-
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
LUXEMBOURG--(BUSINESS WIRE)--Apr. 30, 2019--
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 Ended
March 31, 2018
|
|
|
Three Months Ended
March 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 Ended
March 31, 2018
|
|
|
Three Months Ended
March 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 Ended
March 31, 2018
|
|
|
Three Months Ended
March 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 Ended
March 31, 2018
|
|
|
Three Months Ended
March 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 ACTIVITIES
TO FREE CASH FLOW FROM
(USED IN) OPERATIONS
($ in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31, 2018
|
|
|
Three Months Ended
March 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 TABLE
REVENUE BY
CUSTOMER SET AND SERVICE TYPE
($ in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
By Customer Set
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31, 2018
|
|
|
|
|
|
Three Months Ended
March 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 Ended
March 31, 2018
|
|
|
|
|
|
Three Months Ended
March 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/
Source: Intelsat
Dianne VanBeber
Vice President, Investor Relations
Dianne.vanbeber@intelsat.com
+1
703 559 7406 (o)
+1 703 627 5100 (m)
