Intelsat Announces First Quarter 2021 Results

Tyson's Corner, Va., May 5, 2021-- Intelsat S.A.  (OTC: INTEQ), today announced financial results for the three months ended March 31, 2021. The company reported total revenue was US $502.8 million and net loss attributable to Intelsat S.A. was US$ 174.9 million for the three months ended March 31, 2021.

Intelsat reported EBITDA, or earnings before net interest, taxes and depreciation and amortization, of US$ 130.5 million and Adjusted EBITDA1 of US$ 275.0 million, or 55% of revenue, for the three months ended March 31, 2021.

Intelsat’s Chief Executive Officer, Stephen Spengler, said, “Overall, we delivered solid quarterly operational results which now include our Gogo Commercial Aviation business. Network Services benefited from new business from mobility and fixed network operators, as well as the addition of the Commercial Aviation in-flight connectivity business in the quarter. Government produced modest growth supported by the addition of new services both on and off our network and continued growth of our FlexGround managed land mobility services. Ongoing secular business trends and a large planned service migration from the Intelsat network to assets owned by a specific customer impacted results in our media business.”

Spengler concluded, “We see increased signs of economic activity across our business sectors as COVID-19 restrictions ease. Passenger traffic at airports is increasing in key markets, including the U.S. Global uncertainty about the pandemic remains so we continue to closely engage with our customers as they anticipate their service needs in advance of a potential economic recovery. Intelsat is investing in our next-generation software-defined network and vertical integration to leverage the opportunity to deliver end-to-end managed services to a larger addressable market. We are well-positioned to benefit from an expected economic expansion as we anticipate emergence from our financial restructuring as a stronger and more agile company ready to deliver innovative solutions to our customers."

First Quarter 2021 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.

Network Services

Network services revenue was US$ 214.0 million (or 43% of Intelsat’s total revenue, which now consolidates revenue from our Gogo Commercial Aviation business), for the three months ended March 31, 2021, an increase of 43% compared to the three months ended March 31, 2020. Other factors positively impacting revenue included new business from the expansion of service with certain mobility and enterprise customers. The increase in revenue was partially offset by non-renewals across our mobility and enterprise customer sets, as well as contract terminations, including by a specific enterprise customer.

Media

Media revenue was US$ 185.0 million (or 37% of Intelsat’s total revenue) for the three months ended March 31, 2021, a decrease of 10% compared to the three months ended March 31, 2020. The decline in media was primarily driven by a planned service migration by a specific customer from Intelsat's network to the customer's own network assets. Additionally, ongoing secular trends resulting in lower demand impacted terminations and renewals, and occasional use services did not rebound to 2020 levels. The declines in revenue were slightly offset by new business.

Government

Government revenue was US$ 97.9 million (or 19% of Intelsat’s total revenue) for the three months ended March 31, 2021, an increase of 2% compared to the three months ended March 31, 2020. The increase in government was primarily driven by new business, including a one-time customer premises equipment sale, the expansion of FlexGround services and the entry of our Galaxy-30 satellite into service. The increase in revenue was partially offset by non-renewals and a decline in third-party off-network services.

Average Fill Rate

Intelsat’s average fill rate as of March 31, 2021 on our approximately 1,670 36 MHz station-kept wide-beam transponders was 73%, similar to our average fill rate at December 31, 2020. In addition, as of March 31, 2021 our fleet included approximately 1,215 36 MHz equivalent transponders of high-throughput Intelsat Epic capacity, consistent with the prior quarter.

Satellite Activity

On April 12, 2021, Intelsat, in coordination with Northrop Grumman Corporation and its wholly-owned subsidiary, SpaceLogistics, LLC, successfully completed the docking of Mission Extension Vehicle-2 (MEV-2) to the Intelsat 10-02 satellite ("IS-10-02"), delivering approximately 5 years of life extension for IS-10-02.

Contracted Backlog

At March 31, 2021, Intelsat’s contracted backlog, representing expected future revenue under existing contracts with customers, was US$ 5.9 billion, as compared to US$ 6.1 billion at December 31, 2020.

March 31, 2021

Total revenue for the three months ended March 31, 2021 increased by US$ 43.9 million to US$ 502.8 million, or an increase of 10 percent as compared to the three months ended March 31, 2020, primarily reflecting the consolidation of revenue from our Gogo Commercial Aviation business.

Direct costs of revenue (excluding depreciation and amortization) increased by US$ 60.1 million, or 57 percent, to US$ 165.2 million for the three months ended March 31, 2021, as compared to the three months ended March 31, 2020. The increase was primarily due to a US$ 61.2 million increase in costs attributable to our Gogo Commercial Aviation business and a US$ 3.3 million increase in staff-related expenses largely relating to our employee retention incentive plans. These increases were partially offset by a US$ 3.5 million decrease in third-party managed capacity costs.

Selling, general and administrative expenses increased by US$ 21.6 million, or 27 percent, to US$ 102.6 million for the three months ended March 31, 2021, as compared to the three months ended March 31, 2020. The increase was primarily due to a US$ 28.9 million increase in costs attributable to our Gogo Commercial Aviation business and a US$ 7.2 million increase in staff-related expenses largely relating to our employee retention incentive plans. These increases were partially offset by a US$ 13.4 million decrease in bad debt expense due to higher bad debt expense for the three months ended March 31, 2020, largely relating to a certain customer that filed for Chapter 11 bankruptcy protection in the prior year period.

Depreciation and amortization expense increased by US$ 2.2 million, or 1 percent, to US$ 165.2 million for the three months ended March 31, 2021, as compared to the three months ended March 31, 2020. Significant items impacting depreciation and amortization included an increase of US$ 6.7 million in depreciation and amortization expense attributable to our Gogo Commercial Aviation business and an increase of US$ 1.0 million in depreciation expense resulting from the impact of a certain satellite placed into service. These increases were partially offset by a decrease of US$ 5.4 million in depreciation expense due to the timing of certain satellites becoming fully depreciated.

Other operating expense—C-band consists of reimbursable and non-reimbursable costs associated with our C-band spectrum relocation efforts. We incurred US$ 58.4 million of C-band clearing related expenses for the three months ended March 31, 2021, with no comparable amounts for the three months ended March 31, 2020.

Interest expense, net consists of the gross interest expense we incur, together with gains and losses on interest rate cap contracts we held that matured in February 2021 (which reflected the change in their fair value), offset by interest income earned and the amount of interest we capitalize related to assets under construction.

Interest expense, net decreased by $186.0 million, or 58 percent, to $132.3 million for the three months ended March 31, 2021, as compared to the three months ended March 31, 2020. This was primarily due to a decrease of $171.4 million in interest expense resulting from our Chapter 11 restructuring activities.

The non-cash portion of interest expense, net was US$ 26.7 million for the three months ended March 31, 2021, primarily consisting of interest expense related to the significant financing component identified in customer contracts, amortization and accretion of discounts and premiums, and amortization of deferred financing fees.

Other income, net was US$ 9.7 million for the three months ended March 31, 2021, as compared to US$ 2.7 million for the three months ended March 31, 2020. The net increase in other income primarily consisted of a $5.3 million gain on one of our investments and lower foreign currency losses of US$ 3.8 million, partially offset by a net decrease of $3.0 million on the sale of assets for the three months ended March 31, 2021.

Reorganization items reflect direct costs incurred in connection with our Chapter 11 cases. Reorganization items of US$ 55.8 million for the three months ended March 31, 2021 primarily consisted of professional fees. There were no comparable amounts for the three months ended March 31, 2020.

Income tax expense increased by US$ 7.0 million to US$ 7.2 million for the three months ended March 31, 2021, as compared to the three months ended March 31, 2020. The increase was principally attributable to higher income from our U.S. subsidiaries, withholding taxes on revenue earned in some of the foreign markets in which we operate and prior year adjustments from impacts of the Coronavirus Aid, Relief, and Economic Security (CARES) Act.

Net Income, Net Income per Diluted Common Share attributable to Intelsat S.A., EBITDA and Adjusted EBITDA

Net loss attributable to Intelsat S.A. was US$ 174.9 million for the three months ended March 31, 2021, compared to a net loss of US$ 218.8 million for the same period in 2020.

Net loss per diluted common share attributable to Intelsat S.A. was US$ 1.23 for the three months ended March 31, 2021, compared to net loss of US$ 1.55 per diluted common share for the same period in 2020.

EBITDA was US$ 130.5 million for the three months ended March 31, 2021, compared to US$ 263.3 million for the same period in 2020, reflecting higher operating costs related to our Gogo Commercial Aviation business and costs associated with our C-band spectrum relocation efforts, as described above.

Adjusted EBITDA was US$ 275.0 million for the three months ended March 31, 2021, or 55 percent of revenue, compared to US$ 294.0 million, or 64 percent of revenue, for the same period in 2020.

Free Cash Flow Used In Operations

Net cash provided by operating activities was US$ 12.4 million for the three months ended March 31, 2021. Free cash flow used in operations was US$ 232.2 million for the same period. Free cash flow from (used in) operations is defined as net cash provided by (used in) operating activities and other proceeds from satellites from investing activities, less payments for satellites and other property and equipment (including capitalized interest) from investing activities. Payments for satellites and other property and equipment from investing activities, net during the three months ended March 31, 2021 were US$2 44.6 million.