OTTAWA, Nov. 05, 2019 (GLOBE NEWSWIRE) -- Telesat today announced its financial results for the three and nine-month periods ended September 30, 2019. All amounts are in Canadian dollars and reported under International Financial Reporting Standards (“IFRS”) unless otherwise noted.

For the quarter ended September 30, 2019, Telesat reported consolidated revenue of $237 million, an increase of 4% ($10 million) compared to the same period in 2018. The increase was due to higher revenue related to the Telstar 19 VANTAGE and Telstar 18 VANTAGE satellites, which entered into commercial service in August 2018 and October 2018, respectively, combined with an increase from short-term services provided to other satellite operators.

Operating expenses of $38 million for the quarter were 6% ($2 million) lower than the same period in 2018. The decrease was primarily related to lower cost of sales and other expenses offset by higher compensation expenses. Adjusted EBITDA1 for the quarter was $203 million, an increase of 8% ($15 million) compared to the same period in 2018. When adjusting for foreign exchange rate changes, Adjusted EBITDA1 increased by 7% ($14 million). The Adjusted EBITDA margin1 for the third quarter of 2019 was 85.7%, compared to 82.8% in the same period in 2018.

Telesat’s net loss for the quarter was $123 million compared to net income of $117 million for the quarter ended September 30, 2018. The $240 million difference was the result of higher non-cash losses on financial instruments and a larger non-cash loss on foreign exchange arising principally from the translation of Telesat’s U.S. dollar denominated debt into Canadian dollars in the third quarter of 2019.

For the nine months ended September 30, 2019, revenue was $691 million, an increase of 3% ($19 million) compared to the same period in 2018. When adjusted for changes in foreign exchange rates, revenue was 2% higher ($10 million) compared to 2018. The increase was primarily due to revenue related to the Telstar 19 VANTAGE and Telstar 18 VANTAGE satellites, offset by lower equipment sales and lower revenue from certain customers in the resource sector. Operating expenses were $115 million, unchanged from 2018. When adjusting for the impact of foreign exchange rate changes, expenses decreased by 1% ($2 million).  Adjusted EBITDA1 was $587 million, an increase of 5% ($26 million) or, when adjusted for foreign exchange rates, an increase of 3% ($19 million). The Adjusted EBITDA margin1 for the first nine months of 2019 was 85.1%, compared to 83.7% in 2018.

For the nine months ended September 30, 2019, net income was $185 million, compared to net income of $96 million for 2018. The increase in net income for the year-to-date was principally the result of non-cash foreign exchange gains in 2019, arising from the translation of Telesat’s U.S. dollar denominated debt into Canadian dollars compared to foreign exchange losses in 2018, partially offset by non-cash losses on financial instruments in 2019 when compared to 2018.

“I am pleased with our financial and operating performance in the third quarter of 2019 and the first nine months of the year,” commented Dan Goldberg, Telesat’s President and CEO. “Our Telstar 19V and 18V satellites, as well as certain short-term satellite services provided to another satellite operator, contributed to top line growth relative to Q3 last year, and our continued operating discipline resulted in an increase in both Adjusted EBITDA1 and our Adjusted EBITDA margin1. In addition to our strong performance in the quarter and year to date, last month we successfully refinanced our existing 8.875% Notes to reduce our borrowing costs and extend our borrowing maturities. Looking ahead, we remain heavily focused on continuing to increase the utilization of our in-orbit satellites and executing on our key growth initiatives, including our planned Low Earth Orbit satellite constellation.”

Business Highlights       

  • At September 30, 2019:
     
    • Telesat had contracted backlog2 for future services of approximately $3.4 billion.
       
    • Fleet utilization was 85% across Telesat’s fleet.
       
  • On October 11, 2019, Telesat Canada issued USD$550 million of 6.5% Senior Notes maturing on October 15, 2027. The net proceeds of the offering, together with cash on hand, were used to redeem the outstanding USD$500 million 8.875% Notes due November 15, 2024.

Telesat’s quarterly report on Form 6-K for the quarter ended September 30, 2019, 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 Tuesday, November 5, 2019, at 10:30 a.m. ET to discuss its financial results for the three and nine-month periods ended September 30, 2019. The call will be hosted by Daniel S. Goldberg, President and Chief Executive Officer, and Michel Cayouette, Chief Financial Officer, of Telesat. 

Dial-in Instructions:
The toll-free dial-in number for the teleconference is +1 (800) 478-9326.  Callers outside of North America should dial +1 (416) 340-2219. The conference reference number is 4313774.  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 November 5, 2019 until 11:59 p.m. ET on November 19, 2019.  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 2662285 followed by the number sign (#).

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 “looking ahead”, “continuing”, “executing”, “initiatives” 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” section of Telesat Canada’s Annual Report on Form 20-F for the fiscal year ended December 31, 2018 which can be obtained on the SEC website at http://www.sec.gov. 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 ability to successfully deploy an advanced global LEO satellite constellation, the availability of government funding for the LEO satellite constellation, volatility in exchange rates 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.   

About Telesat 
Telesat is a leading global satellite operator, providing reliable and secure satellite-delivered communications solutions worldwide to broadcast, telecom, corporate and government customers. Headquartered in Ottawa, Canada, with offices and facilities around the world, the company’s state-of-the-art fleet consists of 16 GEO satellites, the Canadian payload on ViaSat-1 and one Phase 1 LEO satellite which is the start of Telesat’s planned advanced global LEO satellite constellation that will offer ultra-low latency, extremely high throughput, affordable broadband services. Telesat is also a leading technical consultant providing high value expertise and support to satellite operators, insurers and other industry participants on a global basis. Privately held, Telesat’s principal shareholders are Canada’s Public Sector Pension Investment Board and Loral Space & Communications Inc. (NASDAQ: LORL). www.telesat.com

For further information:
Michael Bolitho, Telesat, +1 (613) 748-8700 ext. 2336; ir@telesat.com

Telesat Canada       
Unaudited Interim Condensed Consolidated Statements of (Loss) Income 
For the periods ended September 30       
          
          
          
   Three months Nine Months
 (in thousands of Canadian dollars)  2019   2018   2019   2018  
 Revenue $237,117  $227,161  $690,729  $671,403  
 Operating expenses  (37,798)  (40,099)  (114,871)  (114,522) 
    199,319   187,062   575,858   556,881  
 Depreciation  (62,406)  (55,819)  (187,281)  (163,987) 
 Amortization  (6,430)  (6,079)  (18,536)  (18,886) 
 Other operating (losses) gains, net  (60)  1,089   (147)  1,072  
 Operating income  130,423   126,253   369,894   375,080  
 Interest expense  (63,897)  (58,718)  (194,169)  (174,607) 
 Interest and other income  5,514   3,610   15,490   12,427  
 (Loss) gain on changes in fair value of financial instruments(144,524)  3,735   (64,361)  18,239  
 (Loss) gain on foreign exchange  (30,351)  53,131   98,427   (83,788) 
 (Loss) income before tax  (102,835)  128,011   225,281   147,351  
 Tax expense  (19,845)  (10,796)  (40,592)  (51,443) 
 Net (loss) income  $(122,680) $117,215  $184,689  $95,908  


Telesat Canada       
Unaudited Interim Condensed Consolidated Balance Sheets 
         
         
         
(in thousands of Canadian dollars) September 30,
2019
  December 31,
2018
 
          
Assets        
Cash and cash equivalents $978,350 $768,433 
Trade and other receivables  61,468  45,631 
Other current financial assets  15,034  18,779 
Prepaid expenses and other current assets  22,586  16,381 
Total current assets  1,077,438  849,224 
Satellites, property and other equipment  1,525,456  1,703,039 
Deferred tax assets  7,158  10,799 
Other long-term financial assets  26,156  55,755 
Other long-term assets  7,721  7,912 
Intangible assets  808,430  811,154 
Goodwill  2,446,603  2,446,603 
Total assets $5,898,962 $5,884,486 
          
Liabilities       
Trade and other payables $19,508 $30,659 
Other current financial liabilities  40,885  26,386 
Other current liabilities  78,313  113,289 
Current indebtedness  669,486  7,888 
Total current liabilities  808,192  178,222 
Long-term indebtedness  2,937,533  3,716,340 
Deferred tax liabilities  378,294  406,900 
Other long-term financial liabilities  67,400  54,521 
Other long-term liabilities  449,275  435,518 
Total liabilities  4,640,694  4,791,501 
          
Shareholders' Equity       
Share capital  154,091  153,706 
Accumulated earnings  1,027,825  843,601 
Reserves  76,352  95,678 
Total shareholders' equity  1,258,268  1,092,985 
Total liabilities and shareholders' equity $5,898,962 $5,884,486 
        


Telesat Canada      
Unaudited Interim Condensed Consolidated Statements of Cash Flows 
For the nine months ended September 30      
        
        
        
(in thousands of Canadian dollars) 2019  2018  
        
Cash flows from operating activities       
Net income   $184,689  $95,908  
Adjustments to reconcile net income to cash flows from operating activities       
 Depreciation  187,281   163,987  
 Amortization  18,536   18,886  
 Tax expense  40,592   51,443  
 Interest expense  194,169   174,607  
 Interest income  (15,573)  (8,275) 
 (Gain) loss on foreign exchange  (98,427)  83,788  
 Loss (gain) on changes in fair value of financial instruments  64,361   (18,239) 
 Share-based compensation  10,548   3,733  
 Loss on disposal of assets  147   23  
 Other  (84,298)  (67,216) 
Income taxes paid, net of income taxes received  (64,064)  (80,515) 
Interest paid, net of capitalized interest and interest received  (124,744)  (114,968) 
Operating assets and liabilities  (13,029)  40,571  
Net cash from operating activities  300,188   343,733  
        
Cash flows used in investing activities       
Satellite programs, including capitalized interest  (2,950)  (66,063) 
Purchase of property and other equipment  (6,377)  (9,264) 
Purchase of intangible assets  (27,518)  (9,772) 
Net cash used in investing activities  (36,845)  (85,099) 
        
Cash flows used in financing activities       
Repayment of indebtedness  (23,436)  (87,163) 
Payment of debt issue costs     (10,190) 
Payments of principal on lease liabilities  (913)  (22) 
Satellite performance incentive payments  (7,349)  (6,638) 
Dividends paid on preferred shares  (10)    
Net cash used in financing activities  (31,708)  (104,013) 
         
Effect of changes in exchange rates on cash and cash equivalents  (21,718)  3,584  
         
Increase in cash and cash equivalents  209,917   158,205  
Cash and cash equivalents, beginning of period  768,433   479,045  
Cash and cash equivalents, end of period $978,350  $637,250  
        


Telesat’s Adjusted EBITDA margin(1):    
     
  Three months ended September 30, Nine months ended September 30,
(in thousands of Canadian dollars) (unaudited) 2019  2018  2019  2018 
Net (loss) income $(122,680) $117,215  $184,689  $95,908 
Tax expense  19,845   10,796   40,592   51,443 
Loss (gain) on changes in fair value of financial instruments  144,524   (3,735)  64,361   (18,239)
Loss (gain) on foreign exchange  30,351   (53,131)  (98,427)  83,788 
Interest and other income  (5,514)  (3,610)  (15,490)  (12,427)
Interest expense  63,897   58,718   194,169   174,607 
Depreciation  62,406   55,819   187,281   163,987 
Amortization  6,430   6,079   18,536   18,886 
Other operating losses (gains), net  60   (1,089)  147   (1,072)
Non-recurring compensation expenses(3)  376   364   1,080   1,022 
Non-cash expense related to share-based compensation  3,440   723   10,548   3,733 
Adjusted EBITDA $203,135  $188,149  $587,486  $561,636 
             
Revenue $237,117  $227,161  $690,729  $671,403 
Adjusted EBITDA Margin  
85.7%  82.8%  85.1%  83.7%

End Notes

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.

Remaining performance obligations, which we refer to as contracted revenue backlog (‘‘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 calculation of the backlog reflects the revenue recognition policies adopted under IFRS 15. The majority of Telesat’s contracted revenue backlog is generated from contractual agreements for satellite capacity.

Includes severance payments and special compensation and benefits for executives and employees.