Exhibit 99.1
News Release
Contact
Dianne VanBeber
Vice President, Investor Relations
dianne.vanbeber@intelsat.com
+1 703 559 7406 (o)
+1 703 627 5100 (m)
Intelsat Announces Fourth Quarter and Full-Year 2019 Results
| • | Fourth quarter revenue of $517 million; full-year 2019 revenue of $2,061 million |
| • | Fourth quarter net loss attributable to Intelsat S.A. of $115 million; full-year 2019 net loss attributable to Intelsat S.A. of $914 million |
| • | Fourth quarter Adjusted EBITDA of $371 million or 72 percent of revenue; full-year 2019 Adjusted EBITDA of $1,481 million or 72 percent of revenue |
| • | Intelsat issues 2020 Guidance |
Luxembourg, 20 February 2020
Intelsat S.A. (NYSE: I), today announced financial results for the three months and full-year ended December 31, 2019.
Intelsat reported total revenue of $517.0 million and net loss attributable to Intelsat S.A. of $115.0 million for the three months ended December 31, 2019. For the year ended December 31, 2019, Intelsat reported total revenue of $2,061.5 million and net loss attributable to Intelsat S.A. of $913.6 million.
Intelsat reported EBITDA1, or earnings before net interest, gain on early extinguishment of debt, taxes and depreciation and amortization, of $356.0 million and Adjusted EBITDA1 of $371.3 million, or 72 percent of revenue, for the three months ended December 31, 2019. Free cash flow from operations1 was $70.2 million.
For the year ended December 31, 2019, Intelsat reported EBITDA of $1,012.8 million and Adjusted EBITDA of $1,481.5 million, or 72 percent of revenue. Free cash flow from operations was $38.8 million.
Intelsat’s Chief Executive Officer, Stephen Spengler, said, “We delivered on our 2019 plan, exceeding our guidance for full-year revenue and Adjusted EBITDA. Our fourth quarter results reflect the contributions of our new satellites as well as growing revenue streams generated by our Flex managed services, benefitting our network services business. Our media business signed a
significant newdirect-to-home television customer contract in Asia, while the government services business achieved important renewals that will support its stability in 2020.
Spengler concluded, “The draft order issued by the Federal Communications Commission on February 7, 2020 was a major event in theC-band proceeding. Our near-term focus is on improving the draft order proposed by the FCC, obtaining changes that would allow us to quickly clear spectrum to support 5G deployments in the U.S. while protecting the video services on which nearly 120 million American homes rely.”
Fourth Quarter and Full-Year 2019 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 $200.2 million (or 39 percent of Intelsat’s total revenue) for the three months ended December 31, 2019, a decrease of 1 percent compared to the three months ended December 31, 2018. The network services fourth quarter 2019 result included $7.5 million in reduced revenue related to the loss of Intelsat 29e.
Network services revenue was $770.4 million (or 37 percent of Intelsat’s total revenue) for the year ended December 31, 2019, a decrease of 3 percent compared to the year ended December 31, 2018. The network services full-year result included $22.6 million in reduced revenue related to the loss of Intelsat 29e.
Media
Media revenue was $210.6 million (or 41 percent of Intelsat’s total revenue) for the three months ended December 31, 2019, a decrease of 9 percent compared to the three months ended December 31, 2018.
Media revenue was $883.0 million (or 43 percent of Intelsat’s total revenue) for the year ended December 31, 2019, a decrease of 6 percent compared to the year ended December 31, 2018.
Government
Government revenue was $96.0 million (or 19 percent of Intelsat’s total revenue) for the three months ended December 31, 2019, a decrease of 2 percent compared to the three months ended December 31, 2018.
Government revenue was $378.3 million (or 18 percent of Intelsat’s total revenue) for the year ended December 31, 2019, a decrease of 3 percent compared to the year ended December 31, 2018.
Average Fill Rate
Intelsat’s average fill rate at December 31, 2019 on our approximately 1,800 36 MHz equivalent station-kept wide-beam transponders was 78 percent, reflecting the entry into service of a new satellite, discussed below. This compares to an average fill rate at September 30, 2019 of 80 percent on 1,750 transponders. In addition, at December 31, 2019 our fleet included approximately 1,200 36 MHz equivalent transponders of high-throughput Intelsat Epic capacity, reflecting no change from the prior quarter.
Satellite Launches and Fleet Update
Intelsat had no satellite launches in the fourth quarter of 2019. The previously launched Intelsat 39 entered into service on October 14, 2019. Intelsat 39 provides connectivity services for mobile network operators, enterprises and governmental entities, as well as aeronautical and maritime mobility service providers operating in the Europe, Africa, Middle East and Asia-Pacific regions.
On October 9, 2019, Northrop Grumman’sin-space servicing vehicle, Mission Extension Vehicle 1, orMEV-1, successfully launched with a goal of becoming the world’s first instance ofon-orbit satellite servicing. The inaugural mission ofMEV-1 is currently underway, featuring a historic space rendezvous and docking with Intelsat 901. TheMEV-1 service is expected to provide an extension of the service life of Intelsat 901 of up to five years.
Contracted Backlog
At December 31, 2019, Intelsat’s contracted backlog, representing expected future revenue under existing contracts with customers, was $7.0 billion, as compared to $7.2 billion at September 30, 2019.
C-band Proceeding at the U.S. Federal Communications Commission (“FCC”)
On November 18, 2019, the FCC announced a decision to pursue a public auction of theC-band spectrum currently licensed to Intelsat and other satellite operators, a change from the private market solution for which Intelsat had been advocating over the past two years.
Subsequent toyear-end 2019, on February 7, 2020, the FCC issued its draft order in theC-band proceeding. The draft order sets forth proposed acceleration incentive payments to certainC-band satellite operators of $9.7 billion, of which Intelsat would receive $4.85 billion, payable in two tranches. The draft order also outlines a cost reimbursement framework that would apply to the various stakeholders in the proceeding, as well as technical specifications and other elements.
Our near-term focus is on successfully improving the draft order proposed by the FCC while preserving all our rights. There can be no assurance that the FCC will accept any of our proposed changes to the order. The next major event in this proceeding is the vote of the FCC on a final order, which is currently scheduled to occur on February 28, 2020. The final order could be issued later that day.
Financial Results for the Three Months Ended December 31, 2019
Total revenuefor the three months ended December 31, 2019 decreased by $25.8 million to $517.0 million, or 5 percent as compared to the three months ended December 31, 2018. By service type, our revenues increased or decreased due to the following:
TotalOn-Network Revenues decreased by $33.2 million, or 7 percent, to $454.5 million as compared to the three months ended December 31, 2018 due to the following:
| • | Transponder services reported an aggregate decrease of $32.7 million, primarily due to a $15.8 million decrease in revenue from media customers, a $12.7 million decrease in revenue from network services customers and a $4.2 million decrease in revenue from government customers. The decline from media customers was primarily due to a reduction in revenue fromdirect-to-home services delivered in Eastern Europe andnon-renewals of distribution services in Latin America and North America. The decline in network services was primarily due tonon-renewals and service contractions for enterprise and wireless infrastructure |
applications, primarily for services delivered in Latin America, including $8.2 million of lower revenue stemming from the loss of the Intelsat 29e satellite, a portion of which moved tooff-network transponder services. These network services declines were offset in part by increased revenues in the Asia-Pacific region supporting telecommunications infrastructure applications. The decline inon-network government services was primarily due to a reclassification of a new service fromon-network tooff-network, described further below. |
| • | Managed services reported an aggregate decrease of $0.1 million. Managed services for network services customers increased by $7.1 million, related to new revenues from trunking applications and mobility services. These increases were partially offset by decreases of $4.8 million for media services, primarily related to an early contract termination reported in the third quarter of 2019, and $3.9 million resulting from the Intelsat 29e satellite loss. Managed services for government customers declined by $2.4 million, primarily resulting fromnon-renewals earlier in 2019 and lower pricing related to 2018 contract renewals. |
TotalOff-Network and Other Revenues increased by $7.4 million, or 13 percent, to $62.4 million, as compared to the three months ended December 31, 2018 due to the following:
| • | Transponder, MSS and otherOff-Network services revenues increased by an aggregate of $8.0 million to $48.9 million, primarily due to a $3.7 million aggregate increase inoff-network services for government applications, inclusive of the reclassification of a service fromon-network, and a net $4.3 million increase in revenue from network services customers, largely due to a $4.6 million increase in revenues fromoff-network services used for restoration following the loss of the Intelsat 29e satellite. |
| • | Satellite-related servicesreported a decrease of $0.6 million to $13.5 million, primarily due to a decline in professional services provided in support of third-party launch missions. |
Direct costs of revenue (excluding depreciation and amortization) increased by $12.0 million, or 14 percent, to $100.6 million for the three months ended December 31, 2019, as compared to the three months ended December 31, 2018. The increase was primarily due to an increase of $14.2 million in costs incurred in connection with two uncapitalized satellites that entered into service in 2019, as well as an increase of $4.6 million in third-party capacity costs incurred as part of the Intelsat 29e customer restoration process. Direct costs of revenue also increased by $2.6 million due to staff-related expenses. These increases were partially offset by a decrease of $7.5 million in costs largely due to a reduction in revenue share payable related to one of our joint venture satellites, and an aggregate decrease of $3.4 million in third-party costs related to our satellite-related services and network services business.
Selling, general and administrative expenses increased by $10.9 million, or 23 percent, to $58.7 million for the three months ended December 31, 2019, as compared to the three months ended December 31, 2018. The increase was primarily due to an increase of $5.0 million in staff-related expenses, an increase of $4.6 million in bad debt expense largely related to certain customers in the Europe and Africa regions, and an increase of $2.3 million in sales and marketing expenses. These increases were partially offset by a decrease of $2.3 million in professional fees largely due to higher costs incurred in 2018 relating to liability and tax management initiatives.
Depreciation and amortization expense decreased by $12.3 million, or 7 percent, to $161.8 million for the three months ended December 31, 2019, as compared to the three months ended December 31, 2018, primarily due to a decrease of $9.2 million in depreciation expense due to thewrite-off of Intelsat 29e, and a decrease of $7.4 million in depreciation expense due to the timing of certain satellites becoming fully depreciated. The decreases were partially offset by an increase of $3.1 million in depreciation expense resulting from the impact of a satellite placed in service in 2019 and an increase of $2.1 million in depreciation expense resulting from the impact of certain ground segment assets placed in service.
Interest expense, net consists of the gross interest expense we incur, together with gains and losses on interest rate cap contracts we hold (which reflect the change in their fair value), offset by interest income earned and the amount of interest we capitalize related to assets under construction. As of December 31, 2019, we held interest rate cap contracts with an aggregate notional amount of $2.4 billion to mitigate the risk of interest rate increases on the floating-rate term loans under our senior secured credit facilities. The interest rate cap contracts have not been designated as hedges for accounting purposes.
Interest expense, net decreased by $7.1 million, or 2 percent, to $319.9 million for the three months ended December 31, 2019, as compared to $327.0 million for the three months ended December 31, 2018. The decrease was principally due to:
| • | a decrease of $17.6 million corresponding to a lower relative decrease in fair value of the interest rate cap contracts in the fourth quarter of 2019; and |
| • | a decrease of $2.8 million resulting from increased interest income largely due to higher cash balances; partially offset by |
| • | a net increase of $10.0 million primarily resulting from our refinancing activities in 2018 and incremental debt raise in 2019; and |
| • | an increase of $4.4 million from lower capitalized interest, primarily resulting from decreased levels of satellites and related assets under construction. |
Thenon-cash portion of total interest expense, net was $41.0 million for the three months ended December 31, 2019, primarily consisting of interest expense related to the significant financing component identified in customer contracts, amortization and accretion of discounts and premiums, amortization of deferred financing fees, and the gain resulting from the increase in fair value of the interest rate cap contracts we hold.
Loss on early extinguishment of debt. No gain or loss on early extinguishment of debt was recognized for the three months ended December 31, 2019, as compared to a loss of $17.8 million for the three months ended December 31, 2018, consisting of the difference between the carrying value of debt repurchased and the total cash amount paid (including related fees and expenses), together with awrite-off of unamortized debt issuance costs and debt discount and premium.
Other income (expense), netwas $1.7 million of income expense, net for the three months ended December 31, 2019, as compared to other income, net of $2.2 million for the three months ended December 31, 2018. Other expense, net for the three months ended December 31, 2019 primarily consisted of a net loss of $7.3 million related to a change in value of certain investments in third parties and loansheld-for-investment in 2019 with no comparative amounts in 2018, partially offset by higher foreign exchange rate fluctuation gains of $1.6 million mainly related to our business conducted in Brazilianreais and an increase of $1.8 million in other miscellaneous income not associated with our core operations.
Benefit from income taxes was $11.3 million for the three months ended December 31, 2019, as compared to an immaterial provision for income taxes for the three months ended December 31, 2018. The increase in tax benefit was principally attributable to a decrease in valuation allowance recorded for our U.S. subsidiaries, partially offset by the application of final regulations released by the U.S. Department of Treasury and the U.S. Internal Revenue Service related to the Base Erosion and Anti-Abuse Tax (“BEAT”).
Cash paid for income taxes, net of refunds, totaled $3.4 million and $24.3 million for the three months ended December 31, 2018 and 2019, respectively.
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 $115.0 million for the three months ended December 31, 2019, compared to a net loss of $111.3 million for the same period in 2018.
Net loss per diluted common share attributable to Intelsat S.A. was $0.81 for each of the three months ended December 31, 2018 and 2019.
EBITDAwas $356.0 million for the three months ended December 31, 2019, compared to $408.6 million for the same period in 2018, reflecting lower revenue and higher operating costs, as described above.
Adjusted EBITDA was $371.3 million for the three months ended December 31, 2019, or 72 percent of revenue, compared to $417.9 million, or 77 percent of revenue, for the same period in 2018, reflecting lower revenue and higher operating costs, as described above.
Free Cash Flow From Operations
Net cash provided by operating activities was $92.1 million for the three months ended December 31, 2019. Free cash flow from operations was $70.2 million for the same period. Free cash flow from (used in) operations is defined as net cash provided by operating activities and other proceeds from satellites from investing activities, less payments for satellites and other property and equipment (including capitalized interest). Payments for satellites and other property and equipment from investing activities, net during the three months ended December 31, 2019 were $27.6 million, and other proceeds from satellites were $5.6 million.
Financial Outlook 2020
Revenue Guidance: We expect full-year 2020 revenue in a range of $1.930 billion to $1.980 billion.
Adjusted EBITDA Guidance: Intelsat forecasts Adjusted EBITDA performance for the full-year 2020 to be in a range of $1.340 billion to $1.390 billion. This reflects trends relating to the lower revenue and increased direct costs of revenue, staff and marketing costs outlined above.
Capital Expenditure Guidance: Intelsat issued its 2020 capital expenditure guidance for the three calendar years 2020-2022 (the “Guidance Period”). Over the next several years we are in a cycle of lower required investment, due to timing of replacement satellites and increased capital efficiency of satellites being built.
We expect the following capital expenditure ranges:
| • | 2020: $200 million to $250 million; |
| • | 2021: $225 million to $300 million; and |
| • | 2022: $225 million to $325 million. |
Our capital expenditure guidance includes capitalized interest. Capitalized interest is expected to average approximately $20 million annually during the Guidance Period.
Intelsat currently has five satellites covered by our 2020 to 2022 capital expenditure plan, two of which are in the design and manufacturing phase. For the remaining three satellites, no manufacturing contracts have yet been signed. During the Guidance Period, we plan for an increased proportion of our capital expenditures to be invested in ground infrastructure and tools needed to enhance our delivery of managed services.
Our capital expenditure plan excludes satellites which we may be required to build should certain aspects of ourC-band proposal to the FCC be adopted.
By the conclusion of the Guidance Period at the end of 2022, the net number of transponder equivalents is expected to increase by a compound annual growth rate (“CAGR”) of approximately 1 percent, reflecting the net activity of satellites entering and leaving service during the Guidance Period. Capital expenditure incurrence is subject to the timing of achievement of contract, satellite manufacturing, launch and other milestones.
Cash Taxes: We expect cash taxes to range from $30 million to $40 million annually.
| 1 | In this release, financial measures are presented both in accordance with U.S. GAAP and also on anon-U.S. GAAP basis. EBITDA, Adjusted EBITDA (or AEBITDA), free cash flow from (used in) operations and related margins included in this release arenon-U.S. GAAP financial measures. Please see the consolidated financial information below for information reconcilingnon-U.S. GAAP financial measures to comparable U.S. GAAP financial measures. |
Conference Call Information
Intelsat management will hold a public conference call at 8:30 a.m. ET on Thursday, February 20, 2020 to discuss the Company’s financial results for the fourth quarter and full-year 2019. Access to the live conference call will also be available via the Internet atwww.intelsat.com/investors. To participate on the live call, participants should dial +1844-834-1428 from North America, and +1920-663-6274 from all other locations. The participant pass code is 4488046.
Participants will have access to a replay of the conference call through February 27, 2020. The replay number for North America is +1855-859-2056, and for all other locations is +1404-537-3406. The participant pass code for the replay is 4488046.
About Intelsat
As the foundational architects of satellite technology, Intelsat S.A. (NYSE: I) operates the world’s largest and most advanced satellite fleet and connectivity infrastructure. We apply our unparalleled expertise and global scale to connect people, businesses and communities, no matter how difficult the challenge. Intelsat is uniquely positioned to help our customers turn possibilities into reality – transformation happens when businesses, governments and communities use Intelsat’s next-generation global network and managed services to build their connected future. Imagine Here, with us, at Intelsat.com.
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” within the meaning of the Private Securities Litigation Reform Act of 1995 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 statements regarding: our belief as to the likelihood of the cause of the failure of Intelsat 29e occurring on our other satellites; our guidance regarding our expectation that the launches of our satellites in the future will position us for growth; our plans for satellite launches in the near tomid-term; our intention to maximize the value of our spectrum rights; our expectations as to the timing and content of a final U.S. Federal Communications Commission ruling with respect to theC-band proceeding; our expectations as to the timing of any related auction and our receipt of proceeds in connection with any such auction; our guidance regarding expectations for our revenue and Adjusted EBITDA performance; our capital expenditure guidance and cash tax expectations over the next
several years; our belief that the scale of our fleet can reduce the financial impact of any satellite anomalies or launch failures and protect against service interruptions; our belief that the diversity of our revenue allows us to benefit from changing market conditions and lowers our risk from revenue fluctuations in our service applications and geographic regions; our belief that developing differentiated services and investing in related software- and standards-based technology will allow us to unlock opportunities that are essential to providing global broadband connectivity; and our assessments regarding how long satellites that have experienced anomalies in the past should be able to provide service on their transponders.
The forward-looking statements reflect Intelsat’s 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 Intelsat’s 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 ourin-orbit satellites; satellite launch failures, satellite launch and construction delays andin-orbit failures or reduced satellite 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; and litigation. Known risks include, among others, the risks described in Intelsat’s Annual Report on Form10-K for the year ended December 31, 2019, and its other filings with the U.S. Securities and Exchange Commission, the political, economic, regulatory 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 Intelsat’s 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.
INTELSAT S.A.
CONSOLIDATED STATEMENTS OF OPERATIONS
($ in thousands, except per share amounts)
| Three Months Ended December 31, 2018 | Three Months Ended December 31, 2019 | Year Ended December 31, 2018 | Year Ended December 31, 2019 | |||||||||||||
| (unaudited) | (unaudited) | (unaudited) | ||||||||||||||
Revenue | $ | 542,771 | $ | 516,951 | $ | 2,161,190 | $ | 2,061,465 | ||||||||
Operating expenses: | ||||||||||||||||
Direct costs of revenue (excluding depreciation and amortization) | 88,516 | 100,558 | 330,874 | 406,153 | ||||||||||||
Selling, general and administrative | 47,805 | 58,655 | 200,857 | 226,918 | ||||||||||||
Depreciation and amortization | 174,076 | 161,795 | 687,589 | 658,233 | ||||||||||||
Satellite impairment loss | — | — | — | 381,565 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total operating expenses | 310,397 | 321,008 | 1,219,320 | 1,672,869 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Income from operations | 232,374 | 195,943 | 941,870 | 388,596 | ||||||||||||
Interest expense, net | 326,993 | 319,866 | 1,212,374 | 1,273,112 | ||||||||||||
Loss on early extinguishment of debt | (17,751 | ) | — | (199,658 | ) | — | ||||||||||
Other income (expense), net | 2,161 | (1,704 | ) | 4,541 | (34,078 | ) | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Loss before income taxes | (110,209 | ) | (125,627 | ) | (465,621 | ) | (918,594 | ) | ||||||||
Provision for (benefit from) income taxes | 150 | (11,268 | ) | 130,069 | (7,384 | ) | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Net loss | (110,359 | ) | (114,359 | ) | (595,690 | ) | (911,210 | ) | ||||||||
Net income attributable to noncontrolling interest | (987 | ) | (600 | ) | (3,915 | ) | (2,385 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net loss attributable to Intelsat S.A. | $ | (111,346 | ) | $ | (114,959 | ) | $ | (599,605 | ) | $ | (913,595 | ) | ||||
|
|
|
|
|
|
|
| |||||||||
Net loss per common share attributable to Intelsat S.A.: | ||||||||||||||||
Basic | $ | (0.81 | ) | $ | (0.81 | ) | $ | (4.63 | ) | $ | (6.51 | ) | ||||
Diluted | $ | (0.81 | ) | $ | (0.81 | ) | $ | (4.63 | ) | $ | (6.51 | ) | ||||
INTELSAT S.A.
UNAUDITED RECONCILIATION OF NET INCOME (LOSS) TO EBITDA
($ in thousands)
| Three Months Ended December 31, 2018 | Three Months Ended December 31, 2019 | Year Ended December 31, 2018 | Year Ended December 31, 2019 | |||||||||||||
Net loss | $ | (110,359 | ) | $ | (114,359 | ) | $ | (595,690 | ) | $ | (911,210 | ) | ||||
Add: | ||||||||||||||||
Interest expense, net | 326,993 | 319,866 | 1,212,374 | 1,273,112 | ||||||||||||
Loss on early extinguishment of debt | 17,751 | — | 199,658 | — | ||||||||||||
Provision for (benefit from) income taxes | 150 | (11,268 | ) | 130,069 | (7,384 | ) | ||||||||||
Depreciation and amortization | 174,076 | 161,795 | 687,589 | 658,233 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
EBITDA | $ | 408,611 | $ | 356,034 | $ | 1,634,000 | $ | 1,012,751 | ||||||||
|
|
|
|
|
|
|
| |||||||||
EBITDA Margin | 75 | % | 69 | % | 76 | % | 49 | % | ||||||||
Note:
Intelsat calculates a measure called EBITDA to assess the operating performance of Intelsat S.A. EBITDA consists of earnings before net interest, 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 loss (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.
INTELSAT S.A.
UNAUDITED RECONCILIATION OF NET INCOME (LOSS) TO ADJUSTED EBITDA
($ in thousands)
| Three Months Ended December 31, 2018 | Three Months Ended December 31, 2019 | Year Ended December 31, 2018 | Year Ended December 31, 2019 | |||||||||||||
Net loss | $ | (110,359 | ) | $ | (114,359 | ) | $ | (595,690 | ) | $ | (911,210 | ) | ||||
Add: | ||||||||||||||||
Interest expense, net | 326,993 | 319,866 | 1,212,374 | 1,273,112 | ||||||||||||
Loss on early extinguishment of debt | 17,751 | — | 199,658 | — | ||||||||||||
Provision for (benefit from) income taxes | 150 | (11,268 | ) | 130,069 | (7,384 | ) | ||||||||||
Depreciation and amortization | 174,076 | 161,795 | 687,589 | 658,233 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
EBITDA | 408,611 | 356,034 | 1,634,000 | 1,012,751 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Add: | ||||||||||||||||
Compensation and benefits(1) | 2,181 | 2,974 | 6,824 | 13,189 | ||||||||||||
Non-recurring and othernon-cash items(2) | 7,102 | 8,252 | 27,646 | 58,625 | ||||||||||||
Satellite impairment loss (3) | — | — | — | 381,565 | ||||||||||||
Proportionate share from unconsolidated joint venture(4): | ||||||||||||||||
Interest expense, net | — | 1,189 | — | 5,014 | ||||||||||||
Depreciation and amortization | — | 2,815 | — | 10,320 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Adjusted EBITDA(5)(6) | $ | 417,894 | $ | 371,264 | $ | 1,668,470 | $ | 1,481,464 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Adjusted EBITDA margin | 77 | % | 72 | % | 77 | % | 72 | % | ||||||||
| (1) | Reflectsnon-cash expenses incurred relating to our equity compensation plans. |
| (2) | Reflects certainnon-recurring gains and losses andnon-cash items, including the following: professional fees related to our liability, business strategy and tax management initiatives; costs associated with ourC-band spectrum solution proposal; severance, retention and relocation payments; change in value of certain investments; certain foreign exchange gains and losses; and other variousnon-recurring expenses. These costs were partially offset bynon-cash income related to the recognition of deferred revenue on a straight-line basis for certain prepaid capacity service contracts. |
| (3) | Reflects anon-cash impairment charge recorded in connection with the Intelsat 29e satellite loss. |
| (4) | Reflects adjustments related to our interest inHorizons-3 Satellite LLC (“Horizons 3”). |
| (5) | For the three months ended December 31, 2018 and 2019, Adjusted EBITDA included $25.1 million and $26.1 million, respectively, and for the years ended December 31, 2018 and 2019, Adjusted EBITDA included $100.6 million and $102.2 million, respectively of revenue relating to the significant financing component identified in customer contracts in accordance with the adoption of the Financial Accounting Standards Board Accounting Standards Codification,Revenue from Contracts with Customers (ASC 606). These impacts are not permitted to be reflected in the applicable consolidated and Adjusted EBITDA definitions under our debt agreements. |
| (6) | For the three months and year ended December 31, 2019, Intelsat S.A. Adjusted EBITDA reflected $4.9 million and $12.5 million, respectively, of Adjusted EBITDA attributable to IntelsatHorizons-3 LLC, its subsidiaries and its proportionate share of Horizons 3, with a nominal amount for the comparative periods in 2018. These entities are considered to be unrestricted subsidiaries under the definitions set forth in our applicable debt agreements. |
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 ofnon-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 management’s 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.
INTELSAT S.A.
CONSOLIDATED BALANCE SHEETS
($ in thousands)
| December 31, 2018 | December 31, 2019 | |||||||
| (unaudited) | ||||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 485,120 | $ | 810,626 | ||||
Restricted cash | 22,037 | 20,238 | ||||||
Receivables, net of allowances of $28,542 in 2018 and $40,028 in 2019 | 271,393 | 255,722 | ||||||
Contract assets | 45,034 | 47,721 | ||||||
Prepaid expenses and other current assets | 24,075 | 39,230 | ||||||
|
|
|
| |||||
Total current assets | 847,659 | 1,173,537 | ||||||
Satellites and other property and equipment, net | 5,511,702 | 4,702,063 | ||||||
Goodwill | 2,620,627 | 2,620,627 | ||||||
Non-amortizable intangible assets | 2,452,900 | 2,452,900 | ||||||
Amortizable intangible assets, net | 311,103 | 276,752 | ||||||
Contract assets, net of current portion | 96,108 | 74,109 | ||||||
Other assets | 401,414 | 504,394 | ||||||
|
|
|
| |||||
Total assets | $ | 12,241,513 | $ | 11,804,382 | ||||
|
|
|
| |||||
LIABILITIES AND SHAREHOLDERS’ DEFICIT | ||||||||
Current liabilities: | ||||||||
Accounts payable and accrued liabilities | $ | 108,101 | $ | 88,107 | ||||
Taxes payable | 5,679 | 6,402 | ||||||
Employee related liabilities | 29,696 | 44,648 | ||||||
Accrued interest payable | 284,649 | 308,657 | ||||||
Contract liabilities | 137,746 | 137,706 | ||||||
Deferred satellite performance incentives | 35,261 | 42,835 | ||||||
Other current liabilities | 59,080 | 62,446 | ||||||
|
|
|
| |||||
Total current liabilities | 660,212 | 690,801 | ||||||
Long-term debt, net of current portion | 14,028,352 | 14,465,483 | ||||||
Contract liabilities, net of current portion | 1,131,319 | 1,113,450 | ||||||
Deferred satellite performance incentives, net of current portion | 210,346 | 175,837 | ||||||
Deferred income taxes | 82,488 | 55,171 | ||||||
Accrued retirement benefits | 133,735 | 125,511 | ||||||
Other long-term liabilities | 77,670 | 166,977 | ||||||
Shareholders’ deficit: | ||||||||
Common shares; nominal value $0.01 per share | 1,380 | 1,411 | ||||||
Paid-in capital | 2,551,471 | 2,565,696 | ||||||
Accumulated deficit | (6,606,426 | ) | (7,503,830 | ) | ||||
Accumulated other comprehensive loss | (43,430 | ) | (63,135 | ) | ||||
|
|
|
| |||||
Total Intelsat S.A. shareholders’ deficit | (4,097,005 | ) | (4,999,858 | ) | ||||
Noncontrolling interest | 14,396 | 11,010 | ||||||
|
|
|
| |||||
Total liabilities and shareholders’ deficit | $ | 12,241,513 | $ | 11,804,382 | ||||
|
|
|
| |||||
INTELSAT S.A.
CONSOLIDATED STATEMENTS OF CASH FLOWS
($ in thousands)
| Three Months Ended December 31, 2018 | Three Months Ended December 31, 2019 | Year Ended December 31, 2018 | Year Ended December 31, 2019 | |||||||||||||
| (unaudited) | (unaudited) | (unaudited) | ||||||||||||||
Cash flows from operating activities: | ||||||||||||||||
Net loss | $ | (110,359 | ) | $ | (114,359 | ) | $ | (595,690 | ) | $ | (911,210 | ) | ||||
Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||||||||||||
Depreciation and amortization | 174,075 | 161,795 | 687,589 | 658,233 | ||||||||||||
Provision for (benefit from) doubtful accounts | (860 | ) | 3,761 | (836 | ) | 17,190 | ||||||||||
Foreign currency transaction (gain) loss | (1,371 | ) | (2,991 | ) | 6,736 | 2,128 | ||||||||||
Loss on disposal of assets | 27 | 231 | 46 | 402 | ||||||||||||
Satellite impairment loss | — | — | — | 381,565 | ||||||||||||
Share-based compensation | 2,183 | 2,974 | 6,824 | 13,189 | ||||||||||||
Deferred income taxes | (5,592 | ) | (26,678 | ) | 79,160 | (27,707 | ) | |||||||||
Amortization of discount, premium, issuance costs and related costs | 9,833 | 10,932 | 48,495 | 41,943 | ||||||||||||
Loss on early extinguishment of debt | 17,751 | — | 199,658 | — | ||||||||||||
Amortization of actuarial loss and prior service credits for retirement benefits | 418 | (3,908 | ) | 3,823 | (3,572 | ) | ||||||||||
Unrealized (gains) losses on derivative financial instruments | 20,243 | 1,814 | (15,093 | ) | 27,018 | |||||||||||
Unrealized net losses on investments and loansheld-for-investment | — | 7,313 | 408 | 39,695 | ||||||||||||
Sales-type lease | — | — | — | 7,064 | ||||||||||||
Othernon-cash items | 1,709 | (123 | ) | 1,178 | (205 | ) | ||||||||||
Changes in operating assets and liabilities: | ||||||||||||||||
Receivables | (21,074 | ) | 2,708 | (63,814 | ) | (1,307 | ) | |||||||||
Prepaid expenses, contract and other assets | 209 | 23,220 | 3,708 | 15,664 | ||||||||||||
Accounts payable and accrued liabilities | 11,720 | 7,975 | 7,291 | 10,908 | ||||||||||||
Accrued interest payable | 81,693 | 25,084 | 21,442 | 24,008 | ||||||||||||
Deferred revenue and contract liabilities | (18,806 | ) | (1,032 | ) | (39,763 | ) | (18,368 | ) | ||||||||
Accrued retirement benefits | (3,388 | ) | 1,392 | (15,902 | ) | (8,224 | ) | |||||||||
Other long-term liabilities | 11,548 | (7,998 | ) | 8,913 | (12,875 | ) | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Net cash provided by operating activities | 169,959 | 92,110 | 344,173 | 255,539 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Cash flows from investing activities: | ||||||||||||||||
Payments for satellites and other property and equipment (including capitalized interest) | (79,719 | ) | (27,553 | ) | (255,696 | ) | (229,818 | ) | ||||||||
Purchase of investments and origination of loansheld-for-investment | (4,000 | ) | (51,327 | ) | (19,000 | ) | (70,751 | ) | ||||||||
Capital contribution to unconsolidated affiliate (including capitalized interest) | (8,404 | ) | (4,951 | ) | (48,097 | ) | (5,289 | ) | ||||||||
Proceeds from insurance settlements | 14,700 | — | 20,409 | — | ||||||||||||
Other proceeds from satellites | 11,250 | 5,625 | 18,750 | 13,125 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net cash used in investing activities | (66,173 | ) | (78,206 | ) | (283,634 | ) | (292,733 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Cash flows from financing activities: | ||||||||||||||||
Proceeds from issuance of long-term debt | 705,250 | — | 4,585,875 | 400,000 | ||||||||||||
Repayments of long-term debt | (954,650 | ) | — | (4,782,451 | ) | — | ||||||||||
Debt issuance costs | (1,932 | ) | — | (49,436 | ) | (4,650 | ) | |||||||||
Debt modification fees | (3,954 | ) | — | (3,954 | ) | — | ||||||||||
Proceeds from stock issuance, net of issuance costs | — | — | 224,250 | — | ||||||||||||
Payment of premium on early extinguishment of debt | (14,242 | ) | — | (33,890 | ) | — | ||||||||||
Principal payments on deferred satellite performance incentives | (6,698 | ) | (7,043 | ) | (25,488 | ) | (28,034 | ) | ||||||||
Dividends paid to noncontrolling interest | (2,174 | ) | (941 | ) | (8,825 | ) | (5,771 | ) | ||||||||
Proceeds from exercise of employee stock options | 14 | 78 | 3,211 | 1,067 | ||||||||||||
Other financing activities | — | — | 385 | 298 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net cash provided by (used in) financing activities | (278,386 | ) | (7,906 | ) | (90,323 | ) | 362,910 | |||||||||
|
|
|
|
|
|
|
| |||||||||
Effect of exchange rate changes on cash, cash equivalents and restricted cash | 457 | 232 | (4,450 | ) | (2,009 | ) | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Net change in cash, cash equivalents and restricted cash | (174,143 | ) | 6,230 | (34,234 | ) | 323,707 | ||||||||||
Cash, cash equivalents, and restricted cash, beginning of period | 681,300 | 824,634 | 541,391 | 507,157 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Cash, cash equivalents, and restricted cash, end of period | $ | 507,157 | $ | 830,864 | $ | 507,157 | $ | 830,864 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Supplemental cash flow information: | ||||||||||||||||
Interest paid, net of amounts capitalized | $ | 194,959 | $ | 259,694 | $ | 1,052,885 | $ | 1,099,874 | ||||||||
Income taxes paid, net of refunds | 3,395 | 24,300 | 57,085 | 33,584 | ||||||||||||
Supplemental disclosure ofnon-cash investing activities: | ||||||||||||||||
Accrued capital expenditures | $ | 13,604 | $ | 4,298 | $ | 28,203 | $ | 8,123 | ||||||||
Capitalization of deferred satellite performance incentives | — | 29,382 | 28,161 | 29,382 | ||||||||||||
INTELSAT S.A.
UNAUDITED RECONCILIATION OF NET CASH PROVIDED BY OPERATING ACTIVITIES
TO FREE CASH FLOW FROM (USED IN) OPERATIONS
($ in thousands)
| Three Months Ended December 31, 2018 | Three months Ended December 31, 2019 | Year Ended December 31, 2018 | Year Ended December 31, 2019 | |||||||||||||
Net cash provided by operating activities | $ | 169,959 | $ | 92,110 | $ | 344,173 | $ | 255,539 | ||||||||
Other proceeds from satellites from investing activities | 11,250 | 5,625 | 18,750 | 13,125 | ||||||||||||
Payments for satellites and other property and equipment (including capitalized interest) | (79,719 | ) | (27,553 | ) | (255,696 | ) | (229,818 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Free cash flow from operations | $ | 101,490 | $ | 70,182 | $ | 107,227 | $ | 38,846 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Note:
Free cash flow from (used in) operations consists of 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 and other payments for satellites from financing activities. 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 company’s 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 Intelsat’s 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.
INTELSAT S.A.
SUPPLEMENTARY TABLE
REVENUE BY CUSTOMER SET AND SERVICE TYPE
($ in thousands)
By Customer Set
| Three Months Ended December 31, 2018 | Three Months Ended December 31, 2019 | Increase (Decrease) | Percentage change | |||||||||||||||||||||
Network Services | $ | 202,015 | 37 | % | $ | 200,198 | 39 | % | $ | (1,817 | ) | (1 | )% | |||||||||||
Media | 231,142 | 43 | % | 210,615 | 41 | % | (20,527 | ) | (9 | )% | ||||||||||||||
Government | 97,736 | 18 | % | 96,025 | 19 | % | (1,711 | ) | (2 | )% | ||||||||||||||
Other | 11,878 | 2 | % | 10,113 | 2 | % | (1,765 | ) | (15 | )% | ||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
Total | $ | 542,771 | $ | 516,951 | $ | (25,820 | ) | (5 | )% | |||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
By Service Type | ||||||||||||||||||||||||
| Three Months Ended December 31, 2018 | Three Months Ended December 31, 2019 | Increase (Decrease) | Percentage change | |||||||||||||||||||||
On-Network Revenues: | ||||||||||||||||||||||||
Transponder services | $ | 390,317 | 72 | % | $ | 357,609 | 69 | % | $ | (32,708 | ) | (8 | )% | |||||||||||
Managed services | 96,463 | 18 | % | 96,410 | 19 | % | (53 | ) | — | % | ||||||||||||||
Channel | 959 | — | % | 523 | — | % | (436 | ) | (45 | )% | ||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
Totalon-network revenues | 487,739 | 90 | % | 454,542 | 88 | % | (33,197 | ) | (7 | )% | ||||||||||||||
Off-Network and Other Revenues: | ||||||||||||||||||||||||
Transponder, MSS and otheroff-network services | 40,901 | 8 | % | 48,898 | 9 | % | 7,997 | 20 | % | |||||||||||||||
Satellite-related services | 14,131 | 3 | % | 13,511 | 3 | % | (620 | ) | (4 | )% | ||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
Totaloff-network and other revenues | 55,032 | 10 | % | 62,409 | 12 | % | 7,377 | 13 | % | |||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
Total | $ | 542,771 | $ | 516,951 | $ | (25,820 | ) | (5 | )% | |||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
INTELSAT S.A.
SUPPLEMENTARY TABLE
REVENUE BY CUSTOMER SET AND SERVICE TYPE
($ in thousands)
By Customer Set
| Year Ended December 31, 2018 | Year Ended December 31, 2019 | Increase (Decrease) | Percentage change | |||||||||||||||||||||
Network Services | $ | 798,086 | 37 | % | $ | 770,398 | 37 | % | $ | (27,688 | ) | (3 | )% | |||||||||||
Media | 937,710 | 43 | % | 882,953 | 43 | % | (54,757 | ) | (6 | )% | ||||||||||||||
Government | 391,956 | 18 | % | 378,284 | 18 | % | (13,672 | ) | (3 | )% | ||||||||||||||
Other | 33,438 | 2 | % | 29,830 | 1 | % | (3,608 | ) | (11 | )% | ||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
Total | $ | 2,161,190 | $ | 2,061,465 | $ | (99,725 | ) | (5 | )% | |||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
| By Service Type | ||||||||||||||||||||||||
| Year Ended December 31, 2018 | Year Ended December 31, 2019 | Increase (Decrease) | Percentage change | |||||||||||||||||||||
On-Network Revenues: | ||||||||||||||||||||||||
Transponder services | $ | 1,570,278 | 73 | % | $ | 1,468,791 | 71 | % | $ | (101,487 | ) | (6 | )% | |||||||||||
Managed services | 393,264 | 18 | % | 374,026 | 18 | % | (19,238 | ) | (5 | )% | ||||||||||||||
Channel | 4,250 | — | % | 2,400 | — | % | (1,850 | ) | (44 | )% | ||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
Totalon-network revenues | 1,967,792 | 91 | % | 1,845,217 | 90 | % | (122,575 | ) | (6 | )% | ||||||||||||||
Off-Network and Other Revenues: | ||||||||||||||||||||||||
Transponder, MSS and otheroff-network services | 150,186 | 7 | % | 175,602 | 9 | % | 25,416 | 17 | % | |||||||||||||||
Satellite-related services | 43,212 | 2 | % | 40,646 | 2 | % | (2,566 | ) | (6 | )% | ||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
Totaloff-network and other revenues | 193,398 | 9 | % | 216,248 | 10 | % | 22,850 | 12 | % | |||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
Total | $ | 2,161,190 | $ | 2,061,465 | $ | (99,725 | ) | (5 | )% | |||||||||||||||
|
|
|
|
|
| |||||||||||||||||||