Telesat (NASDAQ and TSX: TSAT), one of the world’s largest and most
innovative satellite operators, today announced its financial
results for the three and six-month periods ended June 30, 2022.
All amounts are in Canadian dollars and reported under
International Financial Reporting Standards (“IFRS”) unless
otherwise noted.
“I am very pleased with our financial
performance for the second quarter and first half of the year, as
it positions us to exceed the revenue and Adjusted EBITDA1 guidance
we gave at the outset of the year,” commented Dan Goldberg,
Telesat’s President and CEO. “Our business continues to generate
strong cash flows, ending the first half of the year with $1.5
billion in cash, while delivering industry-leading Adjusted EBITDA
margins1, high capacity utilization and a substantial contractual
backlog.”
Goldberg added: “In the second quarter we
continued to purchase in the open market our senior unsecured
notes. To date, we have repurchased notes with an aggregate face
value of US$160 million, further underscoring our confidence in the
future of our business and our view that the notes are trading
below fair value. On Telesat Lightspeed, our revolutionary planned
Low Earth Orbit satellite constellation, we worked closely with our
prospective suppliers over the last quarter to refine key elements
of the program. We remain highly confident in the promise of
Telesat Lightspeed and expect to have greater clarity on our
financing sources for the program toward the end of this year.”
For the quarter ended June 30, 2022, Telesat
reported consolidated revenue of $187 million, a decrease of 1% ($1
million) compared to the same period in 2021. When adjusted for
changes in foreign exchange rates, revenue declined 3% ($6 million)
compared to 2021. The revenue decrease was primarily due to a
reduction on renewal of a long-term agreement with a North American
direct-to-home customer, partially offset by an early termination
payment received from a customer in Latin America and an increase
in services provided to customers in the mobility market as it
continues to recover from the impact of COVID-19.
Operating expenses for the second quarter were
$59 million, a decrease of $6 million from the same period in 2021.
The change in foreign exchange rates had a minimal impact. The
decrease was primarily due to lower non-cash share-based
compensation combined with higher professional fees incurred in
2021 relating to Telesat becoming a public company.
Adjusted EBITDA1 for the second quarter was $146
million, a decrease of 1% ($2 million) or, when adjusted for
foreign exchange rates, a decrease of 4% ($5 million). The Adjusted
EBITDA margin1 was 78.4%, compared to 78.7% in the same period in
2021.
Telesat’s net loss for the second quarter was $4
million, compared to net income of $53 million for the second
quarter of 2021. The negative variation was principally due to a
non-cash foreign exchange loss for the second quarter of 2022
compared to a non-cash foreign exchange gain for the same period in
the prior year, primarily as a result of the U.S. dollar
strengthening in the second quarter of 2022 as opposed to the
weakening in the same period in the prior year. This loss was
partially offset by a gain on extinguishment of repurchased
debt.
For the six-month period ended June 30, 2022,
Telesat reported consolidated revenue of $372 million, a decrease
of 2% ($6 million) compared to the same period in 2021. When
adjusted for changes in foreign exchange rates, revenue declined 3%
($10 million) compared to 2021. The revenue decrease was primarily
due to lower revenue from North American direct-to-home services,
combined with a decrease in revenues from terminations and
reductions on contract renewal of certain services. This was
partially offset by increased services provided to customers in the
mobility market as it continues to recover from the impact of
COVID-19, an early termination payment from a customer in Latin
America, and higher revenue associated with the Defense Advanced
Research Projects Agency program.
Operating expenses for the six-month period
ended June 30, 2022 were $123 million, an increase of $18 million
from 2021. The change in foreign exchange rates had a minimal
impact. The increase was primarily due to higher non-cash
share-based compensation, the reversal of a bad debt provision in
the first quarter of 2021, which had the impact of lowering
operating expenses in the prior year period, and higher expenses
(including insurance) in 2022 associated with being a public
company. These increases were partially offset by higher
professional fees incurred in 2021 relating to Telesat becoming a
public company.
Adjusted EBITDA1 for the six-month period was
$292 million, a decrease of 3% ($8 million) or, when adjusted for
foreign exchange rates, a decrease of 4% ($12 million). The
Adjusted EBITDA margin1 was 78.4%, compared to 79.3% in the same
period in 2021.
For the six months ended June 30, 2022, net
income was $56 million, compared to $94 million for the 2021. The
decrease was principally due to a non-cash foreign exchange loss
compared to a non-cash foreign exchange gain for the same period in
the prior year, primarily as a result of the U.S. dollar
strengthening as opposed to the weakening in the same period in the
prior year. This loss was partially offset by a gain on
extinguishment of debt.
2022 Financial Outlook
- Telesat now expects its full year
2022 revenues (assuming a foreign exchange rate of US$1 = C$1.30)
to be between $740 million and $750 million. (Previously between
$720 million and $740 million)
- Telesat now expects its Adjusted
EBITDA1 (assuming a foreign exchange rate of US$1 =C$1.30) to be
between $545 million and $560 million in 2022. (Previously between
$525 million and $545 million)
- For 2022, Telesat still expects its
cash flows used in investing activities to be in the range of
US$100 million to US$120 million. Once Telesat has finalized
arrangements around the construction and financing of its Telesat
Lightspeed program, it will provide a further update on the
anticipated capital expenditures for the year, which could increase
substantially.
Business Highlights
- At June 30, 2022:
- Telesat had contracted backlog2 for
future services of approximately $1.9 billion (excluding
contractual backlog associated with Telesat Lightspeed).
- Fleet utilization was
86%.
- Repurchase of 6.5% Senior Unsecured
Notes:
- For the six months ended June 30,
2022, Telesat repurchased the 6.5% Senior Unsecured Notes with a
face value of $202.1 million (US$160 million) by way of open market
purchases in exchange for $97.2 million (US$77.0 million).
- These repurchases, combined with
the related write-off of debt issue costs and prepayment options,
resulted in a gain on extinguishment of debt of $106.9 million
(US$84.5 million).
- Telesat surrendered these purchased
6.5% Senior Unsecured Notes for retirement.
-
Telesat’s Board of Directors has authorized the purchase of up to
US$100 million in face value of additional Telesat debt.
Telesat’s quarterly report on Form 6-K for the
quarter ended June 30, 2022, has been filed with the United States
Securities and Exchange Commission (“SEC”) and the Canadian
securities regulatory authorities, and may be accessed on the SEC’s
website at www.sec.gov and on the System for Electronic Document
Analysis and Retrieval (“SEDAR”) website at www.sedar.com.
Conference Call
Telesat has scheduled a conference call on
Friday, August 5, 2022, at 10:30 a.m. ET to discuss its financial
results for the three and six-month periods ended June 30, 2022.
The call will be hosted by Daniel S. Goldberg, President and Chief
Executive Officer, and Andrew Browne, Chief Financial Officer, of
Telesat.
Dial-in Instructions:
The toll-free dial-in number for the
teleconference is +1 800 806 5484. Callers outside of North America
should dial +1 416 340 2217. The access code is 5717375 followed by
the number sign (#). Please allow at least 15 minutes prior to the
scheduled start time to connect to the teleconference. In the event
of technical issues, please dial *0 and advise the conference call
operator of the company name (“Telesat”) and the name of the
moderator (Michael Bolitho).
Webcast:
The conference call can also be accessed, as a listen in only,
at https://edge.media-server.com/mmc/p/rmcxxyqj. A replay of
the webcast will be archived on Telesat’s website under the tab
“Investors”.
Dial-in Audio Replay:
A replay of the teleconference will be available
one hour after the end of the call on August 5, 2022 until 11:59
p.m. ET on August 19, 2022. To access the replay, please call +1
800 408 3053. Callers from outside North America should dial +1 905
694 9451. The access code is 8406660 followed by the number sign
(#).
About TelesatBacked by a legacy
of engineering excellence, reliability and industry-leading
customer service, Telesat (NASDAQ and TSX: TSAT) is 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 profitable growth.
Continuously innovating to meet the connectivity
demands of the future, Telesat Lightspeed, the company’s Low Earth
Orbit (“LEO”) satellite network, will be the first and only LEO
network optimized to meet the rigorous requirements of telecom,
government, maritime and aeronautical customers. Telesat Lightspeed
will redefine global satellite connectivity with ubiquitous,
affordable, high-capacity links with fibre-like speeds. For updates
on Telesat, follow us on Twitter, LinkedIn, or visit
www.telesat.com.
Contacts:Investor Relations
Hugh Harley |
|
|
Michael Bolitho |
+1 613 748 8424 |
|
|
+1 613 748 8828 |
ir@telesat.com |
|
|
ir@telesat.com |
Forward-Looking Statements Safe Harbor
This news release contains statements that are
not based on historical fact, including financial outlook for 2022
and potential future debt repurchases, and are “forward-looking
statements’’ within the meaning of the Private Securities
Litigation Reform Act of 1995 and Canadian securities laws. When
used herein, statements which are not historical in nature, or
which contain the words “will,” “expect,” “planned,” “positions”,
“future”, ”view” or similar expressions, are forward-looking
statements. 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. All
statements made in this press release are made only as of the date
set forth at the beginning of this release. Telesat Corporation
undertakes no obligation to update the information made in this
release in the event facts or circumstances subsequently change
after the date of this press release.
These forward-looking statements are based on
Telesat Corporation’s current expectations and are subject to a
number of risks, uncertainties and assumptions. These statements
are not guarantees of future performance and are subject to risks,
uncertainties and other factors, some of which are beyond Telesat
Corporation’s control, are difficult to predict, and could cause
actual results to differ materially from those expressed or
forecasted in the forward-looking statements. Known risks and
uncertainties include but are not limited to: inflation, 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 Corporation’s business and the
economic environment; the ability to deploy successfully an
advanced global LEO satellite constellation, and the timing of any
such deployment; 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 Telesat
Corporation’s existing satellite utilization; and risks associated
with domestic and foreign government regulation. The foregoing list
of important factors is not exhaustive. Investors should review the
other risk factors discussed in Telesat Corporation’s annual report
on Form 20-F for the year ended December 31, 2021, that was filed
on March 18, 2022, with the United States Securities and Exchange
Commission (“SEC”) and the Canadian securities regulatory
authorities at the System for Electronic Document Analysis and
Retrieval (“SEDAR”), and may be accessed on the SEC’s website at
www.sec.gov and SEDAR’s website at www.sedar.com.
Unaudited Interim Condensed Consolidated Statements of
Income (Loss)For the periods ended
June 30, |
|
|
|
|
|
|
|
|
Three months |
|
Six months |
(in thousands of Canadian dollars, except per share
amounts) |
|
|
2022 |
|
2021(4) |
|
2022 |
|
2021(4) |
Revenue |
|
|
$ |
186,614 |
|
|
$ |
187,888 |
|
|
$ |
372,383 |
|
|
$ |
378,380 |
|
Operating expenses |
|
|
|
(58,924 |
) |
|
|
(65,047 |
) |
|
|
(123,290 |
) |
|
|
(105,412 |
) |
Depreciation |
|
|
|
(46,487 |
) |
|
|
(52,372 |
) |
|
|
(95,795 |
) |
|
|
(102,739 |
) |
Amortization |
|
|
|
(3,748 |
) |
|
|
(3,948 |
) |
|
|
(7,446 |
) |
|
|
(8,063 |
) |
Other operating gains (losses), net |
|
|
|
(23 |
) |
|
|
(74 |
) |
|
|
(53 |
) |
|
|
(747 |
) |
Operating income |
|
|
|
77,432 |
|
|
|
66,447 |
|
|
|
145,799 |
|
|
|
161,419 |
|
Interest expense |
|
|
|
(49,671 |
) |
|
|
(46,467 |
) |
|
|
(98,174 |
) |
|
|
(88,462 |
) |
Gain on extinguishment of debt |
|
|
|
85,886 |
|
|
|
— |
|
|
|
106,916 |
|
|
|
— |
|
Interest and other income |
|
|
|
2,580 |
|
|
|
1,652 |
|
|
|
3,240 |
|
|
|
1,773 |
|
Gain (loss) on changes in fair value of financial instruments |
|
|
|
2,277 |
|
|
|
3,796 |
|
|
|
4,635 |
|
|
|
(21,328 |
) |
Gain (loss) on foreign exchange |
|
|
|
(98,834 |
) |
|
|
40,641 |
|
|
|
(62,687 |
) |
|
|
75,754 |
|
Income (loss) before tax |
|
|
|
19,670 |
|
|
|
66,069 |
|
|
|
99,729 |
|
|
|
129,156 |
|
Tax (expense) recovery |
|
|
|
(24,045 |
) |
|
|
(13,062 |
) |
|
|
(43,474 |
) |
|
|
(34,827 |
) |
Net income (loss) |
|
|
$ |
(4,375 |
) |
|
$ |
53,007 |
|
|
$ |
56,255 |
|
|
$ |
94,329 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telesat Corporation shareholders |
|
|
$ |
(1,948 |
) |
|
$ |
53,007 |
|
|
$ |
12,035 |
|
|
$ |
94,329 |
|
Non-controlling interest |
|
|
|
(2,427 |
) |
|
|
— |
|
|
|
44,220 |
|
|
|
— |
|
|
|
|
$ |
(4,375 |
) |
|
$ |
53,007 |
|
|
$ |
56,255 |
|
|
$ |
94,329 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per common share attributable to Telesat
Corporation shareholders |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
$ |
(0.16 |
) |
|
$ |
1.07 |
|
|
$ |
1.00 |
|
|
$ |
1.90 |
|
Diluted |
|
|
$ |
(0.16 |
) |
|
$ |
1.03 |
|
|
$ |
0.96 |
|
|
$ |
1.86 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Weighted Average Common Shares
Outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
|
12,113,123 |
|
|
|
49,546,692 |
|
|
|
12,068,419 |
|
|
|
49,546,692 |
|
Diluted |
|
|
|
12,113,123 |
|
|
|
51,545,378 |
|
|
|
13,814,381 |
|
|
|
50,704,966 |
|
Unaudited Interim Condensed Consolidated Balance
Sheets |
|
|
|
|
|
(in thousands of Canadian dollars) |
|
|
June 30, 2022 |
|
December 31, 2021 |
Assets |
|
|
|
|
|
|
|
Cash and cash equivalents |
|
|
$ |
1,482,250 |
|
$ |
1,449,593 |
Trade and other receivables |
|
|
|
70,035 |
|
|
122,698 |
Other current financial assets |
|
|
|
781 |
|
|
861 |
Current income tax recoverable |
|
|
|
5,420 |
|
|
3,219 |
Prepaid expenses and other current assets |
|
|
|
57,030 |
|
|
41,064 |
Total current assets |
|
|
|
1,615,516 |
|
|
1,617,435 |
Satellites, property and other equipment |
|
|
|
1,371,469 |
|
|
1,429,688 |
Deferred tax assets |
|
|
|
46,630 |
|
|
46,187 |
Other long-term financial assets |
|
|
|
13,504 |
|
|
16,348 |
Long-term income tax recoverable |
|
|
|
15,202 |
|
|
12,277 |
Other long-term assets |
|
|
|
30,492 |
|
|
31,254 |
Intangible assets |
|
|
|
758,197 |
|
|
762,659 |
Goodwill |
|
|
|
2,446,603 |
|
|
2,446,603 |
Total assets |
|
|
$ |
6,297,613 |
|
$ |
6,362,451 |
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
Trade and other payables |
|
|
$ |
24,387 |
|
$ |
54,628 |
Other current financial liabilities |
|
|
|
22,666 |
|
|
36,647 |
Income taxes payable |
|
|
|
13,942 |
|
|
5,622 |
Other current liabilities |
|
|
|
85,160 |
|
|
85,058 |
Total current liabilities |
|
|
|
146,155 |
|
|
181,955 |
Long-term indebtedness |
|
|
|
3,655,993 |
|
|
3,792,597 |
Deferred tax liabilities |
|
|
|
286,357 |
|
|
296,318 |
Other long-term financial liabilities |
|
|
|
21,308 |
|
|
23,835 |
Other long-term liabilities |
|
|
|
352,235 |
|
|
371,453 |
Total liabilities |
|
|
|
4,462,048 |
|
|
4,666,158 |
|
|
|
|
|
|
|
|
Shareholders’ Equity |
|
|
|
|
|
|
|
Share capital |
|
|
|
44,084 |
|
|
42,841 |
Accumulated earnings |
|
|
|
372,224 |
|
|
350,029 |
Reserves |
|
|
|
44,133 |
|
|
22,804 |
Total Telesat Corporation shareholders’
equity |
|
|
|
460,441 |
|
|
415,674 |
Non-controlling interest |
|
|
|
1,375,124 |
|
|
1,280,619 |
Total shareholders’ equity |
|
|
|
1,835,565 |
|
|
1,696,293 |
Total liabilities and shareholders’ equity |
|
|
$ |
6,297,613 |
|
$ |
6,362,451 |
Unaudited Interim Condensed Consolidated Statements of Cash
FlowsFor the six months ended
June 30 |
|
|
|
|
|
|
|
|
|
|
|
(in thousands of Canadian dollars) |
|
|
2022 |
|
2021(4) |
Cash flows from operating activities |
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
|
$ |
56,255 |
|
|
$ |
94,329 |
|
Adjustments to reconcile net income (loss) to cash flows from
operating activities |
|
|
|
|
|
|
|
|
|
Depreciation |
|
|
|
95,795 |
|
|
|
102,739 |
|
Amortization |
|
|
|
7,446 |
|
|
|
8,063 |
|
Tax expense (recovery) |
|
|
|
43,474 |
|
|
|
34,827 |
|
Interest expense |
|
|
|
98,174 |
|
|
|
88,462 |
|
Interest income |
|
|
|
(3,526 |
) |
|
|
(2,322 |
) |
(Gain) loss on foreign exchange |
|
|
|
62,687 |
|
|
|
(75,754 |
) |
(Gain) loss on changes in fair value of financial instruments |
|
|
|
(4,635 |
) |
|
|
21,328 |
|
Share-based compensation |
|
|
|
42,863 |
|
|
|
26,587 |
|
(Gain) loss on disposal of assets |
|
|
|
53 |
|
|
|
747 |
|
Gain on extinguishment of debt |
|
|
|
(106,916 |
) |
|
|
— |
|
Deferred revenue amortization |
|
|
|
(31,162 |
) |
|
|
(33,612 |
) |
Pension expenses |
|
|
|
3,787 |
|
|
|
4,030 |
|
Other |
|
|
|
(1,434 |
) |
|
|
(3,881 |
) |
Income taxes paid, net of income taxes received |
|
|
|
(48,589 |
) |
|
|
(53,168 |
) |
Interest paid, net of interest received |
|
|
|
(92,710 |
) |
|
|
(69,079 |
) |
Operating assets and liabilities |
|
|
|
(52,383 |
) |
|
|
9,195 |
|
Net cash from operating activities |
|
|
|
69,179 |
|
|
|
152,491 |
|
Cash flows (used in) generated from investing
activities |
|
|
|
|
|
|
|
|
|
Satellite programs |
|
|
|
(15,875 |
) |
|
|
(78,442 |
) |
Purchase of property and other equipment |
|
|
|
(17,375 |
) |
|
|
(11,530 |
) |
Purchase of intangible assets |
|
|
|
(27 |
) |
|
|
— |
|
C-band clearing proceeds |
|
|
|
64,651 |
|
|
|
— |
|
Net cash (used in) generated from investing
activities |
|
|
|
31,374 |
|
|
|
(89,972 |
) |
Cash flows (used in) generated from financing
activities |
|
|
|
|
|
|
|
|
|
Proceeds from indebtedness |
|
|
|
— |
|
|
|
619,900 |
|
Payment of debt issue costs |
|
|
|
— |
|
|
|
(6,834 |
) |
Repayment of indebtedness |
|
|
|
(97,234 |
) |
|
|
— |
|
Payments of principal on lease liabilities |
|
|
|
(872 |
) |
|
|
(1,355 |
) |
Satellite performance incentive payments |
|
|
|
(3,642 |
) |
|
|
(3,350 |
) |
Government grant received |
|
|
|
8,015 |
|
|
|
— |
|
Net cash (used in) generated from financing
activities |
|
|
|
(93,733 |
) |
|
|
608,361 |
|
|
|
|
|
|
|
|
|
|
|
Effect of changes in exchange rates on cash and cash
equivalents |
|
|
|
25,837 |
|
|
|
(23,159 |
) |
|
|
|
|
|
|
|
|
|
|
Changes in cash and cash equivalents |
|
|
|
32,657 |
|
|
|
647,721 |
|
Cash and cash equivalents, beginning of period |
|
|
|
1,449,593 |
|
|
|
818,378 |
|
Cash and cash equivalents, end of period |
|
|
$ |
1,482,250 |
|
|
$ |
1,466,099 |
|
Telesat’s Adjusted EBITDA margin(1): |
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
Six Months Ended
June 30, |
(in thousands of Canadian dollars) (unaudited) |
|
2022 |
|
2021(4) |
|
2022 |
|
2021(4) |
Net income (loss) |
|
$ |
(4,375 |
) |
|
$ |
53,007 |
|
|
$ |
56,255 |
|
|
$ |
94,329 |
|
Tax expense (recovery) |
|
|
24,045 |
|
|
|
13,062 |
|
|
|
43,474 |
|
|
|
34,827 |
|
(Gain) loss on changes in fair value of financial instruments |
|
|
(2,277 |
) |
|
|
(3,796 |
) |
|
|
(4,635 |
) |
|
|
21,328 |
|
(Gain) loss on foreign exchange |
|
|
98,834 |
|
|
|
(40,641 |
) |
|
|
62,687 |
|
|
|
(75,754 |
) |
Interest and other income |
|
|
(2,580 |
) |
|
|
(1,652 |
) |
|
|
(3,240 |
) |
|
|
(1,773 |
) |
Interest expense |
|
|
49,671 |
|
|
|
46,467 |
|
|
|
98,174 |
|
|
|
88,462 |
|
Gain on extinguishment of debt |
|
|
(85,886 |
) |
|
|
— |
|
|
|
(106,916 |
) |
|
|
— |
|
Depreciation |
|
|
46,487 |
|
|
|
52,372 |
|
|
|
95,795 |
|
|
|
102,739 |
|
Amortization |
|
|
3,748 |
|
|
|
3,948 |
|
|
|
7,446 |
|
|
|
8,063 |
|
Other operating (gains) losses, net |
|
|
23 |
|
|
|
74 |
|
|
|
53 |
|
|
|
747 |
|
Non-recurring compensation expenses(3) |
|
|
(1 |
) |
|
|
174 |
|
|
|
— |
|
|
|
335 |
|
Non-cash expense related to share-based compensation |
|
|
18,694 |
|
|
|
24,876 |
|
|
|
42,863 |
|
|
|
26,587 |
|
Adjusted EBITDA |
|
$ |
146,383 |
|
|
$ |
147,891 |
|
|
$ |
291,956 |
|
|
$ |
299,890 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
$ |
186,614 |
|
|
$ |
187,888 |
|
|
$ |
372,383 |
|
|
$ |
378,380 |
|
Adjusted EBITDA Margin |
|
|
78.4 |
% |
|
|
78.7 |
% |
|
|
78.4 |
% |
|
|
79.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 Telesat refers to as contracted
revenue backlog (‘‘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
calculation of the backlog reflects the revenue recognition
policies adopted under IFRS 15. 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.
4 2021 balances were
adjusted to take into account the retroactive impact of the change
in accounting policy associated with the capitalization of software
as a Service arrangements. In addition, a formal valuation of
restricted share units in the fourth quarter of 2021 resulted in an
increase in compensation and employee benefits of $6.9 million and
$9.5 million in the second and third quarter of 2021, respectively.
For additional details, refer to Note 3 and Note 6 of the financial
statements included in the Telesat’s quarterly report on Form 6-K
for the quarter ended June 30, 2022, which has been filed with the
United States Securities and Exchange Commission (“SEC”) and the
Canadian securities regulatory authorities at the System for
Electronic Document Analysis and Retrieval (“SEDAR”), and may be
accessed on the SEC’s website at www.sec.gov and SEDAR’s website at
www.sedar.com.
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