Telesat today announced its financial results for the three and
nine-month periods ended September 30, 2020. All amounts are in
Canadian dollars and reported under International Financial
Reporting Standards (“IFRS”) unless otherwise noted.
For the quarter ended September 30, 2020,
Telesat reported consolidated revenue of $202 million, a decrease
of 15% ($35 million) compared to the same period in 2019. When
adjusted for changes in foreign exchange rates, revenue declined
14% ($34 million) compared to 2019. The revenue decrease was due to
short-term services provided to another satellite operator in the
third quarter of 2019 that did not recur in 2020, 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. In addition, the restructuring of certain
customer contracts related to the COVID 19 pandemic negatively
impacted revenue.
Operating expenses for the quarter were $42
million, an increase of $4 million from 2019. Increased expenses
primarily consisted of higher professional fees and licensing fees
combined with higher wage expense, which was the result of
increased hiring to support Telesat’s Low Earth Orbit (“LEO”)
program.
Adjusted EBITDA1 was $162 million, a decrease of
20% ($41 million) or, when adjusted for foreign exchange rates, a
decrease of $40 million. The Adjusted EBITDA margin1 for the third
quarter of 2020 was 80.4%, compared to 85.7% in 2019.
For the quarter ended September 30, 2020, net
income was $107 million, compared to net loss of $123 million for
2019. The positive variation for the quarter was principally the
result of non-cash gains on the fair value of financial instruments
in 2020, non-cash foreign exchange gains in 2020 arising from the
translation of Telesat’s U.S. dollar denominated debt into Canadian
dollars and lower interest expense.
For the nine-month period ended September 30,
2020, Telesat reported consolidated revenue of $619 million, a
decrease of 10% ($72 million) compared to the same period in 2019.
Revenue decreases were 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.
In addition, revenue associated with short-term services provided
to other satellite operators in 2019 did not recur in 2020.
Operating expenses for the nine-month period
were $134 million, an increase of $19 million from 2019. The
increase is substantially attributable to compensation and
professional fees associated with the LEO program, provision for
bad debts as previously disclosed and higher in-orbit insurance.
Adjusted EBITDA1 was $493 million, a decrease of
16% ($95 million) or, when adjusted for foreign exchange rates, a
decrease of $93 million. The Adjusted EBITDA margin1 for the first
nine months of 2020 was 79.7%, compared to 85.1% in 2019.
For the nine months ended September 30, 2020,
net loss was $9 million, compared to net income of $185 million for
2019. The negative variation for the period 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, offset
by lower interest expense, smaller losses on changes in the fair
value of financial instruments, and lower taxes.
“Our reduced revenue and Adjusted EBITDA1 over
the first three quarters of this year relative to the prior period
are the result of a number of factors that we have disclosed
previously, including the non-renewal late last year of a North
American DTH contract, the end of the revenue amortization period
of another contract, a dearth of opportunities for the provision of
short-term satellite services, and the adverse impact of COVID-19
on our customers providing broadband to the aeronautical and
maritime markets,” commented Dan Goldberg, Telesat’s President and
CEO. “Having said that, the overwhelming majority of our revenues
has been unaffected by the pandemic and we continue to have robust
operating margins and cash flow, which are underpinned by our
significant contractual backlog. In addition, we are making
substantial progress on the development of our revolutionary LEO
satellite constellation as well as our other strategic objectives,
including leveraging our valuable spectrum rights.”
Business Highlights
- At September 30, 2020:- Telesat had
contracted backlog2 for future services of approximately $2.8
billion.- Fleet utilization was 81%.
Telesat’s quarterly report on Form 6-K for the
quarter ended September 30, 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, October 29, 2020, at 10:30 a.m. ET to discuss its
financial results for the three and nine-month periods ended
September 30, 2020. The call will be hosted by Daniel S. Goldberg,
President and Chief Executive Officer, and Andrew Browne, Chief
Financial Officer, of Telesat.
The toll-free dial-in number for the
teleconference is +1 800 952 5114. Callers outside of North America
should dial +1 416 641 6104. The conference event service
confirmation number is: 4342827. The access code is 9600987
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 October 29, 2020 until 11:59 p.m. ET on November 12, 2020. To
access the replay, please call +1 800 408 3053. Callers from
outside North America should dial +1 905 694 9451. The access code
is 5616479 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 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.
Media 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 “making
progress”, “continuing”, and “development", 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 quarters ending March 31, 2020, June 30, 2020, and
September 30, 2020, all 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
Canada |
|
|
|
|
|
|
Unaudited
Interim Condensed Consolidated Statements of Income
(Loss) |
For the
periods ended September
30 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months |
|
|
|
Nine Months |
|
(in thousands of Canadian dollars) |
|
|
2020 |
|
|
|
2019 |
|
|
|
2020 |
|
|
|
2019 |
|
|
Revenue |
|
$ |
202,053 |
|
|
$ |
237,117 |
|
|
$ |
618,560 |
|
|
$ |
690,729 |
|
|
Operating
expenses |
|
|
(42,185 |
) |
|
|
(37,798 |
) |
|
|
(133,712 |
) |
|
|
(114,871 |
) |
|
Depreciation |
|
|
(55,597 |
) |
|
|
(62,406 |
) |
|
|
(166,819 |
) |
|
|
(187,281 |
) |
|
Amortization |
|
|
(4,289 |
) |
|
|
(6,430 |
) |
|
|
(12,906 |
) |
|
|
(18,536 |
) |
|
Other operating
losses, net |
|
|
(34 |
) |
|
|
(60 |
) |
|
|
(246 |
) |
|
|
(147 |
) |
|
Operating
income |
|
|
99,948 |
|
|
|
130,423 |
|
|
|
304,877 |
|
|
|
369,894 |
|
|
Interest
expense |
|
|
(50,116 |
) |
|
|
(63,897 |
) |
|
|
(155,917 |
) |
|
|
(194,169 |
) |
|
Interest and other
income |
|
|
875 |
|
|
|
5,514 |
|
|
|
6,667 |
|
|
|
15,490 |
|
|
Gain (loss) on
changes in fair value of financial instruments |
5,715 |
|
|
|
(144,524 |
) |
|
|
(38,884 |
) |
|
|
(64,361 |
) |
|
Gain (loss) on
foreign exchange |
|
|
66,334 |
|
|
|
(30,351 |
) |
|
|
(99,088 |
) |
|
|
98,427 |
|
|
Income (loss)
before tax |
|
|
122,756 |
|
|
|
(102,835 |
) |
|
|
17,655 |
|
|
|
225,281 |
|
|
Tax expense |
|
|
(15,736 |
) |
|
|
(19,845 |
) |
|
|
(27,100 |
) |
|
|
(40,592 |
) |
|
Net income
(loss) |
|
$ |
107,020 |
|
|
$ |
(122,680 |
) |
|
$ |
(9,445 |
) |
|
$ |
184,689 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telesat
Canada |
|
|
|
|
|
|
Unaudited
Interim Condensed Consolidated Balance Sheets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in
thousands of Canadian dollars) |
|
September 30,
2020 |
|
December 31, 2019 |
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
Cash and cash
equivalents |
|
$ |
1,242,315 |
|
$ |
1,027,222 |
|
Trade and other
receivables |
|
|
61,136 |
|
|
64,062 |
|
Other current
financial assets |
|
|
562 |
|
|
210 |
|
Prepaid expenses
and other current assets |
|
|
12,654 |
|
|
43,724 |
|
Total
current assets |
|
|
1,316,667 |
|
|
1,135,218 |
|
Satellites,
property and other equipment |
|
|
1,387,115 |
|
|
1,458,933 |
|
Deferred tax
assets |
|
|
15,018 |
|
|
12,412 |
|
Other long-term
financial assets |
|
|
31,810 |
|
|
57,730 |
|
Other long-term
assets |
|
|
7,921 |
|
|
8,264 |
|
Intangible
assets |
|
|
786,409 |
|
|
802,791 |
|
Goodwill |
|
|
2,446,603 |
|
|
2,446,603 |
|
Total
assets |
|
$ |
5,991,543 |
|
$ |
5,921,951 |
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
Trade and other
payables |
|
$ |
21,992 |
|
$ |
26,247 |
|
Other current
financial liabilities |
|
|
61,901 |
|
|
38,281 |
|
Other current
liabilities |
|
|
93,133 |
|
|
72,315 |
|
Current
indebtedness |
|
|
24,974 |
|
|
24,408 |
|
Total
current liabilities |
|
|
202,000 |
|
|
161,251 |
|
Long-term
indebtedness |
|
|
3,763,119 |
|
|
3,688,391 |
|
Deferred tax
liabilities |
|
|
320,477 |
|
|
348,762 |
|
Other long-term
financial liabilities |
|
|
37,290 |
|
|
42,511 |
|
Other long-term
liabilities |
|
|
401,436 |
|
|
435,711 |
|
Total
liabilities |
|
|
4,724,322 |
|
|
4,676,626 |
|
|
|
|
|
|
|
|
|
Shareholders' Equity |
|
|
|
|
|
Share capital |
|
|
154,895 |
|
|
154,895 |
|
Accumulated
earnings |
|
|
1,021,610 |
|
|
1,031,055 |
|
Reserves |
|
|
90,716 |
|
|
59,375 |
|
Total
shareholders' equity |
|
|
1,267,221 |
|
|
1,245,325 |
|
Total
liabilities and shareholders' equity |
$ |
5,991,543 |
|
$ |
5,921,951 |
|
|
|
|
|
|
|
|
Telesat
Canada |
|
|
|
|
Unaudited
Interim Condensed Consolidated Statements of Cash
Flows |
For
the nine months ended
September 30 |
|
|
|
|
|
|
|
|
|
|
(in
thousands of Canadian dollars) |
|
2020 |
|
|
2019 |
|
Cash flows
from operating activities |
|
|
|
|
|
|
Net (loss)
income |
|
$ |
(9,445 |
) |
|
$ |
184,689 |
|
Adjustments to
reconcile net (loss) income to cash flows from operating
activities |
|
|
|
|
|
|
|
Depreciation |
|
|
166,819 |
|
|
|
187,281 |
|
|
Amortization |
|
|
12,906 |
|
|
|
18,536 |
|
|
Tax expense |
|
|
27,100 |
|
|
|
40,592 |
|
|
Interest expense |
|
|
155,917 |
|
|
|
194,169 |
|
|
Interest income |
|
|
(6,761 |
) |
|
|
(15,573 |
) |
|
Loss (gain) on
foreign exchange |
|
|
99,088 |
|
|
|
(98,427 |
) |
|
Loss on changes in
fair value of financial instruments |
|
|
38,884 |
|
|
|
64,361 |
|
|
Share-based
compensation |
|
|
7,160 |
|
|
|
10,548 |
|
|
Loss on disposal of
assets |
|
|
246 |
|
|
|
147 |
|
|
Other |
|
|
(45,474 |
) |
|
|
(84,298 |
) |
Income taxes paid,
net of income taxes received |
|
|
(35,221 |
) |
|
|
(64,064 |
) |
Interest paid, net of
interest received |
|
|
(120,576 |
) |
|
|
(124,744 |
) |
Operating assets and
liabilities |
|
|
9,046 |
|
|
|
(13,029 |
) |
Net cash from
operating activities |
|
|
299,689 |
|
|
|
300,188 |
|
|
|
|
|
|
|
|
Cash flows
used in investing activities |
|
|
|
|
|
|
Purchases for
satellite programs |
|
|
(64,810 |
) |
|
|
(2,950 |
) |
Purchase of property
and other equipment |
|
|
(13,235 |
) |
|
|
(6,377 |
) |
Purchase of
intangible assets |
|
|
(30 |
) |
|
|
(27,518 |
) |
Net cash used
in investing activities |
|
|
(78,075 |
) |
|
|
(36,845 |
) |
|
|
|
|
|
|
|
Cash flows
used in financing activities |
|
|
|
|
|
|
Repayment of
indebtedness |
|
|
(19,197 |
) |
|
|
(23,436 |
) |
Payments of principal
on lease liabilities |
|
|
(1,215 |
) |
|
|
(913 |
) |
Satellite performance
incentive payments |
|
|
(6,877 |
) |
|
|
(7,349 |
) |
Government grant
received |
|
|
6,120 |
|
|
|
— |
|
Dividends paid on
Director Voting preferred shares |
|
|
— |
|
|
|
(10 |
) |
Net cash used
in financing activities |
|
|
(21,169 |
) |
|
|
(31,708 |
) |
|
|
|
|
|
|
|
|
Effect of changes in
exchange rates on cash and cash equivalents |
|
|
14,648 |
|
|
|
(21,718 |
) |
|
|
|
|
|
|
|
|
Increase in cash and
cash equivalents |
|
|
215,093 |
|
|
|
209,917 |
|
Cash and cash
equivalents, beginning of period |
|
|
1,027,222 |
|
|
|
768,433 |
|
Cash and cash
equivalents, end of period |
|
$ |
1,242,315 |
|
|
$ |
978,350 |
|
|
|
|
|
|
|
|
Telesat’s Adjusted EBITDA margin(1):
|
|
Three months ended September
30, |
|
Nine months ended
September 30, |
(in thousands of Canadian dollars) (unaudited) |
|
2020 |
|
|
2019 |
|
|
2020 |
|
|
2019 |
|
Net income (loss) |
|
$ |
107,020 |
|
|
$ |
(122,680 |
) |
|
$ |
(9,445 |
) |
|
$ |
184,689 |
|
Tax expense |
|
|
15,736 |
|
|
|
19,845 |
|
|
|
27,100 |
|
|
|
40,592 |
|
(Gain) loss on changes in fair value of financial instruments |
|
|
(5,715 |
) |
|
|
144,524 |
|
|
|
38,884 |
|
|
|
64,361 |
|
(Gain) loss on foreign exchange |
|
|
(66,334 |
) |
|
|
30,351 |
|
|
|
99,088 |
|
|
|
(98,427 |
) |
Interest and other income |
|
|
(875 |
) |
|
|
(5,514 |
) |
|
|
(6,667 |
) |
|
|
(15,490 |
) |
Interest expense |
|
|
50,116 |
|
|
|
63,897 |
|
|
|
155,917 |
|
|
|
194,169 |
|
Depreciation |
|
|
55,597 |
|
|
|
62,406 |
|
|
|
166,819 |
|
|
|
187,281 |
|
Amortization |
|
|
4,289 |
|
|
|
6,430 |
|
|
|
12,906 |
|
|
|
18,536 |
|
Other operating losses, net |
|
|
34 |
|
|
|
60 |
|
|
|
246 |
|
|
|
147 |
|
Non-recurring compensation expenses(3) |
|
|
252 |
|
|
|
376 |
|
|
|
876 |
|
|
|
1,080 |
|
Non-cash expense related to share-based compensation |
|
|
2,275 |
|
|
|
3,440 |
|
|
|
7,160 |
|
|
|
10,548 |
|
Adjusted EBITDA |
|
$ |
162,395 |
|
|
$ |
203,135 |
|
|
$ |
492,884 |
|
|
$ |
587,486 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
$ |
202,053 |
|
|
$ |
237,117 |
|
|
$ |
618,560 |
|
|
$ |
690,729 |
|
Adjusted EBITDA Margin |
|
|
80.4 |
% |
|
|
85.7 |
% |
|
|
79.7 |
% |
|
|
85.1 |
% |
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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