Telesat today announced its financial results for the three and
six-month periods ended June 30, 2020. All amounts are in Canadian
dollars and reported under International Financial Reporting
Standards (“IFRS”) unless otherwise noted.
For the quarter ended June 30, 2020, Telesat
reported consolidated revenue of $208 million, a decrease of 10%
($23 million) compared to the same period in 2019. When adjusted
for changes in foreign exchange rates, revenue declined 11% ($25
million) compared to 2019. Revenue decreases were primarily due to
a reduction of service for one of Telesat’s North American DTH
customers and lower revenue due to the completion of the term for
prepaid services in a customer agreement that was accounted for as
having a significant financing component. In addition, revenue
associated with short-term services provided to another satellite
operator in the second quarter of 2019 did not recur in 2020.
Operating expenses for the quarter were $46
million, an increase of $8 million from 2019. When adjusted for
changes in foreign exchange rates, operating expenses increased by
$7 million from 2019. Approximately 50% of the increase in
operating expenses was the result of a provision for bad debt
primarily related to customers in the mobility sector whose
business is under pressure from COVID-19. Other increased
expenses include compensation associated with the Low Earth Orbit
(“LEO”) program, professional fees, and in-orbit
insurance.
Adjusted EBITDA1 was $164 million, a decrease of
17% ($33 million) or, when adjusted for foreign exchange rates, a
decrease of $34 million. The Adjusted EBITDA margin1 for the second
quarter of 2020 was 79.1%, compared to 85.2% in 2019.
For the quarter ended June 30, 2020, net income
was $162 million, compared to net income of $135 million for 2019.
The positive variation for the quarter was principally the result
of higher non-cash foreign exchange gains in 2020, arising from the
translation of Telesat’s U.S. dollar denominated debt into Canadian
dollars and lower interest expense, partially offset by non-cash
losses on financial instruments in 2020 compared to gains in
2019.
For the six-month period ended June 30, 2020,
Telesat reported consolidated revenue of $417 million, a decrease
of 8% ($37 million) compared to the same period in 2019. Revenue
decreases were primarily due to a reduction of service for one of
Telesat’s North American DTH customers and lower revenue due to the
completion of the term for prepaid services in a customer agreement
that was accounted for as having a significant financing component.
In addition, revenue associated with short-term services provided
to another satellite operator in the second quarter of 2019 did not
recur in 2020. These revenue decreases were partially offset by
higher equipment sales and new services provided to users impacted
by a failure of a competitor’s satellite in April 2019.
Operating expenses for the six-month period were
$92 million, an increase of $14 million from 2019. Approximately
40% of the increase in operating expenses was the result of a
provision for bad debt primarily related to customers in the
mobility sector whose business is under pressure from
COVID-19. Other increased expenses include compensation
associated with the LEO program, professional fees, and in-orbit
insurance.
Adjusted EBITDA1 was $330 million, a decrease of
14% ($54 million) or, when adjusted for foreign exchange rates, a
decrease of $53 million. The Adjusted EBITDA margin1 for the first
six months of 2020 was 79.3%, compared to 84.7% in 2019.
For the six months ended June 30, 2020, the net
loss was $116 million, compared to net income of $307 million for
2019. The negative variation for the period was principally the
result of non-cash foreign exchange losses in 2020, arising from
the translation of Telesat’s U.S. dollar denominated debt into
Canadian dollars compared to foreign exchange gains in 2019, and
non-cash losses on financial instruments in 2020 compared to gains
in 2019.
“Our second quarter results reflect certain
factors that we anticipated, namely the non-renewal late last year
of a contract with a North American DTH customer and the end of the
revenue amortization period of a contract with another customer, as
well as certain factors that we had not anticipated, namely the
COVID-19 pandemic and a paucity of opportunities this year to
provide short-term satellite services to other satellite
operators,” commented Dan Goldberg, Telesat’s President and
CEO. “These anticipated and unanticipated factors account for
our reduced revenue and Adjusted EBITDA1 over the first two
quarters of this year relative to the prior period. Having said
that, the overwhelming majority of our revenues appears to be
unaffected by the pandemic and we continue to have robust operating
margins and strong cash flow, which is underpinned by our
substantial contractual backlog. In addition, we continue to make
substantial progress on the development of our planned
revolutionary LEO satellite constellation as well as our other
strategic objectives, including leveraging our valuable spectrum
rights.”
Business
Highlights
- At June 30, 2020:
- Telesat had contracted backlog2 for future services of
approximately $2.9 billion.
- Fleet utilization was 81%.
Telesat’s quarterly report on Form 6-K for the
quarter ended June 30, 2020, has been filed with the United States
Securities and Exchange Commission (“SEC”) and may be accessed on
the SEC’s website at www.sec.gov.
Conference Call
The toll-free dial-in number for the
teleconference is +1 800 952 5114. Callers outside of North
America should dial +1 416 641 6104. The conference confirmation
number is 4333921. The access code is 5349569 followed by the
number sign (#). Please allow at least 15 minutes prior to
the scheduled start time to connect to the teleconference.
Dial-in Audio Replay:A replay of the
teleconference will be available one hour after the end of the call
on July 30, 2020 until 11:59 p.m. ET on August 13, 2020. To
access the replay, please call +1 800 408 3053. Callers
outside of North America should dial +1 905 694 9451. The
access code is 3381962 followed by the number sign (#).
About Telesat
Backed by a legacy of engineering excellence,
reliability and industry-leading customer service, Telesat has
grown to be one of the largest and most successful global satellite
operators. Telesat works collaboratively with its customers to
deliver critical connectivity solutions that tackle the world’s
most complex communications challenges, providing powerful
advantages that improve their operations and drive growth. Telesat
LEO, our Low Earth Orbit network will revolutionize global
broadband connectivity by delivering a combination of high
capacity, security, resiliency and affordability with ultra-low
latency and fiber-like speeds.
Privately held and headquartered in Ottawa,
Canada with offices and facilities around the world, Telesat’s
principal shareholders are Canada’s Public Sector Pension
Investment Board and Loral Space & Communications Inc. (NASDAQ:
LORL). For more information, visit www.telesat.com.
Contact: Michael
BolithoTelesat+1.613.748.8828ir@telesat.com
Forward-Looking Statements Safe
Harbor
This news release contains statements that are
not based on historical fact and are ''forward-looking statements''
within the meaning of the Private Securities Litigation Reform Act
of 1995. When used in this news release, the words “anticipated”,
“appears”, “continue”, “planned” and "continue", or other
variations of these words or other similar expressions are intended
to identify forward-looking statements and information. Actual
results may differ materially from the expectations expressed or
implied in the forward-looking statements as a result of known and
unknown risks and uncertainties. Detailed information about some of
the known risks and uncertainties is included in the "Risk Factors"
sections of Telesat Canada's Annual Report on Form 20-F for the
fiscal year ended December 31, 2019 and in Telesat Canada’s
Quarterly Report on Form 6-K for the quarters ending March 31, 2020
and June 30, 2020, all of which can be obtained from the SEC
website.
Known risks and uncertainties include but are
not limited to: risks associated with operating satellites and
providing satellite services, including satellite construction or
launch delays, launch failures, in-orbit failures or impaired
satellite performance, the impact of COVID-19 on
Telesat’s business and the economic environment, the ability to
successfully deploy an advanced global LEO satellite constellation,
the availability of government and/or other funding for the LEO
satellite constellation, the receipt of proceeds in relation to the
re-allocation of C-band spectrum, volatility in exchange rates, the
ability to expand our existing satellite utilization and risks
associated with domestic and foreign government regulation. The
foregoing list of important factors is not exhaustive. The
information contained in this news release reflects Telesat's
beliefs, assumptions, intentions, plans and expectations as of the
date of this news release. Except as required by law, Telesat
disclaims any obligation or undertaking to update or revise the
information herein.
Telesat Canada |
|
|
|
|
|
|
Unaudited
Interim Condensed Consolidated Statements of Income
(Loss) |
For the
periods ended June 30 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months |
|
Six Months |
|
(in
thousands of Canadian dollars) |
|
|
2020 |
|
|
|
2019 |
|
|
|
2020 |
|
|
|
2019 |
|
|
Revenue |
|
$ |
207,834 |
|
|
$ |
231,299 |
|
|
$ |
416,507 |
|
|
$ |
453,612 |
|
|
Operating expenses |
|
|
(46,051 |
) |
|
|
(37,953 |
) |
|
|
(91,527 |
) |
|
|
(77,073 |
) |
|
Depreciation |
|
|
(55,615 |
) |
|
|
(62,584 |
) |
|
|
(111,222 |
) |
|
|
(124,875 |
) |
|
Amortization |
|
|
(4,306 |
) |
|
|
(6,442 |
) |
|
|
(8,617 |
) |
|
|
(12,106 |
) |
|
Other operating gains (losses), net |
|
|
9 |
|
|
|
(14 |
) |
|
|
(212 |
) |
|
|
(87 |
) |
|
Operating income |
|
|
101,871 |
|
|
|
124,306 |
|
|
|
204,929 |
|
|
|
239,471 |
|
|
Interest expense |
|
|
(51,067 |
) |
|
|
(65,190 |
) |
|
|
(105,801 |
) |
|
|
(130,272 |
) |
|
Interest and other income |
|
|
1,540 |
|
|
|
5,301 |
|
|
|
5,792 |
|
|
|
9,976 |
|
|
(Loss) gain on changes in fair value of financial
instruments |
(827 |
) |
|
|
22,827 |
|
|
|
(44,599 |
) |
|
|
80,163 |
|
|
Gain (loss) on foreign exchange |
|
|
125,270 |
|
|
|
58,438 |
|
|
|
(165,422 |
) |
|
|
128,778 |
|
|
Income (loss) before tax |
|
|
176,787 |
|
|
|
145,682 |
|
|
|
(105,101 |
) |
|
|
328,116 |
|
|
Tax expense |
|
|
(15,164 |
) |
|
|
(10,213 |
) |
|
|
(11,364 |
) |
|
|
(20,747 |
) |
|
Net income (loss) |
|
$ |
161,623 |
|
|
$ |
135,469 |
|
|
$ |
(116,465 |
) |
|
$ |
307,369 |
|
Telesat
Canada |
|
|
|
|
|
|
Unaudited
Interim Condensed Consolidated Balance Sheets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in
thousands of Canadian dollars) |
|
June 30, 2020 |
|
December 31, 2019 |
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
Cash and cash
equivalents |
|
$ |
1,187,273 |
|
$ |
1,027,222 |
|
Trade and other
receivables |
|
|
73,051 |
|
|
64,062 |
|
Other current
financial assets |
|
|
3,971 |
|
|
210 |
|
Prepaid expenses
and other current assets |
|
|
40,846 |
|
|
43,724 |
|
Total
current assets |
|
|
1,305,141 |
|
|
1,135,218 |
|
Satellites,
property and other equipment |
|
|
1,389,473 |
|
|
1,458,933 |
|
Deferred tax
assets |
|
|
14,610 |
|
|
12,412 |
|
Other long-term
financial assets |
|
|
32,242 |
|
|
57,730 |
|
Other long-term
assets |
|
|
8,068 |
|
|
8,264 |
|
Intangible
assets |
|
|
792,752 |
|
|
802,791 |
|
Goodwill |
|
|
2,446,603 |
|
|
2,446,603 |
|
Total
assets |
|
$ |
5,988,889 |
|
$ |
5,921,951 |
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
Trade and other
payables |
|
$ |
24,559 |
|
$ |
26,247 |
|
Other current
financial liabilities |
|
|
42,533 |
|
|
38,281 |
|
Other current
liabilities |
|
|
80,846 |
|
|
72,315 |
|
Current
indebtedness |
|
|
25,456 |
|
|
24,408 |
|
Total
current liabilities |
|
|
173,394 |
|
|
161,251 |
|
Long-term
indebtedness |
|
|
3,842,108 |
|
|
3,688,391 |
|
Deferred tax
liabilities |
|
|
325,989 |
|
|
348,762 |
|
Other long-term
financial liabilities |
|
|
46,513 |
|
|
42,511 |
|
Other long-term
liabilities |
|
|
416,214 |
|
|
435,711 |
|
Total
liabilities |
|
|
4,804,218 |
|
|
4,676,626 |
|
|
|
|
|
|
|
|
|
Shareholders' Equity |
|
|
|
|
|
Share capital |
|
|
154,895 |
|
|
154,895 |
|
Accumulated
earnings |
|
|
914,590 |
|
|
1,031,055 |
|
Reserves |
|
|
115,186 |
|
|
59,375 |
|
Total
shareholders' equity |
|
|
1,184,671 |
|
|
1,245,325 |
|
Total
liabilities and shareholders' equity |
$ |
5,988,889 |
|
$ |
5,921,951 |
|
Telesat
Canada |
|
|
|
|
|
|
Unaudited
Interim Condensed Consolidated Statements of Cash
Flows |
|
For the six
months ended June 30 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in
thousands of Canadian dollars) |
|
2020 |
|
|
2019 |
|
|
Cash flows
from operating activities |
|
|
|
|
|
|
|
Net (loss) income
|
|
$ |
(116,465 |
) |
|
$ |
307,369 |
|
|
Adjustments to
reconcile net (loss) income to cash flows from operating
activities |
|
|
|
|
|
|
|
|
Depreciation |
|
|
111,222 |
|
|
|
124,875 |
|
|
|
Amortization |
|
|
8,617 |
|
|
|
12,106 |
|
|
|
Tax expense |
|
|
11,364 |
|
|
|
20,747 |
|
|
|
Interest expense |
|
|
105,801 |
|
|
|
130,272 |
|
|
|
Interest income |
|
|
(5,860 |
) |
|
|
(10,130 |
) |
|
|
Loss (gain) on
foreign exchange |
|
|
165,422 |
|
|
|
(128,778 |
) |
|
|
Loss (gain) on
changes in fair value of financial instruments |
|
|
44,599 |
|
|
|
(80,163 |
) |
|
|
Share-based
compensation |
|
|
4,885 |
|
|
|
7,108 |
|
|
|
Loss on disposal of
assets |
|
|
212 |
|
|
|
87 |
|
|
|
Other |
|
|
(30,803 |
) |
|
|
(54,246 |
) |
|
Income taxes paid,
net of income taxes received |
|
|
(10,965 |
) |
|
|
(50,237 |
) |
|
Interest paid, net of
interest received |
|
|
(95,933 |
) |
|
|
(93,097 |
) |
|
Operating assets and
liabilities |
|
|
(44,882 |
) |
|
|
10,195 |
|
|
Net cash from
operating activities |
|
|
147,214 |
|
|
|
196,108 |
|
|
|
|
|
|
|
|
|
|
Cash flows
used in investing activities |
|
|
|
|
|
|
|
Purchases for
satellite programs |
|
|
(897 |
) |
|
|
(1,727 |
) |
|
Purchase of property
and other equipment |
|
|
(9,122 |
) |
|
|
(4,589 |
) |
|
Purchase of
intangible assets |
|
|
(5 |
) |
|
|
(24,901 |
) |
|
Net cash used
in investing activities |
|
|
(10,024 |
) |
|
|
(31,217 |
) |
|
|
|
|
|
|
|
|
|
Cash flows
used in financing activities |
|
|
|
|
|
|
|
Repayment of
indebtedness |
|
|
(12,972 |
) |
|
|
(15,637 |
) |
|
Payments of principal
on lease liabilities |
|
|
(712 |
) |
|
|
(586 |
) |
|
Satellite performance
incentive payments |
|
|
(4,771 |
) |
|
|
(4,861 |
) |
|
Government grant
received |
|
|
5,013 |
|
|
|
— |
|
|
Dividends paid on
Director Voting preferred shares |
|
|
— |
|
|
|
(10 |
) |
|
Net cash used
in financing activities |
|
|
(13,442 |
) |
|
|
(21,094 |
) |
|
|
|
|
|
|
|
|
|
|
Effect of changes in
exchange rates on cash and cash equivalents |
|
|
36,303 |
|
|
|
(25,986 |
) |
|
|
|
|
|
|
|
|
|
|
Increase in cash and
cash equivalents |
|
|
160,051 |
|
|
|
117,811 |
|
|
Cash and cash
equivalents, beginning of period |
|
|
1,027,222 |
|
|
|
768,433 |
|
|
Cash and cash
equivalents, end of period |
|
$ |
1,187,273 |
|
|
$ |
886,244 |
|
|
|
|
|
|
|
|
|
|
Telesat’s Adjusted EBITDA margin(1):
|
|
Three months ended June
30, |
|
Six months ended June 30, |
(in thousands of Canadian dollars) (unaudited) |
|
2020 |
|
|
2019 |
|
|
2020 |
|
|
2019 |
|
Net income (loss) |
|
$ |
161,623 |
|
|
$ |
135,469 |
|
|
$ |
(116,465 |
) |
|
$ |
307,369 |
|
Tax expense |
|
|
15,164 |
|
|
|
10,213 |
|
|
|
11,364 |
|
|
|
20,747 |
|
Loss (gain) on changes in fair value of financial instruments |
|
|
827 |
|
|
|
(22,827 |
) |
|
|
44,599 |
|
|
|
(80,163 |
) |
(Gain) loss on foreign exchange |
|
|
(125,270 |
) |
|
|
(58,438 |
) |
|
|
165,422 |
|
|
|
(128,778 |
) |
Interest and other income |
|
|
(1,540 |
) |
|
|
(5,301 |
) |
|
|
(5,792 |
) |
|
|
(9,976 |
) |
Interest expense |
|
|
51,067 |
|
|
|
65,190 |
|
|
|
105,801 |
|
|
|
130,272 |
|
Depreciation |
|
|
55,615 |
|
|
|
62,584 |
|
|
|
111,222 |
|
|
|
124,875 |
|
Amortization |
|
|
4,306 |
|
|
|
6,442 |
|
|
|
8,617 |
|
|
|
12,106 |
|
Other operating (gains) losses, net |
|
|
(9 |
) |
|
|
14 |
|
|
|
212 |
|
|
|
87 |
|
Non-recurring compensation expenses(3) |
|
|
264 |
|
|
|
293 |
|
|
|
624 |
|
|
|
704 |
|
Non-cash expense related to share-based compensation |
|
|
2,290 |
|
|
|
3,456 |
|
|
|
4,885 |
|
|
|
7,108 |
|
Adjusted EBITDA |
|
$ |
164,337 |
|
|
$ |
197,095 |
|
|
$ |
330,489 |
|
|
$ |
384,351 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
$ |
207,834 |
|
|
$ |
231,299 |
|
|
$ |
416,507 |
|
|
$ |
453,612 |
|
Adjusted EBITDA Margin |
|
|
79.1 |
% |
|
|
|
|
85.2 |
% |
|
|
79.3 |
% |
|
|
84.7 |
% |
End Notes
1 The common definition of EBITDA is “Earnings
Before Interest, Taxes, Depreciation and Amortization.” In
evaluating financial performance, Telesat uses revenue and deducts
certain operating expenses (including share-based compensation
expense and unusual and non-recurring items, including
restructuring related expenses) to obtain operating income before
interest expense, taxes, depreciation and amortization (“Adjusted
EBITDA”) and the Adjusted EBITDA margin (defined as the ratio of
Adjusted EBITDA to revenue) as measures of Telesat’s operating
performance.
Adjusted EBITDA allows Telesat and investors to
compare Telesat’s operating results with that of competitors
exclusive of depreciation and amortization, interest and investment
income, interest expense, taxes and certain other expenses.
Financial results of competitors in the satellite services industry
have significant variations that can result from timing of capital
expenditures, the amount of intangible assets recorded, the
differences in assets’ lives, the timing and amount of investments,
the effects of other income (expense), and unusual and
non-recurring items. The use of Adjusted EBITDA assists Telesat and
investors to compare operating results exclusive of these items.
Competitors in the satellite services industry have significantly
different capital structures. Telesat believes the use of Adjusted
EBITDA improves comparability of performance by excluding interest
expense.
Telesat believes the use of Adjusted EBITDA and
the Adjusted EBITDA margin along with IFRS financial measures
enhances the understanding of Telesat’s operating results and is
useful to Telesat and investors in comparing performance with
competitors, estimating enterprise value and making investment
decisions. Adjusted EBITDA as used here may not be the same as
similarly titled measures reported by competitors. Adjusted EBITDA
should be used in conjunction with IFRS financial measures and is
not presented as a substitute for cash flows from operations as a
measure of Telesat’s liquidity or as a substitute for net income as
an indicator of Telesat’s operating performance.
2 Remaining performance obligations, which we
refer to as contracted revenue backlog, represents Telesat’s
expected future revenue from existing service contracts (without
discounting for present value) including any deferred revenue that
Telesat will recognize in the future in respect of cash already
received. The majority of Telesat’s contracted revenue backlog is
generated from contractual agreements for satellite capacity.
3 Includes severance payments and special compensation and
benefits for executives and employees.
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