News Release
Intelsat Announces First Quarter 2016 Results
-
First quarter revenue of
$552.6 million -
First quarter net income attributable to
Intelsat S.A. of$15.3 million -
$9.3 billion contracted backlog provides visibility for future revenue and cash flow -
Intelsat EpicNG satellite era begins,
Intelsat 29e enters service -
Intelsat confirms repayment by Intelsat Jackson of Intercompany Loan -
Intelsat reaffirms 2016 Guidance
“With
Mr. Spengler added, “Our backlog continues to provide the visibility
into future revenue and cash flows that allows us to invest in our fleet
and pursue our long-term business strategy. Backlog at
First 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
transponders was 75 percent at
Satellite Launches
Contracted Backlog
At
Capital Structure Updates and Debt Transactions
On
During the third quarter of 2015, Intelsat Jackson declared and paid a
dividend of
As of
We currently expect that during the course of the second quarter of 2016, the same subsidiaries of Intelsat Jackson that currently guarantee its obligations under Intelsat Jackson’s secured credit facility will issue guarantees of the indebtedness under the indenture governing Intelsat Jackson’s 6 5/8% Senior Notes due 2022.
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 a decline of
$50.8 million , primarily due to a$39.9 million decrease in revenue from network services customers, together with an$11.0 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 resulted primarily from lower volumes due to certain North American customers migrating to new compression standards and a single format. The aggregate decrease also reflects$3.3 million in currency-related reductions of our contracts inBrazil andRussia across our network services and media businesses. 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 increase of
$1.8 million , largely due to an increase in revenue from network services customers using our broadband services for maritime applications and an increase in revenue from government customers for broadband solutions, partially offset by declines in revenues from network customers for trunking solutions and from media customers for managed video solutions. -
Channel reported an aggregate decrease of
$9.2 million due to the continued migration of international point-to-point satellite traffic to fiber optic cable, a trend that we expect will continue for this legacy product, which is no longer actively marketed to our customers.
Total Off-Network and Other Revenue reported an aggregate
increase of
-
Transponder, MSS and other off-network services reported an
aggregate increase of
$5.5 million , primarily due to increases in services for government applications, largely related to non-recurring sales of customer premises equipment. -
Satellite-related services reported an aggregate increase of
$3.0 million , primarily due to increased revenue from support for third-party satellites and other services.
For the three months ended
Direct costs of revenue (excluding depreciation and amortization)
increased by
Selling, general and administrative expenses increased by
Depreciation and amortization expense decreased by
Interest expense, net consists of the interest expense we incur
together with gains and losses on interest rate swaps (which reflect net
interest accrued on the interest rate swaps as well as the change in
their fair value), offset by interest income earned and the amount of
interest we capitalize related to assets under construction. Interest
expense, net decreased by
The decrease in interest expense, net was principally due to a decrease
of
The non-cash portion of total interest expense, net was
Provision for income taxes was
EBITDA, Adjusted EBITDA, Net Income, Net Income per Diluted Common
Share attributable to
EBITDA was
Adjusted EBITDA was
Net income attributable to
Net income per diluted common share attributable to
Adjusted net income per diluted common share attributable to
Revenue Comparison by Customer Set and Service Type | ||||||||||||
($ in thousands) |
||||||||||||
By Customer Set | ||||||||||||
Three Months Ended |
Three Months Ended |
|||||||||||
2015 | 2016 | |||||||||||
Network Services | $ | 276,638 | 46 | % | $ | 227,687 | 41 | % | ||||
Media | 224,776 | 37 | % | 212,138 | 38 | % | ||||||
Government | 94,840 | 16 | % | 103,532 | 19 | % | ||||||
Other | 6,052 | 1 | % | 9,286 | 2 | % | ||||||
$ | 602,306 | 100 | % | $ | 552,643 | 100 | % | |||||
By Service Type | ||||||||||||
Three Months Ended |
Three Months Ended |
|||||||||||
2015 | 2016 | |||||||||||
On-Network Revenues | ||||||||||||
Transponder services | $ | 441,174 | 73 | % | $ | 390,374 | 71 | % | ||||
Managed services | 98,784 | 16 | % | 100,614 | 18 | % | ||||||
Channel | 12,048 | 2 | % | 2,837 | 1 | % | ||||||
Total on-network revenues | 552,006 | 92 | % | 493,825 | 89 | % | ||||||
Off-Network and Other Revenues | ||||||||||||
Transponder, MSS and other off-network services | 40,725 | 7 | % | 46,217 | 8 | % | ||||||
Satellite-related services | 9,575 | 2 | % | 12,601 | 2 | % | ||||||
Total off-network and other revenues | 50,300 | 8 | % | 58,818 | 11 | % | ||||||
Total | $ | 602,306 | 100 | % | $ | 552,643 | 100 | % | ||||
Free Cash Flow from Operations
Free cash flow from 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
ten satellites in the manufacturing and design phase, or recently
launched, during the Guidance Period. In addition, we have capacity on
three other satellites in development, including custom payloads being
built for us on two third-party satellites, that will not require
capital expenditure, 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 from (used in) operations, Adjusted net
income per diluted common share 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.
Q1 2016 Quarterly Commentary
Conference Call Information
About
Intelsat Safe Harbor Statement:
Statements in this news release and certain oral statements from time to time by representatives of the company constitute "forward-looking statements" 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: 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 guidance regarding our expectations for our revenue performance and Adjusted EBITDA performance; our capital expenditure guidance over the next several years; 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
Because actual results could differ materially from
INTELSAT S.A. |
||||||||
UNAUDITED CONSOLIDATED STATEMENTS of OPERATIONS |
||||||||
($ in thousands, except per share amounts) |
||||||||
Three Months | Three Months | |||||||
Ended | Ended | |||||||
March 31, 2015 | March 31, 2016 | |||||||
Revenue | $ | 602,306 | $ | 552,643 | ||||
Operating expenses: | ||||||||
Direct costs of revenue (excluding depreciation and amortization) | 83,467 | 87,460 | ||||||
Selling, general and administrative | 54,672 | 57,130 | ||||||
Depreciation and amortization | 171,405 | 168,880 | ||||||
Total operating expenses | 309,544 | 313,470 | ||||||
Income from operations | 292,762 | 239,173 | ||||||
Interest expense, net | 225,974 | 216,910 | ||||||
Other expense, net | (3,638 | ) | (582 | ) | ||||
Income before income taxes | 63,150 | 21,681 | ||||||
Provision for income taxes | 7,485 | 5,389 | ||||||
Net income | 55,665 | 16,292 | ||||||
Net income attributable to noncontrolling interest | (948 | ) | (966 | ) | ||||
Net income attributable to Intelsat S.A. | $ | 54,717 | $ | 15,326 | ||||
Net income per common share attributable to Intelsat S.A.: | ||||||||
Basic | $ | 0.51 | $ | 0.14 | ||||
Diluted | $ | 0.47 | $ | 0.13 |
INTELSAT S.A. |
||||||||
UNAUDITED RECONCILIATION OF NET INCOME TO EBITDA |
||||||||
($ in thousands) |
||||||||
Three Months |
Three Months |
|||||||
Net income | $ | 55,665 | $ | 16,292 | ||||
Add: | ||||||||
Interest expense, net | 225,974 | 216,910 | ||||||
Provision for income taxes | 7,485 | 5,389 | ||||||
Depreciation and amortization | 171,405 | 168,880 | ||||||
EBITDA | $ | 460,529 | $ | 407,471 | ||||
EBITDA Margin | 76 | % | 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 2015 |
Three Months 2016 |
|||||||
Net income | $ | 55,665 | $ | 16,292 | ||||
Add: | ||||||||
Interest expense, net | 225,974 | 216,910 | ||||||
Provision for income taxes | 7,485 | 5,389 | ||||||
Depreciation and amortization | 171,405 | 168,880 | ||||||
EBITDA | 460,529 | 407,471 | ||||||
Add: | ||||||||
Compensation and benefits | 7,948 | 7,669 | ||||||
Non-recurring and other non-cash items | 1,984 | 2,530 | ||||||
Adjusted EBITDA | $ | 470,461 | $ | 417,670 | ||||
Adjusted EBITDA Margin | 78 | % | 76 | % | ||||
Note:
Adjusted EBITDA is not a measure of financial performance under U.S. GAAP and 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. |
||||||||
UNAUDITED ADJUSTED NET INCOME per DILUTED COMMON SHARE |
||||||||
($ in thousands, except per share amounts) |
||||||||
Three Months |
Three Months |
|||||||
Numerator (in thousands): | ||||||||
Net income attributable to Intelsat S.A. | $ | 54,717 | $ | 15,326 | ||||
Add (Subtract): | ||||||||
Compensation and benefits (1) | 7,948 | 7,669 | ||||||
Losses on derivative financial instruments (2) | 1,649 | 13 | ||||||
Amortization (3) | 15,054 | 12,123 | ||||||
Non-recurring and other non-cash items (4) | 1,984 | 2,530 | ||||||
Income tax effect of adjustments above & other discrete tax items (5) |
(186 | ) | (736 | ) | ||||
Adjusted net income attributable to Intelsat S.A. | $ | 81,166 | $ | 36,925 | ||||
Denominator (in millions): | ||||||||
Basic weighted average shares outstanding | 106.9 | 107.8 | ||||||
Weighted average dilutive shares outstanding: | ||||||||
Preferred shares | 9.6 | 9.6 | ||||||
Employee compensation related shares, including options and restricted share units |
0.8 | 0.5 | ||||||
Adjusted diluted weighted average shares outstanding |
117.3 | 117.9 | ||||||
Adjusted diluted net income per common share attributable to Intelsat S.A. |
$ | 0.69 | $ | 0.31 |
Note: |
||
Management evaluates financial performance in part based on adjusted net income per diluted common share attributable to common shareholders. This measure consists of net income per diluted common share attributable to common shareholders as reported, as adjusted to exclude or include certain unusual items, certain other operating expense items and certain other adjustments as described in the table and footnotes below. In addition, in calculating this measure we adjusted our common shares outstanding to reflect dilution when the calculation of the numerator moved from a net loss to net income. We believe investors’ understanding of our operating performance is enhanced by the disclosure of this measure. Adjusted net income per diluted common share attributable to common shareholders is not a recognized financial measure in accordance with U.S. GAAP and should not be considered a substitute for earnings per share or other financial measures as computed in accordance with U.S. GAAP and may not be comparable to similarly titled measures of other companies. | ||
(1) | Reflects non-cash expenses incurred relating to our equity compensation plans. | |
(2) | Represents (i) the changes in the fair value of the undesignated interest rate swaps and (ii) the difference between the amount of floating rate interest we receive and the amount of fixed rate interest we pay under such swaps, both of which are recognized in interest expense, net. | |
(3) | Intangible assets are amortized based on the expected pattern of consumption. We recorded amortization expense related to our backlog and other and customer intangible assets. | |
(4) | Reflects certain non-recurring gains and losses and non-cash items, including the following: costs associated with development activities; expenses associated with the relocation of our government business subsidiary to our U.S. administrative headquarters facility in 2015; non-cash expense related to the recognition of expense on a straight-line basis for certain office space leases mainly in 2015; professional fees related to certain financing and balance sheet initiatives; 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. | |
(5) | Represents the income tax impact of the various adjustments. |
INTELSAT S.A. |
||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS |
||||||||
($ in thousands, except per share amounts) |
||||||||
As of | As of | |||||||
December 31, | March 31, | |||||||
2015 | 2016 | |||||||
(unaudited) | ||||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 171,541 | $ | 1,515,323 | ||||
Receivables, net of allowance of $37,178 in 2015 and $39,722 in 2016 | 232,775 | 222,514 | ||||||
Prepaid expenses and other current assets | 35,784 | 43,042 | ||||||
Total current assets | 440,100 | 1,780,879 | ||||||
Satellites and other property and equipment, net | 5,988,317 | 6,107,241 | ||||||
Goodwill | 2,620,627 | 2,620,627 | ||||||
Non-amortizable intangible assets | 2,452,900 | 2,452,900 | ||||||
Amortizable intangible assets, net | 440,330 | 428,206 | ||||||
Other assets | 311,316 | 320,018 | ||||||
Total assets | $ | 12,253,590 | $ | 13,709,871 | ||||
LIABILITIES AND SHAREHOLDERS' DEFICIT | ||||||||
Current liabilities: | ||||||||
Accounts payable and accrued liabilities | $ | 164,381 | $ | 161,129 | ||||
Taxes payable | 11,742 | 7,469 | ||||||
Employee related liabilities | 35,361 | 27,968 | ||||||
Accrued interest payable | 161,493 | 311,587 | ||||||
Deferred satellite performance incentives | 19,411 | 21,196 | ||||||
Deferred revenue | 108,779 | 161,522 | ||||||
Other current liabilities | 63,275 | 60,731 | ||||||
Total current liabilities | 564,442 | 751,602 | ||||||
Long-term debt, net of current portion | 14,611,379 | 15,846,582 | ||||||
Deferred satellite performance incentives, net of current portion | 162,177 | 188,196 | ||||||
Deferred revenue, net of current portion | 1,010,242 | 983,639 | ||||||
Deferred income taxes | 160,802 | 162,658 | ||||||
Accrued retirement benefits | 195,385 | 192,972 | ||||||
Other long-term liabilities | 169,516 | 182,486 | ||||||
Shareholders' deficit: | ||||||||
Common shares; nominal value $0.01 per share | 1,076 | 1,080 | ||||||
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 | 35 | ||||||
Paid-in capital | 2,133,891 | 2,141,423 | ||||||
Accumulated deficit | (6,706,128 | ) | (6,690,802 | ) | ||||
Accumulated other comprehensive loss | (78,439 | ) | (77,868 | ) | ||||
Total Intelsat S.A. shareholders' deficit | (4,649,565 | ) | (4,626,132 | ) | ||||
Noncontrolling interest | 29,212 | 27,868 | ||||||
Total liabilities and shareholders' deficit | $ | 12,253,590 | $ | 13,709,871 |
INTELSAT S.A. |
||||||||
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS |
||||||||
($ in thousands) |
||||||||
Three Months March 31, 2015 |
Three Months |
|||||||
Cash flows from operating activities: | ||||||||
Net income | $ | 55,665 | $ | 16,292 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 171,405 | 168,880 | ||||||
Provision for doubtful accounts | 5,070 | 6,258 | ||||||
Foreign currency transaction (gain) loss | 5,205 | (1,710 | ) | |||||
Share-based compensation | 7,831 | 7,669 | ||||||
Deferred income taxes | 900 | (2,422 | ) | |||||
Amortization of discount, premium, issuance costs and related costs | 4,977 | 5,066 | ||||||
Unrealized gains on derivative financial instruments | (5,321 | ) | (764 | ) | ||||
Amortization of actuarial loss and prior service credits for retirement benefits | 4,039 | 840 | ||||||
Other non-cash items | (27 | ) | 1,191 | |||||
Changes in operating assets and liabilities: | ||||||||
Receivables | (1,902 | ) | 5,476 | |||||
Prepaid expenses and other assets | (4,299 | ) | (11,840 | ) | ||||
Accounts payable and accrued liabilities | (25,967 | ) | (15,046 | ) | ||||
Accrued interest payable | 149,675 | 150,094 | ||||||
Deferred revenue | 22,679 | 25,477 | ||||||
Accrued retirement benefits | (6,118 | ) | (2,413 | ) | ||||
Other long-term liabilities | 2,541 | 90 | ||||||
Net cash provided by operating activities | 386,353 | 353,138 | ||||||
Cash flows from investing activities: | ||||||||
Payments for satellites and other property and equipment (including capitalized interest) | (186,992 | ) | (227,176 | ) | ||||
Purchase of cost method investment | - | (4,000 | ) | |||||
Other investing activities | 5 | (456 | ) | |||||
Net cash used in investing activities | (186,987 | ) | (231,632 | ) | ||||
Cash flows from financing activities: | ||||||||
Proceeds from issuance of long-term debt | - | 1,250,000 | ||||||
Repayments of long-term debt | (49,000 | ) | - | |||||
Debt issuance costs | - | (19,200 | ) | |||||
Dividends paid to preferred shareholders | (2,480 | ) | (2,480 | ) | ||||
Principal payments on deferred satellite performance incentives | (5,260 | ) | (3,971 | ) | ||||
Dividends paid to noncontrolling interest | (1,938 | ) | (2,310 | ) | ||||
Other financing activities | 96 | - | ||||||
Net cash provided by (used in) financing activities | (58,582 | ) | 1,222,039 | |||||
Effect of exchange rate changes on cash and cash equivalents | (5,205 | ) | 237 | |||||
Net change in cash and cash equivalents | 135,579 | 1,343,782 | ||||||
Cash and cash equivalents, beginning of period | 123,147 | 171,541 | ||||||
Cash and cash equivalents, end of period | $ | 258,726 | $ | 1,515,323 | ||||
Supplemental cash flow information: | ||||||||
Interest paid, net of amounts capitalized | $ | 76,758 | $ | 61,925 | ||||
Income taxes paid, net of refunds | 14,074 | 11,630 | ||||||
Supplemental disclosure of non-cash investing activities: | ||||||||
Accrued capital expenditures | $ | 73,014 | $ | 98,090 | ||||
Capitalization of deferred satellite performance incentives | - | 31,600 |
INTELSAT S.A. |
||||||||
UNAUDITED RECONCILIATION OF NET CASH PROVIDED BY OPERATING ACTIVITIES |
||||||||
TO FREE CASH FLOW FROM OPERATIONS |
||||||||
($ in thousands) |
||||||||
Three Months Ended
March 31, |
Three Months Ended
March 31, |
|||||||
2015 | 2016 | |||||||
Net cash provided by operating activities | $ | 386,353 | $ | 353,138 | ||||
Payments for satellites and other property and equipment (including capitalized interest) |
(186,992 | ) | (227,176 | ) | ||||
Free cash flow from operations | $ | 199,361 | $ | 125,962 | ||||
Note:
Free cash flow from operations consists of net cash provided by
operating activities, less payments for satellites and other property
and equipment (including capitalized interest). Free cash flow from
operations is not a measurement of cash flow under U.S. GAAP.
View source version on businesswire.com: http://www.businesswire.com/news/home/20160428005456/en/
Source:
Intelsat
Dianne VanBeber, +1 703-559-7406
Vice President,
Investor Relations and Corporate Communications
dianne.vanbeber@intelsat.com