 |
|
Other operating losses, net |
|
|
221 |
|
|
|
73 |
|
Non-recurring compensation
expenses(3) |
|
|
360 |
|
|
|
411 |
|
Non-cash expense related to
share-based compensation |
|
|
2,595 |
|
|
|
3,652 |
|
Adjusted
EBITDA |
|
$ |
166,152 |
|
|
$ |
187,256 |
|
|
|
|
|
|
|
|
Revenue |
|
$ |
208,673 |
|
|
$ |
222,313 |
|
|
|
|
|
|
|
|
Adjusted EBITDA
Margin |
|
|
79.6 |
% |
|
|
84.2 |
% |
|
|
|
|
|
|
|
End Notes
1 The common definition of EBITDA is “Earnings
Before Interest, Taxes, Depreciation and Amortization.” In
evaluating financial performance, Telesat uses revenue and deducts
certain operating expenses (including share-based compensation
expense and unusual and non-recurring items, including
restructuring related expenses) to obtain operating income before
interest expense, taxes, depreciation and amortization (“Adjusted
EBITDA”) and the Adjusted EBITDA margin (defined as the ratio of
Adjusted EBITDA to revenue) as measures of Telesat’s operating
performance.
Adjusted EBITDA allows Telesat and investors to
compare Telesat’s operating results with that of competitors
exclusive of depreciation and amortization, interest and investment
income, interest expense, taxes and certain other expenses.
Financial results of competitors in the satellite services industry
have significant variations that can result from timing of capital
expenditures, the amount of intangible assets recorded, the
differences in assets’ lives, the timing and amount of investments,
the effects of other income (expense), and unusual and
non-recurring items. The use of Adjusted EBITDA assists Telesat and
investors to compare operating results exclusive of these items.
Competitors in the satellite services industry have significantly
different capital structures. Telesat believes the use of Adjusted
EBITDA improves comparability of performance by excluding interest
expense.
Telesat believes the use of Adjusted EBITDA and
the Adjusted EBITDA margin along with IFRS financial measures
enhances the understanding of Telesat’s operating results and is
useful to Telesat and investors in comparing performance with
competitors, estimating enterprise value and making investment
decisions. Adjusted EBITDA as used here may not be the same as
similarly titled measures reported by competitors. Adjusted EBITDA
should be used in conjunction with IFRS financial measures and is
not presented as a substitute for cash flows from operations as a
measure of Telesat’s liquidity or as a substitute for net income as
an indicator of Telesat’s operating performance.
2 Remaining performance obligations, which we
refer to as contracted revenue backlog, represents Telesat’s
expected future revenue from existing service contracts (without
discounting for present value) including any deferred revenue that
Telesat will recognize in the future in respect of cash already
received. The majority of Telesat’s contracted revenue backlog is
generated from contractual agreements for satellite capacity.
3 Includes severance payments and special compensation and
benefits for executives and employees.
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