Telesat Reports US$173-M Revenue for the Quarter Ended September 30, 2018

Ottawa, Canada, Nov. 1, 2018 —  Telesat Canada today announced its financial results for the three and nine-month periods ended September 30, 2018. For the quarter ended September 30, 2018, Telesat reported consolidated revenues of US$173.37 million (Ca$227 million), an increase of 6% US$9.93 million (Ca$13 million) compared to the same period in 2017.

The increase was primarily due to short-term services provided to another satellite operator, the impact of the implementation of IFRS 15 and revenue related to the Telstar 19 VANTAGE satellite, which entered commercial service in August. Excluding the impact of foreign exchange rate changes, revenue increased by 5% US$8.4 million (Ca$11 million) compared to the same period in 2017.

Operating expenses of US$30.55 million (Ca$40 million) for the quarter were 4% (US$1.53 million or Ca$2 million) lower than the same period in 2017. Adjusted EBITDA for the quarter was US$143.58 million (Ca$188 million); an increase of 8% (US$10.69 or Ca$14 million) compared to the same period in 2017 and an improvement of 7% US$9.93 million (Ca$13 million) when adjusted for foreign exchange rate changes. The Adjusted EBITDA margin for the third quarter of 2018 was 82.8%, compared to 81.3% in the same period in 2017.

On January 1, 2018, Telesat adopted IFRS 9, Financial Instruments, and IFRS 15, Revenue from Contracts with Customers. For the three-month period ended September 30, 2018, the adoption of IFRS 15 had a net positive impact of approximately US$3.82 million (Ca$5 million) on revenues, an approximately US$3.82 million (Ca$5 million) reduction in operating expenses and a positive impact of approximately US$7.64 million (Ca$10 million) on Adjusted EBITDA. The adoption of IFRS 9 had no impact on revenues, operating expenses and Adjusted EBITDA.

Telesat’s net income for the quarter was US$89.36 million (Ca$117 million) compared to net income of US$150.46 million (Ca$197 million) for the quarter ended September 30, 2017. The US$61.1 million (Ca$80 million) difference was the result of a lower non-cash gain on foreign exchange arising principally from the translation of Telesat’s U.S. dollar denominated debt into Canadian dollars in the third quarter of 2018.

For the nine-month period ended September 30, 2018, revenue was US$512.47 million (Ca$671 million), a decrease of 1% (US$3.05million or Ca$4 million) compared to the same period in 2017. When adjusted for changes in foreign exchange rates, revenues rose 1% (US$5.35 million or Ca$7 million) compared to the same period in 2017.

Operating expenses were US$87.83 million (Ca$115 million), a decrease of 19% (US$19.86 million or Ca$26 million) from the first nine months of 2017. The decrease in operating expenses was due to the impact of IFRS 15 implementation in 2018 and lower compensation expense associated with certain payments to stock option holders made in connection with the cash distribution to shareholders in the first quarter of 2017. Adjusted EBITDA was US$429.22 million (Ca$562 million), an increase of 2% (US$9.16 million or Ca$12 million). When adjusted for foreign exchange rate changes Adjusted EBITDA increased by 4% (US$16.04 million or Ca$21 million) compared to 2017. The Adjusted EBITDA margin for the first nine months of 2018 was 83.7%, compared to 81.5% in the same period in 2017.

The adoption of IFRS 15 had a net positive impact of approximately US$9.93 million (Ca$13 million) on revenues, an approximate US$12.22 million (Ca$16 million) reduction in operating expenses and a positive impact of approximately US$21.38 million (Ca$28 million) on Adjusted EBITDA for the nine-month period ended September 30, 2018.

For the nine-month period ended September 30, 2018, net income was US$9.93 million (Ca$96 million), compared to net income of US$330.7 million (Ca$433 million) for the same period in 2017. The decrease in net income for the first nine months of the year was principally the result of foreign exchange losses in the first nine months of 2018, arising from the translation of Telesat’s U.S. dollar denominated debt into Canadian dollars compared to foreign exchange gains in the first nine months of 2017.

“I am pleased with our performance for the third quarter and first nine months of the year,” commented Dan Goldberg, Telesat’s president and CEO. “In addition to achieving solid financial results, we took a number of concrete steps to strengthen our business and position the company for the future. We successfully launched our state-of-the-art Telstar 19 VANTAGE and Telstar 18 VANTAGE satellites in the quarter and they are both now in commercial service. We also continued the development of our planned LEO constellation and, using our in- orbit Phase 1 LEO satellite, demonstrated some of the key advantages of LEO in a recent customer trial. Looking ahead, we remain focused on increasing the utilization of our in-orbit satellites and executing on our key growth initiatives.”

Other Business Highlights

  • At September 30, 2018: Telesat had contracted backlog for future services of approximately; US$2.83 billion (Ca$3.7 billion).
  • Fleet utilization, including HTS capacity, was 82% across Telesat’s international and North American fleet.
  • In August 2018, commercial service began on the Telstar 19 VANTAGE satellite operating at the 63 degree West orbital location. Telstar 19 VANTAGE successfully launched in July 2018. Telesat customer Hughes Network Systems LLC (Hughes) has signed a 15-year agreement for Telstar 19 VANTAGE Ka-band capacity to expand its broadband satellite services for consumers and businesses in South America. Telesat also has long-term contracts for the entire Ka-band capacity of Telstar 19 VANTAGE over Northern Canada, including providing Bell Canada subsidiary Northwestel with the HTS spot beam capacity required to enhance broadband connectivity for all 25 communities in Nunavut, Canada’s northernmost territory.
  • In October 2018, commercial service began on the Telstar 18 VANTAGE satellite, at the 138 degree East orbital location. Telstar 18 VANTAGE successfully launched in September 2018. It replaces and expands on Telesat’s Telstar 18 satellite through extensive C-band capacity over Asia, Ku-band HTS spot beams over Indonesia and Malaysia, and its five additional regional Ku-band beams. Telstar 18 VANTAGE’s innovative Ku- band payloads of HTS spot beams and focused regional beams provide customers operating in Southeast Asia, Mongolia, Australia & New Zealand, and the North Pacific Ocean with greater choice and flexibility in deploying high performing broadband networks.
  • Telesat selected two contractor teams to develop further system designs for Telesat’s LEO constellation. One of the teams is a consortium of Thales Alenia Space and Maxar Technologies. The other team is led by Airbus Defence and Space. Telesat and Global Eagle Entertainment Inc., a leading provider of satellite-based connectivity services to global mobility markets, recently successfully completed an innovative trial using Telesat’s Phase 1 LEO satellite to demonstrate some of the important advantages of LEO for broadband connectivity to airplanes. In addition, last quarter Telesat entered into agreements with General Dynamics Mission Systems and ThinKom Solutions, Inc. to develop LEO terminals for government and enterprise users. Once fully deployed, Telesat’s LEO constellation is designed to deliver transformative, fiber-like broadband for commercial and government customers throughout the world.