- First quarter revenue of $528.4
million
- First quarter net loss attributable to
Intelsat S.A. of $120.6 million
- First quarter Adjusted EBITDA of $380.3
million or 72 percent of revenue
- March 31, 2019 contracted backlog of
$7.9 billion
- 2019 Financial Guidance Updated for
Financial Impact of Intelsat 29e Satellite Failure
Intelsat S.A. (NYSE:I), operator of the world’s first Globalized
Network and leader in integrated satellite solutions, today
announced financial results for the three months ended
March 31, 2019.
In the first quarter of 2018, we adopted the provisions of the
Financial Accounting Standards Board Accounting Standards
Codification Topic 606, Revenue from Contracts with Customers (“ASC
606”). All financial results presented in our first quarter 2019
quarterly report are presented on a comparable basis to 2018
reported results, unless noted otherwise.
Intelsat reported total revenue of $528.4 million and net loss
attributable to Intelsat S.A. of $120.6 million for the three
months ended March 31, 2019.
Intelsat reported EBITDA1, or earnings before net interest, gain
on early extinguishment of debt, taxes and depreciation and
amortization, of $372.8 million and Adjusted EBITDA1 of $380.3
million, or 72 percent of revenue, for the three months ended
March 31, 2019. Free cash flow from operations1 was $24.0
million.
Intelsat’s Chief Executive Officer, Stephen Spengler, said, “In
the first quarter of 2019, we built momentum on our managed
services strategy, which addresses new requirements in the markets
we serve. We accelerated our deployment of managed services for
enterprise, aeronautical and maritime applications. In the past
weeks, we introduced new hybrid services for our media customers
that seamlessly integrate satellite services with cloud-based
solutions. Each of these managed solutions leverages the global
reach of our fleet and addresses our customers’ needs for efficient
and flexible connectivity.”
Spengler concluded, “In the past month we increased the
transparency and provided more details of the C-Band Alliance
proposal under the U.S. Federal Communications Commission C-band
proceeding. We are collaborating with a number of the stakeholders
in the proceeding, gaining consensus so that we can deliver to the
FCC a market-based approach which is clearly recognized as the best
path to protecting incumbents, while repurposing spectrum that will
accelerate 5G deployment and innovation in the U.S.”
First Quarter 2019 Business Highlights
Intelsat provides critical communications infrastructure to
customers in the network services, media and government sectors.
Our customers use our services for broadband connectivity to
deliver fixed and mobile telecommunications, enterprise, video
distribution and fixed and mobile government applications. For
additional details regarding the performance of our customer sets,
see our Quarterly Commentary, available on our website.
Network Services
Network services revenue was $204.3 million (or 39 percent of
Intelsat’s total revenue) for the three months ended March 31,
2019, an increase of 3 percent compared to the three months ended
March 31, 2018. This increase reflects $14.3 million in
accelerated revenue associated with hardware supplied and
third-party services under a long-term contract subject to
Accounting Standards Codification 842, Leases (“ASC 842”).
Media
Media revenue was $226.0 million (or 43 percent of Intelsat’s
total revenue) for the three months ended March 31, 2019, a
decrease of 6 percent compared to the three months ended
March 31, 2018.
Government
Government revenue was $93.2 million (or 17 percent of
Intelsat’s total revenue) for the three months ended March 31,
2019, a decrease of 4 percent compared to the three months ended
March 31, 2018.
Average Fill Rate
Intelsat’s average fill rate at March 31, 2019 on our
approximately 1,750 36 MHz station-kept wide-beam transponders was
78 percent, as compared to an average fill rate at December 31,
2018 of 78 percent on 1,775 transponders. In addition, at March 31,
2019 our fleet included approximately 1,475 36 MHz units of
high-throughput Intelsat EpicNG capacity, as compared to 1,150
units at December 31, 2018, reflecting the entry into service of
Horizons 3e. Please see Recent Events, below, for more detail
regarding transponder trends following the loss of our Intelsat 29e
satellite.
Satellite Launches
Intelsat conducted no satellite launches in the first quarter of
2019. The Horizons 3e satellite, Intelsat’s joint venture satellite
with Japan’s leading satellite operator, SKY Perfect JSAT
Corporation, entered service in January 2019. Horizons 3e provides
over 30 Gbps of incremental throughput to Intelsat’s fleet,
completing the initial buildout of the Intelsat EpicNG global
high-throughput network with service coverage in the Asia-Pacific
region. Intelsat 38, a satellite carrying replacement capacity for
direct-to-home platforms serving Central and Eastern Europe as well
as the Asia-Pacific region, also entered service in January 2019.
For additional details regarding our satellite investment program
and 2019 planned satellite launches, see our Quarterly
Commentary.
Contracted Backlog
At March 31, 2019, Intelsat’s contracted backlog,
representing expected future revenue under existing contracts with
customers, was $7.9 billion, as compared to $8.1 billion at
December 31, 2018.
C-band Proceeding at the U.S. Federal Communications
Commission (“FCC”)
The C-Band Alliance (“CBA”), of which Intelsat is a founding
member, submitted two significant filings in response to the Notice
of Proposed Rule Making (“NPRM”) issued by the FCC, GN Docket No.
18-122. On April 3, 2019, Intelsat and CBA partner SES filed a
customer commitment letter, detailing customer transition
commitments from the CBA, including costs to be funded by the CBA,
should its proposal for spectrum clearing be adopted by the FCC. On
April 9, 2019, the CBA filed its Transition Implementation Plan for
safely migrating all current services into a reduced spectrum
allocation. For additional details regarding our activities on our
proposal to the FCC, see our Quarterly Commentary, available on our
website.
Recent Events: Intelsat 29e Satellite Failure
On April 7, 2019, the Intelsat 29e satellite propulsion system
experienced damage that caused a leak of the propellant on board
the satellite, resulting in a service disruption to customers on
the satellite. Efforts to recover the satellite were unsuccessful.
We have provided migration paths for the majority of the services
on the satellite, with traffic being transitioned to other Intelsat
capacity as well as third-party services.
As a result of the loss of the satellite, in the second quarter
of 2019 Intelsat expects to record an impairment to asset charge of
approximately $400 million. The impact on our 2019 financial
guidance is discussed below in Financial Outlook 2019 and in our
Quarterly Commentary.
Financial Results for the Three Months Ended March 31,
2019
Total revenue for the three months ended March 31,
2019 decreased by $15.3 million to $528.4 million, or a decrease of
3 percent as compared to the three months ended March 31,
2018. By service type, our revenues increased or decreased due to
the following:
Total On-Network Revenues decreased by $26.4 million, or
5 percent, to $471.2 million as compared to the three months ended
March 31, 2018 due to the following:
- Transponder services reported an
aggregate decrease of $18.4 million, primarily due to a
$12.7 million decrease in revenue from media customers and a
$6.0 million decrease in revenue from network services customers.
The decrease in media revenue was primarily related to non-renewals
and volume reductions from certain customers in the North America,
Latin America and Africa regions for distribution applications. The
decrease in network services revenue was mainly related to declines
for wide-beam wireless infrastructure and enterprise services due
to non-renewals and service contractions in the Latin America
region and for Europe to Africa connectivity. These declines were
partially offset by increases for maritime and aeronautical
mobility applications and revenue from new service starts for
wireless customers in the Asia-Pacific region.
- Managed services reported an
aggregate decrease of $7.5 million, primarily due to a decrease
of$3.8 million in revenue from government customers resulting from
non-renewals and lower pricing related to 2018 contract renewals,
and a $2.9 million decrease in revenue from network services
customers driven by declines for mobility broadband solutions and
point-to-point trunking applications, which were partially offset
by $1.8 million in net increases in revenue from managed mobility
services.
Total Off-Network and Other Revenues increased by $11.1
million, or 24 percent, to $57.3 million, as compared to the three
months ended March 31, 2018 due to the following:
- Transponder, MSS and other
Off-Network services revenues increased by an aggregate of
$14.9 million to $49.9 million, inclusive of $14.3 million in
revenue recognized in the first quarter of 2019 from a network
services customer as a result of the adoption of ASC 842, with no
comparable amount in the first quarter of 2018.
- Satellite-related services
reported a decrease of $3.8 million, to $7.4 million, due to the
completion of a contract for professional services supporting
third-party satellite operations in the first quarter of 2018 with
no similar contracts completed in the first quarter of 2019.
For the three months ended March 31, 2019, changes in operating
expenses, interest expense, net, and other significant income
statement items are described below.
Direct costs of revenue (excluding depreciation and
amortization) increased by $22.8 million, or 28 percent, to
$105.4 million for the three months ended March 31, 2019, as
compared to the three months ended March 31, 2018. The
increase was primarily due to $16.1 million in equipment and
third-party service costs recognized in the first quarter of 2019
under ASC 842 and $6.8 million in costs related to the entry into
service of two non-capex satellites in January 2019, with no
comparable amounts in the first quarter of 2018.
Selling, general and administrative expenses decreased by
$8.6 million, or 14 percent, to $51.7 million for the three months
ended March 31, 2019, as compared to the three months ended
March 31, 2018. The decrease was primarily due to a $10.3
million decline in professional fees, largely due to costs incurred
in the first quarter of 2018 relating to liability management
activities with no comparable amounts in 2019, partially offset by
an increase of $2.8 million in staff-related expenses.
Depreciation and amortization expense increased by $4.6
million, or 3 percent, to $171.1 million for the three months ended
March 31, 2019, as compared to the three months ended
March 31, 2018.
Interest expense, net consists of the gross interest
expense we incur, together with gains and losses on interest rate
cap contracts (which reflect the change in their fair value),
offset by interest income earned and the amount of interest we
capitalize related to assets under construction. As of
March 31, 2019, we held interest rate cap contracts with an
aggregate notional amount of $2.4 billion to mitigate the risk of
interest rate expense increase on the floating-rate term loans
under our senior secured credit facilities. The contracts have not
been designated as hedges for accounting purposes.
Interest expense, net increased by $34.1 million, or 12 percent,
to $316.6 million for the three months ended March 31, 2019,
as compared to $282.5 million in the three months ended
March 31, 2018. The increase was principally due to:
- an increase of $30.1 million
corresponding to the decrease in fair value of the interest rate
cap contracts;
- an increase of $3.9 million from
lower capitalized interest primarily resulting from decreased
levels of satellites and related assets under construction;
and
- a net increase of $2.0 million in
interest expense primarily resulting from our refinancing
activities in 2018.
The non-cash portion of total interest expense, net was $47.4
million for the three months ended March 31, 2019, primarily
consisting of interest expense related to the significant financing
component identified in our customer contracts, amortization and
accretion of discounts and premiums, the loss resulting from the
decrease in fair value of the interest rate cap contracts we hold
and amortization of deferred financing fees.
Other income, net was $1.4 million for the three months
ended March 31, 2019, as compared to other income, net of $4.4
million for the three months ended March 31, 2018. The
decrease of $3.0 million was primarily due to $3.1 million of other
lease income recognized in the three months ended March 31, 2018
with no comparable amount in 2019.
Provision for income taxes was $5.1 million for the three
months ended March 31, 2019, as compared to $22.4 million for
the three months ended March 31, 2018. The decrease was
principally attributable to the implementation in 2018 of a series
of internal transactions and related steps that reorganized the
ownership of certain of our assets among our subsidiaries.
Cash paid for income taxes, net of refunds, totaled
$1.9 million and $2.2 million for the three months ended
March 31, 2019 and 2018, respectively.
Net Income, Net Income per Diluted Common Share attributable
to Intelsat S.A., EBITDA and Adjusted EBITDA
Net loss attributable to Intelsat S.A. was $120.6 million
for the three months ended March 31, 2019, compared to a net
loss of $66.8 million for the same period in 2018, primarily due to
lower revenue and higher direct cost of revenue, as described
above.
Net loss per diluted common share attributable to Intelsat
S.A. was $0.87 for the three months ended March 31, 2019,
compared to net loss of $0.56 per diluted common share for the same
period in 2018.
EBITDA was $372.8 million for the three months ended
March 31, 2019, compared to $405.4 million for the same period
in 2018, primarily due to lower revenue and higher direct cost of
revenue, as described above.
Adjusted EBITDA was $380.3 million for the three months
ended March 31, 2019, or 72 percent of revenue, compared to
$418.6 million, or 77 percent of revenue, for the same period in
2018, primarily due to lower revenue and higher direct cost of
revenue, as described above.
Free Cash Flow From Operations1
Net cash provided by operating activities was $117.3 million for
the three months ended March 31, 2019. Free cash flow from
operations was $24.0 million for the same period. Free cash flow
from (used in) operations is defined as net cash provided by
operating activities and other proceeds from satellites from
investing activities, less payments for satellites and other
property and equipment (including capitalized interest). Payments
for satellites and other property and equipment from investing
activities, net during the three months ended March 31, 2019
was $93.3 million.
Financial Outlook 2019
Intelsat provided a preliminary update to its 2019 financial
outlook for revenue and Adjusted EBITDA as noted below, to reflect
the financial implications of the loss of the Intelsat 29e
satellite, for which all restoration contractual details are not
yet complete. Elements from the satellite failure affecting the
financial impact include: the use of growth capacity for
restoration services, the issuance of revenue credits to compensate
customers for repointing costs, the reversal of accrued revenue
related to certain contractual terms that will not be realized
given the loss of the satellite and increased direct costs of
revenue related to the purchase of third-party restoration capacity
and other field services costs stemming from service migration.
Intelsat also updated its financial guidance for two other
business changes that will affect our financial performance in
2019. These include lowered revenue expectations in our media and
government businesses, and higher cost of goods sold related to
accounting changes creating incremental impact to Adjusted
EBITDA.
- Revenue Guidance: Intelsat
expects full-year 2019 revenue in a range of $2.000 billion to
$2.060 billion.
- Adjusted EBITDA Guidance:
Intelsat forecasts Adjusted EBITDA performance for the full-year
2019 to be in a range of $1.430 billion to $1.480 billion.
For further details on the changes to our financial outlook,
please see our Quarterly Commentary.
Capital Expenditure Guidance: Intelsat affirmed its
capital expenditure guidance for the three years 2019-2021 (the
“Guidance Period”). Over the next several years we are in a cycle
of lower required investment, due to timing of replacement
satellites and smaller satellites being built. The replacement
strategy for Intelsat 29e has not yet been completed and we may
update our capital expenditure guidance when our analysis is
complete.
We continue to expect the following capital expenditure
ranges:
- 2019: $250 million to $300
million;
- 2020: $275 million to $350 million;
and
- 2021: $250 million to $350
million.
Our capital expenditure guidance includes capitalized interest.
Capitalized interest is expected to average approximately $30
million annually during the Guidance Period.
Intelsat currently has five satellites covered by our 2019 to
2021 capital expenditure plan, two of which are in the design and
manufacturing phase. For the remaining three satellites, no
manufacturing contracts have yet been signed. During the Guidance
Period, we expect that an increased proportion of our capital
expenditures will be invested in ground infrastructure and tools
needed to enhance our delivery of managed services.
Our capital expenditure plan excludes up to four satellites
which we may be required to build should our C-band proposal to the
FCC be adopted in all material respects.
Capital expenditure incurrence is subject to the timing of
achievement of contract, satellite manufacturing, launches and
other milestones.
Cash Taxes: We expect cash taxes to range from $30
million to $40 million annually.
- - - - - - - - - - - - - - - - - - - - - - - - - -
1In this release, financial measures are presented both in
accordance with U.S. GAAP and also on a non-U.S. GAAP basis.
EBITDA, Adjusted EBITDA (or “AEBITDA”), free cash flow from (used
in) operations and related margins included in this release are
non-U.S. GAAP financial measures. Please see the consolidated
financial information below for information reconciling non-U.S.
GAAP financial measures to comparable U.S. GAAP financial
measures.
1Q 2019 Quarterly Commentary
Intelsat provides a detailed quarterly commentary on the
Company’s business trends and performance. Please visit
www.intelsat.com/investors for management’s commentary on the
Company’s progress against its operational priorities and financial
outlook.
Conference Call Information
Intelsat management will hold a public conference call at 8:30
a.m. ET on Tuesday, April 30, 2019 to discuss the Company’s
financial results for the first quarter of 2019. Access to the live
conference call will also be available via the Internet at
www.intelsat.com/investors. To participate on the live call,
participants should dial +1 844-834-1428 from North America, and +1
920-663-6274 from all other locations. The participant pass code is
2457288.
Participants will have access to a replay of the conference call
through May 7, 2019. The replay number for North America is +1
855-859-2056, and for all other locations is +1 404-537-3406. The
participant pass code for the replay is 2457288.
About Intelsat
Intelsat S.A. (NYSE:I) operates the world’s first Globalized
Network, delivering high-quality, cost-effective video and
broadband services anywhere in the world. Intelsat’s Globalized
Network combines the world’s largest satellite backbone with
terrestrial infrastructure, managed services and an open,
interoperable architecture to enable customers to drive revenue and
reach through a new generation of network services. Thousands of
organizations serving billions of people worldwide rely on Intelsat
to provide ubiquitous broadband connectivity, multi-format video
broadcasting, secure satellite communications and seamless mobility
services. The end result is an entirely new world, one that allows
us to envision the impossible, connect without boundaries and
transform the ways in which we live. For more information, visit
www.intelsat.com.
Intelsat Safe Harbor Statement:
Some of the information and statements contained in this
quarterly commentary and certain oral statements made from time to
time by representatives of Intelsat constitute "forward-looking
statements" within the meaning of the Private Securities Litigation
Reform Act of 1995 that do not directly or exclusively relate to
historical facts. When used in this earnings release, the words
“may,” “will,” “might,” “should,” “expect,” “plan,” “anticipate,”
“project,” “believe,” “estimate,” “predict,” “intend,” “potential,”
“outlook,” and “continue,” and the negative of these terms, and
other similar expressions are intended to identify forward-looking
statements and information. Forward-looking statements include
statements regarding: our expectations as to the impact of the loss
of Intelsat 29e on our business and financial outlook; our guidance
regarding our expectation that the launches of our satellites in
the future will position us for growth; our plans for satellite
launches in the near to mid-term; our intention to leverage our
satellite launches and maximize the value of our spectrum rights,
including the pursuit of partnerships to optimize new satellite
business cases and the exploration of joint use of certain spectrum
with the wireless sector in certain geographies; our expectations
as to the potential timing of a final FCC ruling with respect to
our C-band joint-use proposal; guidance regarding our expectations
for our revenue performance and Adjusted EBITDA performance; our
capital expenditure guidance and cash tax expectations over the
next several years; our belief that the scale of our fleet can
reduce the financial impact of satellite anomalies or launch
failures and protect against service interruptions; our belief that
the diversity of our revenue and customer base allow us to
recognize trends across regions and capture new growth
opportunities; our expectation that developing differentiated
services and investing in new technology will allow us to unlock
essential opportunities; our expectations as to the increased
number of transponder equivalents on our fleet over the next
several years; and our expectations as to the level of our cash tax
payments in the future.
The forward-looking statements reflect Intelsat's intentions,
plans, expectations, anticipations, projections, estimations,
predictions, outlook, assumptions and beliefs about future events
and are subject to risks, uncertainties and other factors, many of
which are outside of Intelsat's control. Important factors that
could cause actual results to differ materially from the
expectations expressed or implied in the forward-looking statements
include known and unknown risks. Some of the factors that could
cause actual results to differ from historical results or those
anticipated or predicted by these forward-looking statements
include: risks associated with operating our in-orbit satellites;
satellite launch failures, satellite launch and construction delays
and in-orbit failures or reduced performance; potential changes in
the number of companies offering commercial satellite launch
services and the number of commercial satellite launch
opportunities available in any given time period that could impact
our ability to timely schedule future launches and the prices we
pay for such launches; our ability to obtain new satellite
insurance policies with financially viable insurance carriers on
commercially reasonable terms or at all, as well as the ability of
our insurance carriers to fulfill their obligations; possible
future losses on satellites that are not adequately covered by
insurance; U.S. and other government regulation; changes in our
contracted backlog or expected contracted backlog for future
services; pricing pressure and overcapacity in the markets in which
we compete; our ability to access capital markets for debt or
equity; the competitive environment in which we operate; customer
defaults on their obligations to us; our international operations
and other uncertainties associated with doing business
internationally; and litigation. Known risks include, among others,
the risks described in Intelsat’s Annual Report on Form 20-F for
the year ended December 31, 2018, and its other filings with the
U.S. Securities and Exchange Commission, the political, economic,
regulatory and legal conditions in the markets we are targeting for
communications services or in which we operate, and other risks and
uncertainties inherent in the telecommunications business in
general and the satellite communications business in particular.
Because actual results could differ materially from Intelsat's
intentions, plans, expectations, anticipations, projections,
estimations, predictions, outlook, assumptions and beliefs about
the future, you are urged to view all forward-looking statements
with caution. Intelsat does not undertake any obligation to update
or revise any forward-looking statements, whether as a result of
new information, future events or otherwise.
INTELSAT S.A.UNAUDITED CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS($ in thousands, except
per share amounts)
Three Months EndedMarch 31,
2018 Three Months EndedMarch 31, 2019 Revenue $
543,782 $ 528,449 Operating expenses: Direct costs of revenue
(excluding depreciation and amortization) 82,571 105,405 Selling,
general and administrative 60,282 51,658 Depreciation and
amortization 166,457 171,094 Total operating expenses
309,310 328,157 Income from operations 234,472
200,292 Interest expense, net 282,454 316,602 Gain on early
extinguishment of debt 65 — Other income, net 4,429 1,413
Loss before income taxes (43,488 ) (114,897 ) Provision for
income taxes 22,361 5,145 Net loss (65,849 ) (120,042
) Net income attributable to noncontrolling interest (952 ) (580 )
Net loss attributable to Intelsat S.A. $ (66,801 ) $ (120,622 ) Net
loss per common share attributable to Intelsat S.A.: Basic $ (0.56
) $ (0.87 ) Diluted $ (0.56 ) $ (0.87 )
INTELSAT S.A.UNAUDITED RECONCILIATION
OF NET INCOME (LOSS) TO EBITDA($ in thousands)
Three Months EndedMarch 31,
2018 Three Months EndedMarch 31, 2019 Net income
(loss) $ (65,849 ) $ (120,042 ) Add (Subtract): Interest expense,
net 282,454 316,602 Loss (gain) on early extinguishment of debt (65
) — Provision for (benefit from) income taxes 22,361 5,145
Depreciation and amortization 166,457 171,094 EBITDA
$ 405,358 $ 372,799 EBITDA Margin 75 % 71 %
Note:
Intelsat calculates a measure called EBITDA to assess the
operating performance of Intelsat S.A. EBITDA consists of earnings
before net interest, gain on early extinguishment of debt, taxes
and depreciation and amortization. Given our high level of
leverage, refinancing activities are a frequent part of our efforts
to manage our costs of borrowing. Accordingly, we consider gain on
early extinguishment of debt an element of interest expense. EBITDA
is a measure commonly used in the Fixed Satellite Services (“FSS”)
sector, and we present EBITDA to enhance the understanding of our
operating performance. We use EBITDA as one criterion for
evaluating our performance relative to that of our peers. We
believe that EBITDA is an operating performance measure, and not a
liquidity measure, that provides investors and financial analysts
with a measure of operating results unaffected by differences in
capital structures, capital investment cycles and ages of related
assets among otherwise comparable companies.
EBITDA is not a measure of financial performance under U.S.
GAAP, and our EBITDA may not be comparable to similarly titled
measures of other companies. EBITDA should not be considered as an
alternative to operating income (loss) or net income (loss),
determined in accordance with U.S. GAAP, as an indicator of our
operating performance, or as an alternative to cash flows from
operating activities, determined in accordance with U.S. GAAP, as
an indicator of cash flows, or as a measure of liquidity.
INTELSAT S.A.UNAUDITED RECONCILIATION
OF NET INCOME (LOSS) TO ADJUSTED EBITDA($ in
thousands)
Three Months EndedMarch 31,
2018 Three Months EndedMarch 31, 2019 Net income
(loss) $ (65,849 ) $ (120,042 ) Add (Subtract): Interest expense,
net 282,454 316,602 Loss (gain) on early extinguishment of debt (65
) — Provision for (benefit from) income taxes 22,361 5,145
Depreciation and amortization 166,457 171,094 EBITDA
405,358 372,799 Add: Compensation and benefits(1)
1,303 2,707 Non-recurring and other non-cash items(2) 11,979
4,774 Adjusted EBITDA(3) $ 418,640 $ 380,280
Adjusted EBITDA margin 77 % 72 % (1)
Reflects non-cash expenses incurred relating to our equity
compensation plans. (2) Reflects certain non-recurring gains and
losses and non-cash items, including the following: professional
fees related to our liability and tax management initiatives; costs
associated with our C-band spectrum solution proposal; severance,
retention and relocation payments; and other various non-recurring
expenses. These costs were partially offset by non-cash income
related to the recognition of deferred revenue on a straight-line
basis for certain prepaid capacity service contracts. (3) For each
of the three months ended March 31, 2018 and 2019, Adjusted EBITDA
includes $25,139 of revenue relating to the significant financing
component identified in customer contracts in accordance with the
adoption of ASC 606. These impacts are not permitted to be
reflected in the applicable consolidated and Adjusted EBITDA
definitions under our debt agreements.
Note:
Intelsat calculates a measure called Adjusted EBITDA to assess
the operating performance of Intelsat S.A. Adjusted EBITDA consists
of EBITDA as adjusted to exclude or include certain unusual items,
certain other operating expense items and certain other adjustments
as described in the table above. Our management believes that the
presentation of Adjusted EBITDA provides useful information to
investors, lenders and financial analysts regarding our financial
condition and results of operations, because it permits clearer
comparability of our operating performance between periods. By
excluding the potential volatility related to the timing and extent
of non-operating activities, our management believes that Adjusted
EBITDA provides a useful means of evaluating the success of our
operating activities. We also use Adjusted EBITDA, together with
other appropriate metrics, to set goals for and measure the
operating performance of our business, and it is one of the
principal measures we use to evaluate our management’s performance
in determining compensation under our incentive compensation plans.
Adjusted EBITDA measures have been used historically by investors,
lenders and financial analysts to estimate the value of a company,
to make informed investment decisions and to evaluate performance.
Our management believes that the inclusion of Adjusted EBITDA
facilitates comparison of our results with those of companies
having different capital structures.
Adjusted EBITDA is not a measure of financial performance under
U.S. GAAP, and our Adjusted EBITDA may not be comparable to
similarly titled measures of other companies. Adjusted EBITDA
should not be considered as an alternative to operating income
(loss) or net income (loss), determined in accordance with U.S.
GAAP, as an indicator of our operating performance, or as an
alternative to cash flows from operating activities, determined in
accordance with U.S. GAAP, as an indicator of cash flows, or as a
measure of liquidity.
INTELSAT S.A.CONDENSED CONSOLIDATED
BALANCE SHEETS($ in thousands)
December 31, 2018 March 31,
2019 (unaudited) ASSETS Current assets: Cash and
cash equivalents $ 485,120 $ 489,648 Restricted cash 22,037 22,110
Receivables, net of allowances of $28,542 in 2018 and $26,421 in
2019 271,393 240,999 Contract assets 45,034 55,248 Prepaid expenses
and other current assets 24,075 26,285
Total current assets
847,659 834,290 Satellites and other property and equipment, net
5,511,702 5,419,410 Goodwill 2,620,627 2,620,627 Non-amortizable
intangible assets 2,452,900 2,452,900 Amortizable intangible
assets, net 311,103 302,515 Contract assets, net of current portion
96,108 98,308 Other assets 401,414 511,463 Total
assets $ 12,241,513 $ 12,239,513
LIABILITIES AND
SHAREHOLDERS’ DEFICIT Current liabilities: Accounts payable and
accrued liabilities $ 108,101 $ 102,031 Taxes payable 5,679 7,578
Employee related liabilities 29,696 27,486 Accrued interest payable
284,649 317,656 Contract liabilities 137,746 133,725 Deferred
satellite performance incentives 35,261 35,775 Other current
liabilities 59,080 59,535 Total current liabilities
660,212 683,786 Long-term debt, net of current portion 14,028,352
14,038,533 Contract liabilities, net of current portion 1,131,319
1,127,205 Deferred satellite performance incentives, net of current
portion 210,346 202,465 Deferred income taxes 82,488 87,988 Accrued
retirement benefits, net of current portion 133,735 130,620 Other
long-term liabilities 77,670 170,443 Shareholders’ deficit: Common
shares; nominal value $0.01 per share 1,380 1,406 Paid-in capital
2,551,471 2,554,384 Accumulated deficit (6,606,426 ) (6,710,857 )
Accumulated other comprehensive loss (43,430 ) (59,511 ) Total
Intelsat S.A. shareholders’ deficit (4,097,005 ) (4,214,578 )
Noncontrolling interest 14,396 13,051 Total
liabilities and shareholders’ deficit $ 12,241,513 $
12,239,513
INTELSAT S.A.UNAUDITED CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS($ in
thousands)
Three Months EndedMarch 31,
2018 Three Months EndedMarch 31, 2019 Cash
flows from operating activities: Net loss $ (65,849 ) $
(120,042 ) Adjustments to reconcile net loss to net cash provided
by operating activities: Depreciation and amortization 166,457
171,094 Provision for doubtful accounts 1,266 411 Foreign currency
transaction (gain) loss (741 ) 1,030 Loss on disposal of assets —
40 Share-based compensation 1,303 2,707 Deferred income taxes (50 )
2,029 Amortization of discount, premium, issuance costs and related
costs 12,109 10,049 Gain on early extinguishment of debt (65 ) —
Amortization of actuarial loss and prior service credits for
retirement benefits 1,224 112 Unrealized (gains) losses on
derivatives and investments (21,309 ) 8,931 Sales-type lease —
6,913 Other non-cash items (769 ) (108 ) Changes in operating
assets and liabilities: Receivables (17,204 ) 29,396 Prepaid
expenses, contract and other assets (7,441 ) (22,826 ) Accounts
payable and accrued liabilities 14,377 2,106 Accrued interest
payable 22,626 33,007 Deferred revenue and contract liabilities
(22,250 ) (8,300 ) Accrued retirement benefits (3,444 ) (3,115 )
Other long-term liabilities 617 3,900 Net cash
provided by operating activities 80,857 117,334
Cash flows from investing activities: Payments for
satellites and other property and equipment (including capitalized
interest) (68,027 ) (93,297 ) Purchase of investments — (10,000 )
Capital contributions to unconsolidated affiliates (12,129 ) (338 )
Proceeds from insurance settlements 5,709 — Other proceeds from
satellites 3,750 — Net cash used in investing
activities (70,697 ) (103,635 )
Cash flows from financing
activities: Repayments of long-term debt (32,603 ) — Principal
payments on deferred satellite performance incentives (7,109 )
(7,259 ) Dividends paid to noncontrolling interest (2,601 ) (1,925
) Proceeds from exercise of employee stock options — 232 Other
financing activities 1,233 297 Net cash used in
financing activities (41,080 ) (8,655 ) Effect of exchange rate
changes on cash, cash equivalents and restricted cash 783
(443 ) Net change in cash, cash equivalents and restricted cash
(30,137 ) 4,601 Cash, cash equivalents, and restricted cash
beginning of period 541,391 507,157 Cash, cash
equivalents, and restricted cash end of period $ 511,254 $
511,758
Supplemental cash flow information:
Interest paid, net of amounts capitalized $ 241,008 $ 238,407
Income taxes paid, net of refunds 2,174 1,936
Supplemental
disclosure of non-cash investing activities: Accrued capital
expenditures $ 14,447 $ 8,595 Capitalization of deferred satellite
performance incentives 28,161 —
INTELSAT S.A.UNAUDITED RECONCILIATION
OF NET CASH PROVIDED BY OPERATING ACTIVITIESTO FREE CASH
FLOW FROM (USED IN) OPERATIONS($ in thousands)
Three Months EndedMarch 31,
2018 Three Months EndedMarch 31, 2019 Net cash
provided by operating activities $ 80,857 $ 117,334 Other proceeds
from satellites from investing activities 3,750 — Payments for
satellites and other property and equipment (including capitalized
interest) (68,027 ) (93,297 ) Free cash flow from (used in)
operations $ 16,580 $ 24,037
Note:
Free cash flow from (used in) operations consists of net cash
provided by (used in) operating activities and other proceeds from
satellites from investing activities, less payments for satellites
and other property and equipment (including capitalized interest)
from investing activities and other payments for satellites from
financing activities. Free cash flow from (used in) operations is
not a measurement of cash flow under U.S. GAAP. Intelsat believes
free cash flow from (used in) operations is a useful measure of
financial performance that shows a company’s ability to fund its
operations. Free cash flow from (used in) operations is used by
Intelsat in comparing its performance to that of its peers and is
commonly used by financial analysts and investors in assessing
performance. Free cash flow from (used in) operations does not give
effect to cash used for debt service requirements and thus does not
reflect funds available for investment or other discretionary uses.
Free cash flow from (used in) operations is not a measure of
financial performance under U.S. GAAP, and free cash flow from
(used in) operations may not be comparable to similarly titled
measures of other companies. You should not consider free cash flow
from (used in) operations as an alternative to operating income
(loss) or net income (loss), determined in accordance with U.S.
GAAP, as an indicator of Intelsat’s operating performance, or as an
alternative to cash flows from operating activities, determined in
accordance with U.S. GAAP, as an indicator of cash flows, or as a
measure of liquidity.
INTELSAT S.A.SUPPLEMENTARY
TABLEREVENUE BY CUSTOMER SET AND SERVICE TYPE($ in
thousands)
By Customer Set Three Months
EndedMarch 31, 2018 Three Months EndedMarch
31, 2019 Increase (Decrease) Percentage change
Network Services $ 198,588 37 % $ 204,257 39 % $ 5,669 3 % Media
239,277 43 226,016 43 (13,261 ) (6 ) Government 97,314 18 93,233 17
(4,081 ) (4 ) Other 8,603 2 4,943 1 (3,660 ) (43 )
Total $ 543,782 100 % $ 528,449 100 % $ (15,333 ) (3
)%
By Service Type Three Months EndedMarch
31, 2018 Three Months EndedMarch 31, 2019
Increase (Decrease) Percentage change On-Network
Revenues: Transponder services $ 395,696 73 % $ 377,284 71 % $
(18,412 ) (5 )% Managed services 100,682 19 93,201 18 (7,481 ) (7 )
Channel 1,184 — 691 — (493 ) (42 ) Total on-network
revenues 497,562 92 471,176 89 (26,386 ) (5 )
Off-Network and
Other Revenues: Transponder, MSS and other off-network services
34,983 6 49,858 9 14,875 43 Satellite-related services 11,237
2 7,415 1 (3,822 ) (34 ) Total off-network and other
revenues 46,220 8 57,273 11 11,053 24 Total $
543,782 100 % $ 528,449 100 % $ (15,333 ) (3 )%
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190430005501/en/
Dianne VanBeberVice President, Investor
RelationsDianne.vanbeber@intelsat.com+1 703 559 7406 (o)+1 703 627
5100 (m)
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