News Release
Intelsat Announces Second Quarter 2016 Results
-
Second quarter revenue of
$542.0 million -
Second quarter net income attributable to
Intelsat S.A. of$116.4 million , including$131.4 million gain on early extinguishment of debt -
$9.2 billion contracted backlog provides visibility for future revenue and cash flow -
Intelsat 31 entered into service in late July;Intelsat 33e andIntelsat 36 on track for Q3 launch -
Intelsat reaffirms 2016 Guidance
“With
Mr. Spengler added, “Our backlog continues to provide visibility into
future revenue and cash flows that allows us to invest in our fleet and
pursue our long-term business strategy. Backlog at
Second Quarter 2016 Business Highlights
Network Services
Network Services revenue was
Media
Media revenue was
Government
Government revenue was
Average Fill Rate
Intelsat’s average fill rate on our approximately 2,125 station-kept
wide-beam transponders was 76 percent at
Satellite Launches
Contracted Backlog
At
Capital Structure Updates and Debt Transactions
During the second quarter of 2016, we repurchased
On
Financial Results for the Three Months Ended
On-Network revenue generally includes revenue from any services delivered via our satellite or ground network. Off-Network and Other Revenue generally includes revenue from transponder services, Mobile Satellite Services (“MSS”) and other satellite-based transmission services using capacity procured from other operators, often in frequencies not available on our network. Off-Network and Other Revenue also includes revenue from consulting and other services and sales of customer premises equipment.
Total On-Network Revenue reported a decline of
-
Transponder services reported an aggregate decrease of
$48.1 million , primarily due to a$38 .3 million decrease in revenue from network services customers, together with a$9 .3 million decline from media customers. The network services decline was mainly due to non-renewals and renewal pricing at lower rates for enterprise and wireless infrastructure services, together with reduced volumes from non-renewals of point-to-point connectivity, which is shifting to fiber alternatives. The media decrease of$9.3 million resulted primarily from lower volumes due to certain North American customers migrating to new compression standards and single format distribution. The aggregate decrease also reflects $1.3 million in currency-related reductions of our contracts inBrazil andRussia , primarily in our media business. Our sector is undergoing a period of increased supply across all regions; the resulting competitive environment is causing pricing pressure in certain regions and applications, primarily with respect to our network services business, and we expect this to continue to impact our business negatively in the near to mid-term. -
Managed services reported an aggregate increase of
$5.3 million , largely due to an increase of$10.2 million in revenue from network services customers for broadband services for air and maritime mobility applications, partially offset by declines of$5.1 million in revenues primarily from network services customers for trunking applications and from media customers for video solutions. -
Channel reported an aggregate decrease of
$9.4 million due to the continued migration of international point-to-point satellite traffic to fiber optic cable. This legacy product is no longer actively marketed to our customers.
Total Off-Network and Other Revenue reported an aggregate
decrease of
-
Transponder, MSS and other off-network services reported an
aggregate decrease of
$2.9 million , primarily due to decreases in services for government applications, largely related to sales of off-network managed services. -
Satellite-related services reported an aggregate decrease of
$1.1 million , primarily due to decreased revenue from support for third-party satellites and other services.
For the three months ended
Direct costs of revenue (excluding depreciation and amortization)
decreased by
Selling, general and administrative expenses increased by
Depreciation and amortization expense increased by
Interest expense, net consists of the interest expense we incur
together with gains and losses on interest rate swaps (which reflect net
interest accrued on the interest rate swaps as well as the change in
their fair value), offset by interest income earned and the amount of
interest we capitalize related to assets under construction. Interest
expense, net increased by
The increase in interest expense, net was principally due to a net
increase of
The non-cash portion of total interest expense, net was
Gain on Early Extinguishment of Debt was
Other Expense, net was
Provision for income taxes was
Net Income, Net Income per Diluted Common Share attributable to
Net income attributable to
Net income per diluted common share attributable to
EBITDA was
Adjusted EBITDA was
Revenue Comparison by Customer Set and Service Type |
||||||||||||
($ in thousands) |
||||||||||||
By Customer Set | ||||||||||||
Three Months Ended |
Three Months Ended |
|||||||||||
2015 | 2016 | |||||||||||
Network Services | $ | 270,606 | 45 | % | $ | 228,338 | 42 | % | ||||
Media | 222,039 | 37 | % | 210,992 | 39 | % | ||||||
Government | 95,299 | 16 | % | 93,567 | 17 | % | ||||||
Other | 10,165 | 2 | % | 9,086 | 2 | % | ||||||
$ | 598,109 | 100 | % | $ | 541,983 | 100 | % | |||||
By Service Type | ||||||||||||
Three Months Ended |
Three Months Ended |
|||||||||||
2015 | 2016 | |||||||||||
On-Network Revenues | ||||||||||||
Transponder services | $ | 432,513 | 72 | % | $ | 384,438 | 71 | % | ||||
Managed services | 101,553 | 17 | % | 106,821 | 20 | % | ||||||
Channel | 11,853 | 2 | % | 2,490 | 0 | % | ||||||
Total on-network revenues | 545,919 | 91 | % | 493,749 | 91 | % | ||||||
Off-Network and Other Revenues | ||||||||||||
Transponder, MSS and other off-network services | 38,743 | 6 | % | 35,861 | 7 | % | ||||||
Satellite-related services | 13,447 | 2 | % | 12,373 | 2 | % | ||||||
Total off-network and other revenues | 52,190 | 9 | % | 48,234 | 9 | % | ||||||
Total | $ | 598,109 | 100 | % | $ | 541,983 | 100 | % | ||||
Free Cash Flow Used in Operations
Free cash flow used in operations1 was
Payments for satellites and other property and equipment during the
three months ended
Financial Outlook 2016
Today,
Revenue:
Adjusted EBITDA:
Capital Expenditures:
We expect the following capital expenditures ranges, all of which are consistent with prior guidance:
-
2016:
$725 million to $800 million ; -
2017:
$625 million to $700 million ; and -
2018:
$425 million to $525 million .
Capital expenditure guidance for 2016 through 2018 assumes investment in
eight satellites in the manufacturing and design or recently launched
phases during the Guidance Period. In addition, we are developing
capacity on three other satellites for which we do not incur capital
expenditures. This includes custom payloads being built for us on two
third-party satellites, as well as our Horizons 3e joint venture, which
is building a satellite for the
We are scheduled to launch three more of our new Intelsat EpicNG
high throughput satellites during the Guidance Period, as well as our
Our capital expenditures guidance includes capitalized interest.
Cash Taxes: Annual 2016 cash taxes are expected to total
approximately
- - - - - - - - - - - - - - - - - - - - - - - - - -
1In this release, financial measures are presented both in accordance with U.S. GAAP and also on a non-U.S. GAAP basis. EBITDA, Adjusted EBITDA (or “AEBITDA”), free cash flow used in operations and related margins included in this release are non-U.S. GAAP financial measures. Please see the consolidated financial information below for information reconciling non-U.S. GAAP financial measures to comparable U.S. GAAP financial measures.
Q2 2016 Quarterly Commentary
Conference Call Information
Participants will have access to a replay of the conference call through
About
Intelsat Safe Harbor Statement:
Some of the information and statements contained in this earnings
release and certain oral statements made from time to time by
representatives of
The forward-looking statements reflect
Because actual results could differ materially from
INTELSAT S.A. |
||||||||
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME |
||||||||
($ in thousands, except per share amounts) |
||||||||
Three Months |
Three Months |
|||||||
Revenue | $ | 598,109 | $ | 541,983 | ||||
Operating expenses: | ||||||||
Direct costs of revenue (excluding depreciation and amortization) | 81,935 | 78,414 | ||||||
Selling, general and administrative | 54,085 | 59,166 | ||||||
Depreciation and amortization | 171,247 | 177,079 | ||||||
Total operating expenses | 307,267 | 314,659 | ||||||
Income from operations | 290,842 | 227,324 | ||||||
Interest expense, net | 222,781 | 234,987 | ||||||
Gain on early extinguishment of debt | - | 131,402 | ||||||
Other income (expense), net | 252 | (829 | ) | |||||
Income before income taxes | 68,313 | 122,910 | ||||||
Provision for income taxes | 7,077 | 5,498 | ||||||
Net income | 61,236 | 117,412 | ||||||
Net income attributable to noncontrolling interest | (1,016 | ) | (983 | ) | ||||
Net income attributable to Intelsat S.A. | $ | 60,220 | $ | 116,429 | ||||
Cumulative preferred dividends | (9,919 | ) | - | |||||
Net income attributable to common shareholders | $ | 50,301 | $ | 116,429 | ||||
Net income per common share attributable to Intelsat S.A.: | ||||||||
Basic | $ | 0.47 | $ | 1.02 | ||||
Diluted | $ | 0.47 | $ | 0.98 |
INTELSAT S.A. |
||||||||
UNAUDITED RECONCILIATION OF NET INCOME TO EBITDA |
||||||||
($ in thousands) |
||||||||
Three Months |
Three Months |
|||||||
Net income |
$ |
61,236 |
$ | 117,412 | ||||
Add (Subtract): | ||||||||
Interest expense, net | 222,781 | 234,987 | ||||||
Gain on early extinguishment of debt | - | (131,402 | ) | |||||
Provision for income taxes | 7,077 | 5,498 | ||||||
Depreciation and amortization | 171,247 | 177,079 | ||||||
EBITDA | $ | 462,341 | $ | 403,574 | ||||
EBITDA Margin | 77 | % | 74 | % | ||||
Note:
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 TO ADJUSTED EBITDA |
||||||||
($ in thousands) |
||||||||
Three Months |
Three Months |
|||||||
Net income | $ | 61,236 | $ | 117,412 | ||||
Add (Subtract): | ||||||||
Interest expense, net | 222,781 | 234,987 | ||||||
Gain on early extinguishment of debt | - | (131,402 | ) | |||||
Provision for income taxes | 7,077 | 5,498 | ||||||
Depreciation and amortization | 171,247 | 177,079 | ||||||
EBITDA | 462,341 | 403,574 | ||||||
Add: | ||||||||
Compensation and benefits | 7,318 | 5,504 | ||||||
Non-recurring and other non-cash items | 3,775 | 1,659 | ||||||
Adjusted EBITDA | $ | 473,434 | $ | 410,737 | ||||
Adjusted EBITDA Margin | 79 | % | 76 | % | ||||
Note:
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. |
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CONDENSED CONSOLIDATED BALANCE SHEETS |
||||||||
($ in thousands, except per share amounts) |
||||||||
As of
December 31, 2015 |
As of
June 30, 2016 |
|||||||
(unaudited) | ||||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 171,541 | $ | 969,565 | ||||
Receivables, net of allowance of $37,178 in 2015 and $49,355 in 2016 | 232,775 | 238,061 | ||||||
Prepaid expenses and other current assets | 35,784 | 47,210 | ||||||
Total current assets | 440,100 | 1,254,836 | ||||||
Satellites and other property and equipment, net | 5,988,317 | 6,144,000 | ||||||
Goodwill | 2,620,627 | 2,620,627 | ||||||
Non-amortizable intangible assets | 2,452,900 | 2,452,900 | ||||||
Amortizable intangible assets, net | 440,330 | 416,084 | ||||||
Restricted cash | - | 480,200 | ||||||
Other assets | 311,316 | 339,667 | ||||||
Total assets | $ | 12,253,590 | $ | 13,708,314 | ||||
LIABILITIES AND SHAREHOLDERS' DEFICIT | ||||||||
Current liabilities: | ||||||||
Accounts payable and accrued liabilities | $ | 164,381 | $ | 188,866 | ||||
Taxes payable | 11,742 | 12,154 | ||||||
Employee related liabilities | 35,361 | 33,207 | ||||||
Accrued interest payable | 161,493 | 186,458 | ||||||
Deferred satellite performance incentives | 19,411 | 21,522 | ||||||
Deferred revenue | 108,779 | 149,637 | ||||||
Other current liabilities | 63,275 | 62,861 | ||||||
Total current liabilities | 564,442 | 654,705 | ||||||
Long-term debt, net of current portion | 14,611,379 | 15,848,690 | ||||||
Deferred satellite performance incentives, net of current portion | 162,177 | 183,321 | ||||||
Deferred revenue, net of current portion | 1,010,242 | 965,261 | ||||||
Deferred income taxes | 160,802 | 164,930 | ||||||
Accrued retirement benefits | 195,385 | 190,733 | ||||||
Other long-term liabilities | 169,516 | 177,671 | ||||||
Shareholders' deficit: | ||||||||
Common shares; nominal value $0.01 per share | 1,076 | 1,177 | ||||||
5.75% Series A mandatory convertible junior non-voting preferred shares; nominal value $0.01 per share; aggregate liquidation preference of $172,500 ($50 per share) | 35 | - | ||||||
Paid-in capital | 2,133,891 | 2,146,865 | ||||||
Accumulated deficit | (6,706,128 | ) | (6,574,373 | ) | ||||
Accumulated other comprehensive loss | (78,439 | ) | (77,272 | ) | ||||
Total Intelsat S.A. shareholders' deficit | (4,649,565 | ) | (4,503,603 | ) | ||||
Noncontrolling interest | 29,212 | 26,606 | ||||||
Total liabilities and shareholders' deficit | $ | 12,253,590 | $ | 13,708,314 |
INTELSAT S.A. |
||||||||
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS |
||||||||
($ in thousands) |
||||||||
Three Months |
Three Months |
|||||||
Cash flows from operating activities: | ||||||||
Net income | $ | 61,236 | $ | 117,412 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 171,247 | 177,079 | ||||||
Provision for doubtful accounts | 5,615 | 10,342 | ||||||
Foreign currency transaction (gain) loss | 99 | (1,930 | ) | |||||
Share-based compensation | 7,201 | 5,504 | ||||||
Deferred income taxes | (1,806 | ) | (1,118 | ) | ||||
Amortization of discount, premium, issuance costs and related costs | 5,014 | 5,855 | ||||||
Gain on early extinguishment of debt | - | (138,238 | ) | |||||
Unrealized gains on derivative financial instruments | (6,021 | ) | - | |||||
Amortization of actuarial loss and prior service credits for retirement benefits | 1,287 | 841 | ||||||
Other non-cash items | 134 | (868 | ) | |||||
Changes in operating assets and liabilities: | ||||||||
Receivables | (16,917 | ) | (24,157 | ) | ||||
Prepaid expenses and other assets | (2,193 | ) | (18,150 | ) | ||||
Accounts payable and accrued liabilities | 17,122 | 15,843 | ||||||
Accrued interest payable | (149,695 | ) | (125,129 | ) | ||||
Deferred revenue | (3,859 | ) | (30,885 | ) | ||||
Accrued retirement benefits | (12,001 | ) | (2,239 | ) | ||||
Other long-term liabilities | 1,516 | (1,610 | ) | |||||
Net cash provided by (used in) operating activities | 77,979 | (11,448 | ) | |||||
Cash flows from investing activities: | ||||||||
Payments for satellites and other property and equipment (including capitalized interest) | (212,602 | ) | (190,458 | ) | ||||
Purchase of cost method investment | (25,000 | ) | - | |||||
Other investing activities | - | (331 | ) | |||||
Net cash used in investing activities | (237,602 | ) | (190,789 | ) | ||||
Cash flows from financing activities: | ||||||||
Repayments of long-term debt | (275,000 | ) | (328,569 | ) | ||||
Proceeds from drawdown of long-term debt | 300,000 | - | ||||||
Debt issuance costs | - | (5,853 | ) | |||||
Dividends paid to preferred shareholders | (2,479 | ) | (2,479 | ) | ||||
Dividends paid to noncontrolling interest | (2,545 | ) | (2,245 | ) | ||||
Principal payments on deferred satellite performance incentives | (4,576 | ) | (4,573 | ) | ||||
Net cash provided by (used in) financing activities | 15,400 | (343,719 | ) | |||||
Effect of exchange rate changes on cash and cash equivalents | (99 | ) | 198 | |||||
Net change in cash and cash equivalents | (144,322 | ) | (545,758 | ) | ||||
Cash and cash equivalents, beginning of period | 258,726 | 1,515,323 | ||||||
Cash and cash equivalents, end of period | $ | 114,404 | $ | 969,565 | ||||
Supplemental cash flow information: | ||||||||
Interest paid, net of amounts capitalized | $ | 373,516 | $ | 354,610 | ||||
Income taxes paid, net of refunds | 5,331 | 2,492 | ||||||
Supplemental disclosure of non-cash investing activities: | ||||||||
Accrued capital expenditures | $ | (37,867 | ) | $ | 17,232 | |||
Supplemental disclosure of non-cash financing activities: | ||||||||
Debt financing and restricted cash received | - | 480,200 |
INTELSAT S.A. |
||||||||
UNAUDITED RECONCILIATION OF NET CASH USED IN OPERATING ACTIVITIES |
||||||||
TO FREE CASH FLOW USED IN OPERATIONS |
||||||||
($ in thousands) |
||||||||
Three Months Ended
June 30, |
Three Months Ended
June 30, |
|||||||
2015 | 2016 | |||||||
Net cash provided by (used in) operating activities | $ | 77,979 | $ | (11,448 | ) | |||
Payments for satellites and other property and equipment (including capitalized interest) |
(212,602 | ) | (190,458 | ) | ||||
Free cash flow used in operations | $ | (134,623 | ) | $ | (201,906 | ) | ||
Note:
Free cash flow used in operations consists of net cash provided by
operating activities, less payments for satellites and other property
and equipment (including capitalized interest). Free cash flow used in
operations is not a measurement of cash flow under U.S. GAAP.
View source version on businesswire.com: http://www.businesswire.com/news/home/20160727005351/en/
Source:
Intelsat
Dianne VanBeber
Vice President, Investor Relations
and Corporate Communications
+1 703-559-7406
dianne.vanbeber@intelsat.com