UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 or 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of October, 2017
001-35878
(Commission File Number)
Intelsat S.A.
(Translation of registrants name into English)
4 rue Albert Borschette
Luxembourg
Grand-Duchy of Luxembourg
L-1246
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
Form 20-F ☒ Form 40-F ☐
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ☐
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ☐
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
INTELSAT S.A. | ||||||
Date: October 26, 2017 | ||||||
By: | /s/ Jacques Kerrest | |||||
Name: | Jacques Kerrest | |||||
Title: | Executive Vice President and Chief Financial Officer |
EXHIBIT INDEX
Third Quarter 2017 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.
Network Services
Network services revenue was $211.5 million (or 39 percent of Intelsats total revenue) for the three months ended September 30, 2017; a decrease of 5 percent compared to the three months ended September 30, 2016.
Media
Media revenue was $236.7 million (or 44 percent of Intelsats total revenue) for the three months ended September 30, 2017; an increase of 9 percent compared to the three months ended September 30, 2016. The increase was largely a result of advance payments forfeited and fees paid by a customer upon partial termination of services.
Government
Government revenue was $84.6 million (or 16 percent of Intelsats total revenue) for the three months ended September 30, 2017; a decline of 13 percent compared to the three months ended September 30, 2016.
Average Fill Rate
Intelsats average fill rate on our approximately 2,025 station-kept wide-beam 36 MHz equivalent transponders was 78 percent at September 30, 2017, consistent with 78 percent as of June 30, 2017. Separately, our fleet includes approximately 825 36 MHz equivalent units of high-throughput Intelsat EpicNG capacity.
Satellite Launches
Intelsat 35e, the fourth of our Intelsat EpicNG next generation high-throughput satellites, completed in-orbit testing and entered service at 325.5°E on August 15, 2017.
Intelsat 37e was successfully launched on September 29, 2017, on an Arianespace, Ariane 5 rocket. This satellite, which will replace Intelsat 901 in the Atlantic Ocean region, is expected to enter into service in the first quarter of 2018 following the completion of in-orbit testing.
Contracted Backlog
At September 30, 2017, Intelsats backlog, representing expected future revenue under existing contracts with customers, was $7.9 billion, as compared to $8.2 billion at June 30, 2017.
2
Capital Structure Activities
On July 5, 2017, Intelsat Jackson completed an offering of $1.5 billion aggregate principal amount of 9.75% Senior Notes due 2025, and used the net proceeds from the sale of the notes, along with other available cash, to satisfy and discharge all $1.5 billion aggregate principal amount of Intelsat Jacksons senior notes due in 2019, and to pay related fees and expenses.
Financial Results for the Three Months Ended September 30, 2017
On-Network revenues generally include revenue from any services delivered via our satellite or ground network. On-Network services also include revenues from our channel services product, which are not detailed here as they are immaterial in size and we no longer actively market these services. Off-Network and Other Revenues generally include 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 Revenues also include revenue from consulting and other services and sales of customer premises equipment.
Total On-Network Revenues reported an increase of $3.3 million to $496.6 million, or an increase of 1 percent, as compared to the three months ended September 30, 2016:
| Transponder services reported an aggregate decrease of $5.1 million, primarily due to a $10.4 million decline in revenue from network services customers, which was partially offset by a $4.9 million increase in revenue from media customers. The network services decline was largely due to non-renewals and contraction of services for enterprise and wireless infrastructure in the Latin America, Europe, and Asia-Pacific regions, partially offset by revenue recovery from a customer in Latin America. The increase in media revenue resulted primarily from growth in direct-to-home (DTH) television services in Africa, partially offset by non-renewals and termination of services related in part to the end of life of certain satellites. 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 $8.8 million, largely due to an increase of $13.5 million in revenue related to advance payments forfeited and fees paid by a customer upon partial termination of services and an increase of $4.3 million in revenue from network services customers for broadband solutions for maritime mobility and aero applications. These increases were partially offset by a decrease of $4.9 million in revenue from our network services customers for point-to-point trunking applications, which are switching to fiber alternatives, and a decrease of $3.8 million in managed services for our government applications, primarily related to the previously announced termination of a contract. |
Total Off-Network and Other Revenues reported an aggregate decline of $7.2 million, or a decrease of 15 percent, to $42.2 million, as compared to the three months ended September 30, 2016:
| Transponder, MSS and other Off-Network services reported an aggregate decrease of $5.8 million, primarily due to decreases in services for government applications, largely related to sales of customer premises equipment that occurred in 2016. This was partially offset by increased revenue from third-party services for a media customer. |
3
| Satellite-related services reported an aggregate decrease of $1.5 million, primarily resulting from decreased revenue from support for third-party satellites and the previously announced termination of a government contract. |
For the three months ended September 30, 2017, changes in operating expenses, interest expense, net, and other significant income statement items are described below.
Direct costs of revenue (excluding depreciation and amortization) decreased by $10.3 million, or 12 percent, to $78.1 million, as compared to the three months ended September 30, 2016. Of this decrease, $8.2 million was largely due to lower cost of sales for customer premises equipment related to our government customer set; and declines in costs of our satellite-related services business, off-network fixed satellite services and managed services capacity purchased in support of our government business. There was also a decrease of $1.4 million in staff-related expenses.
Selling, general and administrative expenses declined by $11.1 million, or 19 percent, to $47.9 million, as compared to the three months ended September 30, 2016. The decrease was largely due to an $8.0 million decline in bad debt expense primarily in the Latin America region and a $2.3 million decline in staff-related expenses.
Depreciation and amortization expense increased by $3.8 million, or 2 percent, to $178.7 million, as compared to the three months ended September 30, 2016, due to the net increase in depreciation related to new satellites entering service over the course of the last 12 months.
Interest expense, net consists of the interest expense we incur offset by interest income earned and the amount of interest we capitalize related to assets under construction. Interest expense, net increased by $18.8 million, or 8 percent, to $261.8 million for the three months ended September 30, 2017, as compared to $243.0 million in the three months ended September 30, 2016. This increase was principally due to a net increase of $12.3 million driven by the Companys new debt issuances at higher interest rates, partially offset by certain debt repurchases and exchanges in 2016 and 2017; together with a net increase of $6.3 million from lower capitalized interest for the three months ended September 30, 2017, primarily resulting from a decreased number of satellites and related assets under construction.
The non-cash portion of total interest expense, net was $12.3 million for the three months ended September 30, 2017, due to the amortization of deferred financing fees and the accretion and amortization of discounts and premiums.
Other income, net was $1.8 million for the three months ended September 30, 2017, as compared to $0.3 million for the three months ended September 30, 2016. The variance of $1.5 million was primarily due to a $1.5 million increase in income mainly related to our business conducted in Brazilian reais.
Income tax benefit increased by $1.8 million to $1.2 million for the three months ended September 30, 2017, as compared to income tax expense of $0.7 million for the three months ended September 30, 2016. The increase was principally due to lower income for the three months ended September 30, 2017. Cash paid for income taxes, net of refunds, totaled $11.4 million for the three months ended September 30, 2017, as compared to $3.9 million for the three months ended September 30, 2016.
4
Net Income (Loss), Net Income (Loss) per Diluted Common Share attributable to Intelsat S.A., EBITDA and Adjusted EBITDA
Net loss attributable to Intelsat S.A. was $30.4 million for the three months ended September 30, 2017, compared to net income attributable to Intelsat S.A. of $195.6 million for the same period in 2016, which included a net gain on extinguishment of debt of $219.6 million.
Net loss per diluted common share attributable to Intelsat S.A. was $0.26 for the three months ended September 30, 2017, compared to net income per diluted common share of $1.65 for the same period in 2016.
EBITDA was $414.6 million for the three months ended September 30, 2017, compared to $395.6 million for the same period in 2016.
Adjusted EBITDA increased 4 percent to $420.5 million for the three months ended September 30, 2017, or 78 percent of revenue, compared to $404.9 million, or 75 percent of revenue, for the same period in 2016.
Intelsat management has reviewed the data pertaining to the use of the Intelsat network, and is providing revenue information with respect to that use by customer set and service type in the following tables. Intelsat management believes this provides a useful perspective on the changes in revenue and customer trends over time.
5
By Customer Set
Three Months Ended September 30, |
Three Months Ended September 30, |
|||||||||||||||
2016 | 2017 | |||||||||||||||
Network Services |
$ | 222,302 | 41 | % | $ | 211,497 | 39 | % | ||||||||
Media |
216,637 | 40 | % | 236,670 | 44 | % | ||||||||||
Government |
96,825 | 18 | % | 84,556 | 16 | % | ||||||||||
Other |
6,963 | 1 | % | 6,036 | 1 | % | ||||||||||
|
|
|
|
|||||||||||||
$ | 542,727 | 100 | % | $ | 538,759 | 100 | % | |||||||||
|
|
|
|
By Service Type
Three Months Ended September 30, |
Three Months Ended September 30, |
|||||||||||||||
2016 | 2017 | |||||||||||||||
On-Network Revenues |
||||||||||||||||
Transponder services |
$ | 388,372 | 72 | % | $ | 383,316 | 71 | % | ||||||||
Managed services |
103,034 | 19 | % | 111,835 | 21 | % | ||||||||||
Channel services |
1,873 | 0 | % | 1,407 | 0 | % | ||||||||||
|
|
|
|
|||||||||||||
Total on-network revenues |
493,279 | 91 | % | 496,558 | 92 | % | ||||||||||
Off-Network and Other Revenues |
||||||||||||||||
Transponder, MSS and other off-network services |
39,365 | 7 | % | 33,594 | 6 | % | ||||||||||
Satellite-related services |
10,083 | 2 | % | 8,607 | 2 | % | ||||||||||
|
|
|
|
|||||||||||||
Total off-network and other revenues |
49,448 | 9 | % | 42,201 | 8 | % | ||||||||||
|
|
|
|
|||||||||||||
Total |
$ | 542,727 | 100 | % | $ | 538,759 | 100 | % | ||||||||
|
|
|
|
Free Cash Flow From (Used in) Operations
Net cash provided by operating activities was $212.9 million for the three months ended September 30, 2017, and free cash flow from operations1 was $97.0 million for the same period. Free cash flow from (used in) operations is defined as net cash provided by operating activities, less payments for satellites and other property and equipment (including capitalized interest). Payments for satellites and other property and equipment during the three months ended September 30, 2017 was $98.9 million, and payments for satellites from financing activities was $17.1 million for the three months ended September 30, 2017.
Financial Outlook 2017
Today, Intelsat provided an update on its 2017 revenue and Adjusted EBITDA guidance issued on June 16, 2017, stating that the Company expects the following:
Revenue: As a result of current business trends, the Company now expects to come in at the bottom of the previously disclosed revenue guidance range of $2.150 billion to $2.180 billion for 2017.
Adjusted EBITDA: Intelsat maintained its forecast for Adjusted EBITDA performance for the full-year 2017 to be in a range of $1.640 billion to $1.670 billion.
6
Capital Expenditures: Intelsat maintained its 2017 capital expenditure guidance ranges for the three calendar years 2017 through 2019 (the Guidance Period) issued on June 16, 2017:
| 2017: $500 million to $550 million; |
| 2018: $400 million to $475 million; and |
| 2019: $400 million to $500 million. |
Our capital expenditure guidance includes capitalized interest. The net number of transponder equivalents is expected to increase by a compound annual growth rate (CAGR) of 10 percent as a result of the net new capacity entering service between January 1, 2017 and December 31, 2019. This reflects the incremental capacity related to the launches of the Intelsat EpicNG high-throughput satellites, five of which are expected to enter service during the Guidance Period, net of satellites de-orbited or moved to inclined service. Capital expenditure incurrence is subject to timing of achievement of contract, satellite manufacturing, launch and other milestones.
Cash Taxes: We expect annual cash taxes to be approximately $30 million to $35 million.
1 In 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.
Q3 2017 Quarterly Commentary
Intelsat provides a detailed quarterly commentary on the Companys business trends and performance. Please visit www.intelsat.com/investors for managements commentary on the Companys 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 Thursday, October 26, 2017 to discuss the Companys third quarter financial results for the period ended September 30, 2017. 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 72710316.
Participants will have access to a replay of the conference call through November 2, 2017. 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 72710316.
About Intelsat
Intelsat S.A. (NYSE: I) operates the worlds first Globalized Network, delivering high-quality, cost-effective video and broadband services anywhere in the world. Intelsats Globalized Network combines the worlds 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.
7
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 Intelsat 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 statements regarding certain plans, expectations, goals, projections, anticipations, estimations, predictions, intentions, outlook and beliefs about 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 belief that the scale of our fleet can reduce the financial impact of satellite 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 Intelsats 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 Intelsats 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 anomalies, 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; potential adverse reactions or changes to business or employee relationships resulting from the termination of the proposed combination of the businesses of Intelsat and OneWeb pursuant to a Combination Agreement (the Merger), and the proposed cash investment by SoftBank pursuant to a Share Purchase Agreement (the SoftBank Investment); competitive responses to the terminated Merger and SoftBank Investment; diversion of managements attention from ongoing business operations and opportunities as a result of the terminated Merger and SoftBank Investment; and litigation. Known risks include, among others, the risks described in Intelsats annual
8
report on Form 20-F for the year ended December 31, 2016, as amended by Amendment No. 1 on Form 20-F/A filed on October 11, 2017 (the Form 20-F), and its other filings with the U.S. Securities and Exchange Commission, the political, economic 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 Intelsats 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.
9
INTELSAT S.A.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
($ in thousands, except per share amounts)
Three Months Ended September 30, 2016 |
Three Months Ended September 30, 2017 |
|||||||
Revenue |
$ | 542,727 | $ | 538,759 | ||||
Operating expenses: |
||||||||
Direct costs of revenue (excluding depreciation and amortization) |
88,460 | 78,111 | ||||||
Selling, general and administrative |
58,948 | 47,873 | ||||||
Depreciation and amortization |
174,909 | 178,742 | ||||||
|
|
|
|
|||||
Total operating expenses |
322,317 | 304,726 | ||||||
|
|
|
|
|||||
Income from operations |
220,410 | 234,033 | ||||||
Interest expense, net |
243,039 | 261,834 | ||||||
Gain (loss) on early extinguishment of debt |
219,560 | (4,565 | ) | |||||
Other income, net |
324 | 1,797 | ||||||
|
|
|
|
|||||
Income (loss) before income taxes |
197,255 | (30,569 | ) | |||||
Provision for (benefit from) income taxes |
650 | (1,153 | ) | |||||
|
|
|
|
|||||
Net income (loss) |
196,605 | (29,416 | ) | |||||
Net income attributable to noncontrolling interest |
(983 | ) | (996 | ) | ||||
|
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|
|
|||||
Net income (loss) attributable to Intelsat S.A. |
$ | 195,622 | $ | (30,412 | ) | |||
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|
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Net income (loss) per common share attributable to Intelsat S.A.: |
||||||||
Basic |
$ | 1.66 | $ | (0.26 | ) | |||
Diluted |
$ | 1.65 | $ | (0.26 | ) |
10
INTELSAT S.A.
UNAUDITED RECONCILIATION OF NET INCOME/(LOSS) TO EBITDA
($ in thousands)
Three Months Ended September 30, 2016 |
Three Months Ended September 30, 2017 |
|||||||
Net income (loss) |
$ | 196,605 | $ | (29,416 | ) | |||
Add (Subtract): |
||||||||
Interest expense, net |
243,039 | 261,834 | ||||||
Loss (gain) on early extinguishment of debt |
(219,560 | ) | 4,565 | |||||
Provision for (benefit from) income taxes |
650 | (1,153 | ) | |||||
Depreciation and amortization |
174,909 | 178,742 | ||||||
|
|
|
|
|||||
EBITDA |
$ | 395,643 | $ | 414,572 | ||||
|
|
|
|
|||||
EBITDA Margin |
73 | % | 77 | % |
Note:
Intelsat calculates a measure called EBITDA to assess the operating performance of Intelsat S.A. EBITDA consists of earnings before net interest expense, net loss (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.
11
INTELSAT S.A.
UNAUDITED RECONCILIATION OF NET INCOME/(LOSS) TO ADJUSTED EBITDA
($ in thousands)
Three Months Ended September 30, 2016 |
Three Months Ended September 30, 2017 |
|||||||
Net income (loss) |
$ | 196,605 | $ | (29,416 | ) | |||
|
|
|
|
|||||
Add (Subtract): |
||||||||
Interest expense, net |
243,039 | 261,834 | ||||||
Loss (gain) on early extinguishment of debt |
(219,560 | ) | 4,565 | |||||
Provision for (benefit from) income taxes |
650 | (1,153 | ) | |||||
Depreciation and amortization |
174,909 | 178,742 | ||||||
|
|
|
|
|||||
EBITDA |
395,643 | 414,572 | ||||||
|
|
|
|
|||||
Add: |
||||||||
Compensation and benefits |
4,855 | 4,494 | ||||||
Non-recurring and other non-cash items |
4,375 | 1,385 | ||||||
|
|
|
|
|||||
Adjusted EBITDA |
$ | 404,873 | $ | 420,451 | ||||
|
|
|
|
|||||
Adjusted EBITDA Margin |
75 | % | 78 | % |
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 managements 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.
12
INTELSAT S.A.
CONSOLIDATED BALANCE SHEETS
($ in thousands, except per share amounts)
As of December 31, 2016 |
As of September 30, 2017 |
|||||||
(unaudited) | ||||||||
ASSETS |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 666,024 | $ | 580,694 | ||||
Restricted cash |
| 17,541 | ||||||
Receivables, net of allowance of $54,744 in 2016 and $44,372 in 2017 |
203,036 | 194,953 | ||||||
Prepaid expenses and other current assets |
55,908 | 59,125 | ||||||
|
|
|
|
|||||
Total current assets |
924,968 | 852,313 | ||||||
Satellites and other property and equipment, net |
6,185,842 | 6,028,395 | ||||||
Goodwill |
2,620,627 | 2,620,627 | ||||||
Non-amortizable intangible assets |
2,452,900 | 2,452,900 | ||||||
Amortizable intangible assets, net |
391,838 | 360,147 | ||||||
Other assets |
365,834 | 403,480 | ||||||
|
|
|
|
|||||
Total assets |
$ | 12,942,009 | $ | 12,717,862 | ||||
|
|
|
|
|||||
LIABILITIES AND SHAREHOLDERS DEFICIT |
||||||||
Current liabilities: |
||||||||
Accounts payable and accrued liabilities |
$ | 215,987 | $ | 97,599 | ||||
Taxes payable |
16,733 | 8,343 | ||||||
Employee related liabilities |
50,178 | 31,208 | ||||||
Accrued interest payable |
204,840 | 295,030 | ||||||
Current portion of long-term debt |
| 96,527 | ||||||
Deferred satellite performance incentives |
23,455 | 23,855 | ||||||
Deferred revenue |
157,684 | 169,040 | ||||||
Other current liabilities |
64,786 | 45,642 | ||||||
|
|
|
|
|||||
Total current liabilities |
733,663 | 767,244 | ||||||
Long-term debt, net of current portion |
14,198,084 | 14,120,002 | ||||||
Deferred satellite performance incentives, net of current portion |
210,706 | 220,477 | ||||||
Deferred revenue, net of current portion |
906,744 | 824,393 | ||||||
Deferred income taxes |
168,445 | 168,693 | ||||||
Accrued retirement benefits |
186,284 | 175,739 | ||||||
Other long-term liabilities |
148,081 | 126,391 | ||||||
Shareholders deficit: |
||||||||
Common shares; nominal value $0.01 per share |
1,180 | 1,190 | ||||||
Paid-in capital |
2,156,911 | 2,171,011 | ||||||
Accumulated deficit |
(5,715,931 | ) | (5,804,708 | ) | ||||
Accumulated other comprehensive loss |
(76,305 | ) | (73,040 | ) | ||||
|
|
|
|
|||||
Total Intelsat S.A. shareholders deficit |
(3,634,145 | ) | (3,705,547 | ) | ||||
Noncontrolling interest |
24,147 | 20,470 | ||||||
|
|
|
|
|||||
Total liabilities and shareholders deficit |
$ | 12,942,009 | $ | 12,717,862 | ||||
|
|
|
|
13
INTELSAT S.A.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
($ in thousands)
Three Months Ended September 30, 2016 |
Three Months Ended September 30, 2017 |
|||||||
Cash flows from operating activities: |
||||||||
Net income (loss) |
$ | 196,605 | $ | (29,416 | ) | |||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: |
||||||||
Depreciation and amortization |
174,909 | 178,742 | ||||||
Provision for doubtful accounts |
9,553 | 1,571 | ||||||
Foreign currency transaction gain |
(501 | ) | (2,062 | ) | ||||
Loss on disposal of assets |
| 2 | ||||||
Share-based compensation |
4,855 | 4,494 | ||||||
Deferred income taxes |
(4,972 | ) | (8,055 | ) | ||||
Amortization of discount, premium, issuance costs and related costs |
6,722 | 12,292 | ||||||
(Gain) loss on early extinguishment of debt |
(212,724 | ) | 4,565 | |||||
Amortization of actuarial loss and prior service credits for retirement benefits |
840 | 822 | ||||||
Other non-cash items |
844 | (332 | ) | |||||
Changes in operating assets and liabilities: |
||||||||
Receivables |
14,116 | 1,008 | ||||||
Prepaid expenses and other assets |
(9,840 | ) | 3,768 | |||||
Accounts payable and accrued liabilities |
(4,178 | ) | (7,186 | ) | ||||
Accrued interest payable |
118,093 | 87,610 | ||||||
Deferred revenue |
(32,109 | ) | (23,710 | ) | ||||
Accrued retirement benefits |
(2,496 | ) | (2,944 | ) | ||||
Other long-term liabilities |
(5,412 | ) | (8,236 | ) | ||||
|
|
|
|
|||||
Net cash provided by operating activities |
254,305 | 212,933 | ||||||
|
|
|
|
|||||
Cash flows from investing activities: |
||||||||
Payments for satellites and other property and equipment (including capitalized interest) |
(202,837 | ) | (98,857 | ) | ||||
Capital contributions to unconsolidated affiliates |
(5,891 | ) | (7,160 | ) | ||||
Proceeds from insurance settlements |
| 26,804 | ||||||
|
|
|
|
|||||
Net cash used in investing activities |
(208,728 | ) | (79,213 | ) | ||||
|
|
|
|
|||||
Cash flows from financing activities: |
||||||||
Proceeds from issuance of long-term debt |
| 1,500,000 | ||||||
Repayments of long-term debt |
| (1,500,000 | ) | |||||
Debt issuance costs |
(756 | ) | (21,188 | ) | ||||
Payments on tender, debt exchange, and consent |
(34,009 | ) | | |||||
Other payments for satellites |
(18,333 | ) | (17,063 | ) | ||||
Principal payments on deferred satellite performance incentives |
(4,190 | ) | (23,319 | ) | ||||
Dividends paid to noncontrolling interest |
(2,210 | ) | (1,876 | ) | ||||
Restricted cash for collateral |
| 525 | ||||||
Other financing activities |
1,942 | 175 | ||||||
|
|
|
|
|||||
Net cash used in financing activities |
(57,556 | ) | (62,746 | ) | ||||
|
|
|
|
|||||
Effect of exchange rate changes on cash and cash equivalents |
281 | 877 | ||||||
|
|
|
|
|||||
Net change in cash and cash equivalents |
(11,698 | ) | 71,851 | |||||
Cash and cash equivalents, beginning of period |
969,565 | 508,843 | ||||||
|
|
|
|
|||||
Cash and cash equivalents, end of period |
$ | 957,867 | $ | 580,694 | ||||
|
|
|
|
|||||
Supplemental cash flow information: |
||||||||
Interest paid, net of amounts capitalized |
$ | 120,778 | $ | 163,086 | ||||
Income taxes paid, net of refunds |
3,858 | 11,409 | ||||||
Supplemental disclosure of non-cash investing activities: |
||||||||
Accrued capital expenditures and payments for satellites |
$ | (50,987 | ) | $ | (6,962 | ) | ||
Capitalization of deferred satellite performance incentives |
38,309 | 17,120 | ||||||
Supplemental disclosure of non-cash financing activities: |
||||||||
Restricted cash used |
$ | (480,200 | ) | $ | | |||
Restricted cash - letters of credit collateral |
| (525 | ) |
14
INTELSAT S.A.
UNAUDITED RECONCILIATION OF NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
TO FREE CASH FLOW FROM (USED IN) OPERATIONS
($ in thousands)
Three Months Ended September 30, 2016 |
Three Months Ended September 30, 2017 |
|||||||
Net cash provided by operating activities |
$ | 254,305 | $ | 212,933 | ||||
Payments for satellites and other property and equipment (including capitalized interest) |
(202,837 | ) | (98,857 | ) | ||||
Payments for satellites from financing activities |
(18,333 | ) | (17,063 | ) | ||||
|
|
|
|
|||||
Free cash flow from operations |
$ | 33,135 | $ | 97,013 | ||||
|
|
|
|
Note:
Free cash flow from (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 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 companys 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 Intelsats 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.
15
Intelsat S.A.
Quarterly Commentary, 3Q 2017
A number of trends are reflected in the quarterly revenue result, including:
| slower than expected revenue ramp for Intelsat EpicNG, specifically with wireless and enterprise customers, with new contract signings below initial expectations; |
| revenue declines due to certain non-renewals, including point-to-point services moving to fiber alternatives and regional and national satellite operators; |
| continued pricing pressure as services renew for certain wide-beam network services applications, creating a headwind to year-over-year growth; and |
| limited new U.S. government opportunities. |
Contracted backlog at September 30, 2017 was $7.9 billion, representing expected future revenue under existing contracts with customers, as compared to $8.2 billion at June 30, 2017. The largest proportion of our backlog is related to our long-term media contracts.
Until our new assets and strategies, including managed services, achieve greater momentum, our business remains in transition, causing our return to growth to take longer than previously anticipated. Our heavy investment phase related to our high-throughput satellites is now nearing completion. The lower capital expenditures associated with our next replacement cycle are expected to support an improved cash flow profile and financial flexibility over the next several years.
2017 Operational Priorities:
Build upon a stable revenue foundation as Intelsat EpicNG transforms our Globalized Network; introduce new managed services and support development of new technologies that can accelerate the adoption of our high-throughput services.
Our plan includes four operational priorities as we pursue our return to growth in 2017, with third quarter progress described below:
| Maintain our design, manufacturing and launch schedule for the next generation Intelsat EpicNG high-throughput satellite (HTS) fleet and other satellites in our plan to ensure availability of new, differentiated inventory to drive revenue growth. |
| Intelsat 35e successfully completed in-orbit testing and entered into service on August 15, 2017. |
| Intelsat 37e successfully launched on an Arianespace rocket on September 29, 2017. It is expected to enter service in the first quarter of 2018. |
| Accelerate commercialization of Intelsat EpicNG. |
| Intelsat EpicNG backlog expanded in the third quarter, with growth sourced primarily from enterprise, wireless infrastructure and government customers. Contract terms on the entire Intelsat EpicNG fleet continue to be favorable, with the average contract length for growth services being over 5 years. At September 30, 2017, the Intelsat EpicNG backlog was comprised of over 160 contracts. |
Page 2
Intelsat S.A.
Quarterly Commentary, 3Q 2017
| An integral component in accelerating the adoption of Intelsat EpicNG is the introduction of our managed services enabled by the high-performance satellite network, as well as our collaboration with service provider distributors to develop new services. Our managed services platform, IntelsatOne Flex, is expected to reach a major milestone in the fourth quarter when one of the leading maritime services providers begins migrating sites to our network. |
| Maintain our leadership in government services. |
| Intelsats demonstrations of Intelsat EpicNG performance with its government customers are yielding new contracts, primarily with respect to government mobility applications where the Intelsat EpicNG elevated power transmissions support collection of mission critical video information from small antennas. |
| Optimize our capital expenditure plan, and our industry-leading portfolio of spectrum rights. |
On October 2, 2017, Intelsat and Intel Corporation, one of the worlds leaders in computing and communications technologies, submitted a joint proposal under a current U.S. Federal Communications Commission (FCC) Notice of Inquiry regarding enabling the joint-use of our 3700-4200 MHz spectrum with terrestrial mobile services.
The joint proposal seeks to encourage the FCC to adopt our creative and proactive market-based proposal for C-band spectrum use that accommodates the interests both of satellite operators and our media and data customers, as well as the interests of mobile operators. Our reasons for proactively introducing a market-based solution are to create certainty around the use of satellite C-band in the United States, support further investment in the band and place control in the hands of the current users of the band.
The approach contemplates the use of incentive compensation provided by the wireless sector for accommodating joint-use and the opportunity costs of satellite operators related to loss of flexibility and restrictions of our services within the band. The approach, if adopted, supports an accelerated roll-out of 5G, creating new outlets for content and maintaining the technology edge of the U.S. While the issues can be complex, we believe that the speed of our market-based solution would be to the benefit of all parties, in comparison to a government-invoked rule change, which could take more than a decade to effect.
Our proposal is the first step in a potentially lengthy and uncertain process, which would culminate in the issuance of new regulations by the FCC. There can be no assurance that the FCC will adopt our proposal, in whole or in part. The FCC could instead adopt rules significantly less favorable to satellite operators.
Page 3
Intelsat S.A.
Quarterly Commentary, 3Q 2017
Q3 2017 Business Highlights and Customer Set Performance
All 2017 comparisons are to 2016 unless noted otherwise
Network Services
Network Services revenue was $211 million in the third quarter of 2017, an $11 million, or 5 percent, decrease from the prior year quarter. The largest factors contributing to the year-over-year decline were non-renewals and contraction of services by certain cellular backhaul and enterprise customers in Latin America, Europe and Asia-Pacific, non-renewals of point-to-point international trunking services, and pricing adjustments related to renewing wide-beam business. These declines were partially offset by growth in revenue from broadband services for the commercial aeronautical and maritime sectors, as well as revenue recovery from a customer in Latin America.
As compared to the second quarter of 2017, Network Services revenue decreased by $4 million, or 2 percent, largely due to non-renewals of cellular backhaul services more than offsetting growth in mobility applications. |
Third Quarter Network Services Highlights and Business Trends:
Intelsat continues to build backlog commitments for our next generation Intelsat EpicNG fleet, while also booking new business and renewals on our wide-beam assets. In the third quarter of 2017, we signed agreements supporting networks in the enterprise and telecom infrastructure sectors.
Enterprise networkslarge private data networks that use satellite solutions because of geographic reach, efficient broadcast transmissions and reliabilityrepresent one of the largest applications within our network services business. Enterprise contracts signed in the third quarter of 2017 include the following:
| Hughes Network Systems (HNS) signed a multi-year renewal for satellite services across five Intelsat satellites for corporate enterprise and government applications. |
| Under a multi-year agreement, Tangerine Electronics has renewed and expanded satellite services on Intelsat 29e. Leveraging Intelsats high-throughput platform services, Tangerine operates a UHP Networks Hub advanced Very Small Aperture Terminal (VSAT) network servicing the needs of more than 700 schools in Mexico. |
Page 4
Intelsat S.A.
Quarterly Commentary, 3Q 2017
Mobility services, which provide broadband connectivity to planes and ocean vessels, are a fast growing application which uses our wide-beam satellites, Intelsat EpicNG satellites, and our IntelsatOne Flex maritime managed services. Mobility contracts signed in the third quarter include:
| Speedcast, a leading provider of fully managed, remote communications and IT solutions, renewed service commitments across eight Intelsat satellites. The commitments will deliver broadband connectivity to maritime operators, as well as support network infrastructure for enterprise applications, including in the oil and gas sector. |
Intelsat provides essential wireless communications infrastructure, particularly in regions where reliability and flexibility are required:
| Ecuador-based Corporación Nacional de Telecomunicaciones (CNT) E.P., Ecuadors public telecommunications company, renewed and increased satellite services on Intelsat 29e to support enterprise, internet, fixed and mobile telephony services. |
| A leading Japanese global telecommunications company signed a new, multi-year contract with Intelsat to support its upcoming 4G LTE network which will allow the company to further expand and meet Japans connectivity demands. Initially, the company is expected to utilize existing satellite and disaster recovery services which are expected to migrate to our joint venture satellite, Horizons 3e, Intelsats sixth planned Intelsat EpicNG satellite, when it enters service in 2019. |
On a global basis, growth opportunities for our network services business include increased demand for aeronautical and maritime mobility applications, and high-throughput capacity for fixed and mobile broadband applications for telecommunications providers and enterprise networks.
Although high-performance capacity, such as that provided by Intelsat EpicNG, is an important element of capturing this growth, our customers also need managed services that simplify network buildouts, and smaller, more capable, site hardware that is easier to install and operate. As stated previously, we are experiencing a longer sales cycle on Intelsat EpicNG for wireless network and corporate enterprise customers and as such, our new business for these applications is below our initial expectations. In addition, our IntelsatOne Flex managed services for enterprise and maritime applications are not yet at an activity level and scale to contribute meaningfully to revenue growth.
Page 5
Intelsat S.A.
Quarterly Commentary, 3Q 2017
Media
Media revenue was $237 million in the third quarter of 2017, a $20 million, or 9 percent increase, when compared to the prior year period. New revenue from our Intelsat 31 and Intelsat 36 satellites, that entered service in July and September 2016, respectively, contributed to the growth in the quarter, as well as a one-time benefit of approximately $13 million related to advance payments forfeited and fees paid by a customer upon partial termination of services.
As compared to the second quarter of 2017, media revenues increased by $15 million, or 7 percent, primarily due to the fees described above. |
Third Quarter Media Highlights and Business Trends:
Business activity was driven by new and renewing contracts related to Intelsats media distribution neighborhoods in Africa and Latin America.
| Trinity Broadcasting Network (TBN), the worlds largest religious broadcasting network, signed a long-term commitment for the replacement satellite for Intelsat Galaxy 14-R. Under the agreement, TBN will receive in-orbit protection and leverage Intelsats satellite services to distribute high definition (HD) and standard definition (SD) faith based programming to cable head-ends throughout North America. |
| TV Plus, a direct-to-home (DTH) television provider, signed a multi-year renewal for satellite services on Intelsat 19, one of Intelsats premier video neighborhoods. TV Plus will leverage Intelsat 19s video neighborhood to deliver global content locally to viewers in Australia and New Zealand. |
| Arqiva has renewed distribution services on Intelsat 34, broadcasting premium news and video content throughout the Americas. |
| During the third quarter of 2017, the Brazilian regional television broadcaster, TV Catarina, signed a new, multi-year agreement for C-band services on Intelsat 14, our new video neighborhood covering the Latin American region. The investment made to develop the new video neighborhood on Intelsat 14 will enable customers, such as TV Catarina, to distribute high quality, regional programming via a network architecture that is highly reliable, flexible and cost efficient. |
Our next media satellite will be Intelsat 38, currently planned for launch in 2018, which is expected to replace capacity for an existing satellite. In addition, we are investing in the ground infrastructure for our existing satellites to enhance our leading video neighborhoods, providing growth options for our programming customers, particularly in Latin America, such as on Intelsat 14, discussed above.
Page 6
Intelsat S.A.
Quarterly Commentary, 3Q 2017
Government
Third Quarter Government Highlights and Business Trends:
Our government business is relatively stable. Business activity in this customer set reflects the current tempo of our end-customers operations. The pace of RFP issuances and subsequent awards remains slow. We note continued reliance on LPTA (lowest price, technically acceptable) as the predominant evaluation criteria for awards of new business.
| During the third quarter, Intelsat General Corporation (IGC) signed five new Intelsat EpicNG contracts on Intelsat 29e, Intelsat 33e and Intelsat 35e for United States and allied government mobility applications. |
| The Boeing Company activated the second option year of a seven-year contract for 72 MHz on Galaxy 17 and 36 MHz on Galaxy 28 to global in-flight broadband and communication services to the senior leaders of the United States government. The service, which began in 2016, also includes a one-year renewal of teleport services. |
Over the mid-term, our strategy to grow our government business includes providing mobility services to the U.S. government for aeronautical and ground mobile requirements, especially as our next generation Intelsat EpicNG services are activated in regions of interest to the U.S. government. We are also positioning to provide satellite-related operations support as the government considers commercialization of certain satellite operations capabilities.
Page 7
Intelsat S.A.
Quarterly Commentary, 3Q 2017
Fleet and Operations Update
The station-kept 36 MHz transponder equivalent unit count on our wide-beam fleet was approximately 2,025 at the end of the third quarter of 2017 as Intelsat 903 was removed from station-kept service as it drifts to a new orbital location following its replacement by Intelsat 35e. Utilization was at 78 percent, consistent with the 2017 second quarter utilization rate of 78 percent.
As of September 30, 2017, the HTS Intelsat EpicNG unit count increased to approximately 825 units in service, reflecting the addition of Intelsat 35e.
Intelsat currently has two satellites in the design, manufacturing and launch stages that are covered by our capital expenditure plan. Our capital expenditure plan also contemplates starts on three additional replacement satellites, for which manufacturing contracts have not yet been signed, and the use of MEVs to extend the operational life of two of our wide-beam satellites. In addition, we are working on one custom payload being built on a third-party satellite and a separate joint venture satellite which do not require capital expenditures, each noted below as a Non-Capex Satellite.
Our owned satellites, third-party payloads and a joint venture project currently in the design and manufacturing stages are noted below. Intelsat EpicNG-class satellites are noted with a small e following the satellite number.
Satellite |
Follows | Orbital Location |
Launch Provider |
Estimated Launch Date |
Estimated In-Service Date |
Application | ||||||
Intelsat 37e |
IS-901 | 342°E | Arianespace Ariane 5 | Launched Sept. 29, 2017 |
1Q18 | Broadband Infrastructure | ||||||
Intelsat 39 |
IS-902 | 62°E | Arianespace Ariane 5 | 2019 | 2019 | Broadband Infrastructure | ||||||
Non-Capex Satellite |
Follows | Orbital Location |
Launch Provider |
Estimated Launch Date |
Estimated In-Service Date |
Application | ||||||
Intelsat 38 |
IS-904,G-11 | 45°E | Arianespace Ariane 5 | 2Q18 | 4Q18 | Broadband & Media | ||||||
Horizons 3e |
IS-805 | 169°E | Arianespace Ariane 5 | 4Q18/1Q19 | 2019 | Broadband Infrastructure |
Page 8
Intelsat S.A.
Quarterly Commentary, 3Q 2017
Other Third Quarter 2017 Financial Highlights
Cash Flows
During the third quarter of 2017, net cash provided by operating activities was $213 million. Cash paid for interest in the third quarter was $163 million. Capitalized interest was $15 million.
Capital expenditures were $99 million and payments for satellites from financing activities were $17 million. Combined, this resulted in free cash flow from operations1 of $97 million for the third quarter of 2017.
Our ending cash balance at September 30, 2017 was $581 million.
Capital Structure Activities
As previously disclosed, on July 5, 2017, Intelsat Jackson completed an offering of $1.5 billion aggregate principal amount of 9.75% Senior Notes due 2025, and used the net proceeds from the sale of the notes, along with other available cash, to satisfy and discharge all $1.5 billion aggregate principal amount of Intelsat Jacksons senior notes due in 2019, and to pay related fees and expenses.
2017 Financial Outlook
Today, Intelsat provided an update on its 2017 revenue and Adjusted EBITDA guidance issued on June 16, 2017, stating that we expect the following:
Revenue: Given current business trends, we now expect full-year 2017 revenue to be at the bottom of the previously provided revenue guidance of $2.150 billion to $2.180 billion for 2017.
Adjusted EBITDA: We continue to expect 2017 performance to be in the range of $1.640 billion to $1.670 billion, reflecting continued focus on operational efficiency, as we optimize parts of our operations to fund further investment in our managed service infrastructure.
Capital Expenditures: Intelsat maintained its 2017 capital expenditure guidance ranges for the three calendar years 2017 through 2019 (the Guidance Period) issued on June 16, 2017:
| 2017: $500 million to $550 million; |
| 2018: $400 million to $475 million; and |
| 2019: $400 million to $500 million. |
Our capital expenditure guidance includes capitalized interest. The net number of transponder equivalents is expected to increase by a compound annual growth rate (CAGR) of 10 percent as a result of the net new capacity entering service during the Guidance Period. This reflects the incremental capacity related to the launches of the Intelsat EpicNG high-throughput satellites, five of which are expected to enter service during the Guidance Period, net of satellites de-orbited or moved to inclined service. Capital expenditure incurrence is subject to timing of achievement of contract, satellite manufacturing, launch and other milestones.
Cash Taxes: We expect annual cash taxes to be approximately $30 million to $35 million.
Stephen Spengler, Chief Executive Officer, Intelsat S.A.
Jacques Kerrest, Executive Vice President and Chief Financial Officer, Intelsat S.A.
1 In this quarterly commentary, financial measures are presented both in accordance with U.S. GAAP and also on a non-U.S. GAAP basis. EBITDA, Adjusted EBITDA (AEBITDA), free cash flow from (used in) operations and related margins included in this commentary are non-U.S. GAAP financial measures. Please see the consolidated financial information found in our earnings release and available on our website for information reconciling non-U.S. GAAP financial measures to comparable U.S. GAAP financial measures.
Page 9
Intelsat S.A.
Quarterly Commentary, 3Q 2017
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 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 statements regarding certain plans, expectations, goals, projections, anticipations, estimations, predictions, intentions, outlook and beliefs about 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 belief that the scale of our fleet can reduce the financial impact of satellite 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 Intelsats 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 Intelsats 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 anomalies, 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; potential adverse reactions or changes to business or employee relationships, resulting from the termination of the proposed combination of the businesses of Intelsat and OneWeb pursuant to a Combination Agreement (the Merger), and a the proposed cash investment by SoftBank pursuant to a Share Purchase Agreement (the SoftBank Investment); competitive responses to the now terminated Merger and SoftBank Investment; diversion of managements attention from ongoing business operations and opportunities as a result of the terminated Merger and SoftBank Investment; and litigation. Known risks include, among others, the risks described in Intelsats annual report on Form 20-F for the year ended December 31, 2016, as amended by Amendment No. 1 on Form 20-F/A filed on October 11, 2017, and its other filings with the U.S. Securities and Exchange Commission, the political, economic 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 Intelsats 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.
Contact
Dianne VanBeber
Vice President, Investor Relations and Corporate Communications
dianne.vanbeber@intelsat.com
+1 703-559-7406
Page 10