Telesat Reports Results for the Quarter and Nine Months

October 29, 2020

Telesat announced its financial results for the three and nine-month periods ended September 30, 2020. All amounts are in Canadian dollars and reported under International Financial Reporting Standards (“IFRS”) unless otherwise noted.

For the quarter ended September 30, 2020, Telesat reported consolidated revenue of $202 million, a decrease of 15% ($35 million) compared to the same period in 2019. When adjusted for changes in foreign exchange rates, revenue declined 14% ($34 million) compared to 2019. The revenue decrease was due to short-term services provided to another satellite operator in the third quarter of 2019 that did not recur in 2020, a reduction of service for one of Telesat’s North American DTH customers and lower revenue due to the completion of the term for prepaid services in a customer agreement that was accounted for as having a significant financing component. In addition, the restructuring of certain customer contracts related to the COVID 19 pandemic negatively impacted revenue.

Operating expenses for the quarter were $42 million, an increase of $4 million from 2019. Increased expenses primarily consisted of higher professional fees and licensing fees combined with higher wage expense, which was the result of increased hiring to support Telesat’s Low Earth Orbit (“LEO”) program.

Adjusted EBITDA1 was $162 million, a decrease of 20% ($41 million) or, when adjusted for foreign exchange rates, a decrease of $40 million. The Adjusted EBITDA margin1 for the third quarter of 2020 was 80.4%, compared to 85.7% in 2019.

For the quarter ended September 30, 2020, net income was $107 million, compared to net loss of $123 million for 2019. The positive variation for the quarter was principally the result of non-cash gains on the fair value of financial instruments in 2020, non-cash foreign exchange gains in 2020 arising from the translation of Telesat’s U.S. dollar denominated debt into Canadian dollars and lower interest expense.

For the nine-month period ended September 30, 2020, Telesat reported consolidated revenue of $619 million, a decrease of 10% ($72 million) compared to the same period in 2019. Revenue decreases were due to a reduction of service for one of Telesat’s North American DTH customers and lower revenue due to the completion of the term for prepaid services in a customer agreement that was accounted for as having a significant financing component. In addition, revenue associated with shortterm services provided to other satellite operators in 2019 did not recur in 2020.

Operating expenses for the nine-month period were $134 million, an increase of $19 million from 2019. The increase is substantially attributable to compensation and professional fees associated with the LEO program, provision for bad debts as previously disclosed and higher in-orbit insurance.

Adjusted EBITDA1 was $493 million, a decrease of 16% ($95 million) or, when adjusted for foreign exchange rates, a decrease of $93 million. The Adjusted EBITDA margin1 for the first nine months of 2020 was 79.7%, compared to 85.1% in 2019.

For the nine months ended September 30, 2020, net loss was $9 million, compared to net income of $185 million for 2019. The negative variation for the period was principally the result of non-cash foreign exchange losses in 2020, arising from the translation of Telesat’s U.S. dollar denominated debt into Canadian dollars compared to foreign exchange gains in 2019, offset by lower interest expense, smaller losses on changes in the fair value of financial instruments, and lower taxes.

“Our reduced revenue and Adjusted EBITDA1 over the first three quarters of this year relative to the prior period are the result of a number of factors that we have disclosed previously, including the non-renewal late last year of a North American DTH contract, the end of the revenue amortization period of another contract, a dearth of opportunities for the provision of short-term satellite services, and the adverse impact of COVID-19 on our customers providing broadband to the aeronautical and maritime markets,” commented Dan Goldberg, Telesat’s President and CEO. “Having said that, the overwhelming majority of our revenues has been unaffected by the pandemic and we continue to have robust operating margins and cash flow, which are underpinned by our significant contractual backlog. In addition, we are making substantial progress on the development of our revolutionary LEO satellite constellation as well as our other strategic objectives, including leveraging our valuable spectrum rights.”