Feb. 26, 2018

Intelsat S.A. announced financial results for the three months and full-year ended December 31, 2017.

Intelsat reported total revenue of $538.1 million and net loss attributable to Intelsat S.A. of $90.0 million for the three months ended December 31, 2017.

Intelsat reported EBITDA¹, or earnings before net interest, taxes and depreciation and amortization, of $409.1 million and Adjusted EBITDA¹ of $416.4 million, or 77 percent of revenue, for the three months ended December 31, 2017.

For the year ended December 31, 2017, Intelsat reported total revenue of $2,148.6 million and net loss attributable to Intelsat S.A. of $178.7 million.

Intelsat reported EBITDA of $1,629.0 million and Adjusted EBITDA of $1,664.6 million, or 77 percent of revenue, for the year ended December 31, 2017.

“Our fourth quarter financial results, $538 million in revenue and $416 million in Adjusted EBITDA, are in-line with our 2017 annual guidance,” said Stephen Spengler, Chief Executive Officer, Intelsat. “In delivering on our expectation for Adjusted EBITDA for the year, we demonstrated our discipline with respect to expenses and managing cash flows. Our business results, combined with the successful extension of our $3.1 billion secured term loan maturity to 2023 and 2024, provide a solid foundation as we implement our 2018 business plan.”

Mr. Spengler continued, “Our goals in 2018 capitalize upon the better performance and economics associated with the services delivered by our high-throughput satellite Intelsat Epic^NG fleet. Our position will be further enhanced by completion of the Intelsat Epic^NG global deployment, which is planned to occur later this year with the launch of the Asia Pacific-oriented Horizons 3e satellite. We developed our 2018 initiatives to drive stability in our business sectors while accelerating the introduction of new end-to-end service capabilities. As we continue to innovate in technologies that support entry to new segments, we will expand the opportunity set for our Company and create new revenue streams to support growth.”

Fourth Quarter and Full-Year 2017 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. For additional details regarding the performance of our customer sets, see our Quarterly Commentary.

Total Company revenue for the three months ended December 31, 2017 was $538.1 million, a decrease of 2 percent, as compared to the three months ended December 31, 2016. Total Company revenue for the year ended December 31, 2017 was $2,148.6 million, a decrease of 2 percent, as compared to the year ended December 31, 2016.

Network Services

Network services revenue was $212.2 million (or 39 percent of Intelsat’s total revenue) for the three months ended December 31, 2017, a decrease of 4 percent compared to the three months ended December 31, 2016. For the year ended December 31, 2017, the Company reported total network services revenue of $851.6 million (or 40 percent of Intelsat’s total revenue), a decrease of 5 percent compared to the year ended December 31, 2016.

Media

Media revenue was $226.2 million (or 42 percent of Intelsat’s total revenue) for the three months ended December 31, 2017, a decrease of 1 percent compared to the three months ended December 31, 2016. For the year ended December 31, 2017, the Company reported total media revenue of $910.1 million (or 42 percent of Intelsat’s total revenue), an increase of 5 percent compared to the year ended December 31, 2016.

Government

Government revenue was $90.1 million (or 17 percent of Intelsat’s total revenue) for the three months ended December 31, 2017, a decrease of 3 percent compared to the three months ended December 31, 2016. For the year ended December 31, 2017, total government revenue was $352.6 million (or 16 percent of Intelsat’s total revenue), a decline of 9 percent compared to the year ended December 31, 2016.

Average Fill Rate

Intelsat’s average fill rate at December 31, 2017 on our approximately 1,950 station-kept wide-beam transponders was 79 percent, as compared to an average fill rate at September 30, 2017 of 78 percent on 2,025 transponders, reflecting the reclassification of two satellites into inclined orbit operations. High-throughput satellite Intelsat Epic^NG capacity was unchanged from the third quarter of 2017 at approximately 825 units. Intelsat 37e, launched in September 2017, is planned for entry into service in the first quarter of 2018.

Satellite Launches

Intelsat has two satellite launches scheduled for 2018. Intelsat 38 is planned to launch in the second quarter of 2018, and Horizons 3e is planned to launch in the third to fourth quarters of 2018. For additional details regarding our satellite investment program, see our Quarterly Commentary.

Contracted Backlog

At December 31, 2017, Intelsat’s contracted backlog, representing expected future revenue under existing contracts with customers, was $7.8 billion, as compared to $7.9 billion at September 30, 2017.

Capital Structure Updates and Debt Transactions

On November 27, 2017, our subsidiary, Intelsat Jackson Holdings S.A. (“Intelsat Jackson”), entered into an amendment and joinder agreement, which further amended the Intelsat Jackson Secured Credit Agreement. The amendment extended the maturity date of $2.0 billion of the existing floating rate B-2 Tranche of Term Loans (the “B-3 Tranche Term Loans”), to November 27, 2023.

On January 2, 2018, Intelsat Jackson entered into an amendment and joinder agreement, which further amended the Intelsat Jackson Secured Credit Agreement, extending the maturity date of the remaining $1.095 billion B-2 Tranche Term Loans, through the creation of (i) a new incremental floating rate tranche of term loans with a principal amount of $395.0 million (the “B-4 Tranche Term Loans”), and (ii) a new incremental fixed rate tranche of term loans with a principal amount of $700.0 million (the “B-5 Tranche Term Loans”). The maturity date of the B-4 Tranche Term Loans and the B-5 Tranche Term Loans is January 2, 2024.

The B-3 Tranche Term Loans have an applicable interest rate margin of 3.75% for LIBOR loans and 2.75% for base rate loans, among other terms. The B-4 Tranche Term Loans have an applicable interest rate margin of 4.50% per annum for LIBOR loans and 3.50% per annum for base rate loans, and the B-5 Tranche Term Loans have an interest rate of 6.625% per annum.

Expected Impact of Accounting Standards Codification Topic 606

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASC 606”), which will supersede the revenue recognition requirements in FASB ASC Topic 605 – Revenue Recognition. Based on our assessment, the adoption of the new standard will impact the total consideration for prepayment contracts, accounting of incremental costs for obtaining a contract, allocation of the transaction price to performance obligations in multiple element arrangements, our accounting for contract modifications, and will require additional disclosures.

We will adopt the new revenue standard effective January 1, 2018, using the modified retrospective transition method applied to contracts which were still in service at that date. The most significant adjustments to our reported results will be related to contracts with a significant financing component, typically with respect to our long-term contracts for which a prepayment was received, which will result in an increase in revenue and an increase in interest expense, both of which are non-cash. We expect the change to our revenue and interest expense in 2018 as a result to be an increase of approximately $100 million to $105 million in revenue and approximately $110 million to $115 million in interest expense.

A complete discussion, including adjustments related to other revenue, expense and balance sheet accounts for the expected impacts of ASC 606, will be provided in our Annual Report on Form 20-F for the year ended December 31, 2017, and in our Quarterly Commentary, both expected to be available today. We expect to identify the effects of ASC 606 in our upcoming 2018 quarterly financial discussions to accommodate same basis period-over-period comparisons.

Implications of U.S. Tax Code Changes

On December 22, 2017, the U.S. Tax Cuts and Jobs Act (the “Act") was signed into law. The Act includes a number of provisions, including the lowering of the U.S. corporate tax rate from 35 percent to 21 percent, effective January 1, 2018.

We accounted for the tax effects of the Act in our 2017 financial statements by re-measuring the deferred taxes of our U.S. subsidiaries to reflect the lower tax rate. This resulted in a $28 million non-cash income tax benefit.

The Act introduced some additional changes to the U.S. tax rules which we are currently evaluating. As we are a Luxembourg-domiciled company, any impact of these new rules should be limited to our U.S. operations.

Financial Results for the Three Months Ended December 31, 2017

On-Network revenues generally include revenue from any services delivered via our satellite or ground network. Off-Network and Other revenues generally include revenue from transponder services, mobile satellite services (“MSS”) and other satellite-based transmission services using capacity procured from other operators, often in frequencies not available on our network. Off-Network and Other revenues also include revenue from consulting and other services and sales of customer premises equipment.

Total On-Network Revenues reported a decline of $17.1 million, or 3 percent, to $487.1 million as compared to the three months ended December 31, 2016:

• Transponder services reported an aggregate decrease of $12.9 million, primarily due to a $9.3 million decrease in revenue from network services customers and a $4.9 million decrease in revenue from media customers, partially offset by a $1.3 million increase from revenues for government applications. The network services decline was mainly due to non-renewals with wireless operators terminating services on wide-beam assets, in some cases for point-to-point connectivity as has been previously discussed. These were offset somewhat by increases in mobility services on new assets for aeronautical and maritime customers, of which $3.1 million represented delayed billings. The media decrease resulted primarily from reduced revenue from non-renewals for direct-to-home (“DTH”) services in Latin America, due to the relocation of a satellite asset, and lower revenue from distribution services in Europe, partially offset by DTH growth in the Asia-Pacific region and distribution growth in the North America region.
• Managed services reported an aggregate decrease of $3.5 million, primarily due to a decrease of $5.0 million from network services customers largely for point-to-point trunking applications switching to fiber alternatives, and a $3.4 million decrease in revenue related to the previously announced end of a government maritime contract, partially offset by an increase of $4.6 million in revenue from network services managed broadband solutions for mobility applications and managed services for video applications.

Total Off-Network and Other Revenues reported an aggregate increase of $4.5 million, or an increase of 10 percent, to $51.0 million as compared to the three months ended December 31, 2016:

• Transponder, MSS and other Off-Network services reported an aggregate increase of $3.0 million, primarily due to recurring service fees related to media and network services customers and increased sales of MSS.
• Satellite-related services reported an aggregate increase of $1.5 million, primarily due to approximately $2.4 million in revenues earned for the completion of a third-party satellite orbit-raising project and other professional services, offset somewhat by lower revenue from government-related professional services.

For the three months ended December 31, 2017, changes in operating expenses, interest expense, net, and other significant income statement items are described below.

Direct costs of revenue (excluding depreciation and amortization) decreased by $6.6 million, or 8 percent, to $80.2 million for the three months ended December 31, 2017, as compared to the three months ended December 31, 2016. The decrease was primarily due to a decline of $5.6 million in staff-related expenses, as well as a decrease of $1.3 million in satellite-related insurance costs. Lower costs of off-network satellite capacity were largely offset by increased cost of goods sold related to customer premises equipment, both of which are related to our government business.

Selling, general and administrative expenses decreased by $4.5 million, or 8 percent, to $51.7 million for the three months ended December 31, 2017 as compared to the three months ended December 31, 2016. This was primarily due to a decrease of $8.8 million in staff-related expenses, partially offset by an increase of $4.1 million in professional fees largely due to our liability management initiatives.

Depreciation and amortization expense decreased by $1.6 million, or 1 percent, to $172.4 million, as compared to the three months ended December 31, 2016.

Interest expense, net consists of the interest expense we incur together with gains and losses on interest rate caps (which reflect net interest accrued on the interest rate caps as well as 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, 2017, we held interest rate caps with an aggregate notional amount of $2.4 billion to mitigate the risk of interest rate expense increase on the floating-rate term loans under our senior secured credit facilities. The caps have not been designated as hedges for accounting purposes.

Interest expense, net increased by $21.0 million, or 9 percent, to $264.6 million for the three months ended December 31, 2017, as compared to $243.6 million in the three months ended December 31, 2016. The increase was principally due to a net increase of $14.8 million in interest expense largely resulting from refinancings at higher interest rates, which was partially offset by certain debt repurchases and exchanges in 2016 and 2017, and a net increase of $5.2 million resulting from lower capitalized interest of $14.1 million for the three months ended December 31, 2017, as compared to $19.3 million for the three months ended December 31, 2016, primarily resulting from a decreased number of satellites and related assets under construction.

The non-cash portion of total interest expense, net was $12.5 million for the three months ended December 31, 2017, due to the amortization of deferred financing fees and the accretion and amortization of discounts and premiums.

Gain on early extinguishment of debt did not exist in the three months ended December 31, 2017, as compared to a gain of $679.1 million for the three months ended December 31, 2016. The gains were related to certain debt transactions that occurred during 2016. The gains on early extinguishment of debt consisted of the difference between the carrying value of the debt exchanged and the fair value of the debt issued, if applicable, and the total cash amount paid (including related fees and expenses), together with a write-off of unamortized debt issuance costs.

Other income, net was $2.8 million for the three months ended December 31, 2017, as compared to other expense, net of $1.0 million for the three months ended December 31, 2016. The variance of $3.8 million was primarily driven by $1.1 million in foreign exchange fluctuation related to our business conducted in Brazilian reais and Euros, and a $2.7 million increase in other miscellaneous income related to activities that are not associated with our core operations.

Provision for income taxes was $61.0 million for the three months ended December 31, 2017, as compared to $4.4 million for the three months ended December 31, 2016. The increase in expense was principally due to valuation allowances recorded in the three months ended December 31, 2017 on certain deferred tax assets, partially offset by tax benefits related to the tax rate change for our U.S. subsidiaries as a result of the Act enacted on December 22, 2017.

Cash paid for income taxes, net of refunds, totaled $3.3 million and $4.7 million for the three months ended December 31, 2017 and 2016, 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 $90.0 million for the three months ended December 31, 2017, compared to net income of $662.8 million for the same period in 2016, during which we recognized a $679.1 million gain on extinguishment of debt.

Net loss per diluted common share attributable to Intelsat S.A. was $0.75 for the three months ended December 31, 2017, compared to net income of $5.56 per diluted common share for the same period in 2016.

EBITDA was $409.1 million for the three months ended December 31, 2017, compared to $406.7 million for the same period in 2016.

Adjusted EBITDA was $416.4 million for the three months ended December 31, 2017, or 77 percent of revenue, compared to $417.4 million, or 76 percent of revenue, for the same period in 2016.

Intelsat management has reviewed the data pertaining to the use of the Intelsat network, and is providing revenue information with respect to that use by customer set and service type in the following tables. Intelsat management believes this provides a useful perspective on the changes in revenue and customer trends over time.

Free Cash Flow Used in Operations

Free cash flow used in operations¹ was $35.4 million for the three months ended December 31, 2017. Free cash flow from (used in) operations is defined as net cash provided by operating activities, less payments for satellites and other property and equipment (including capitalized interest) from investing activities and payments for satellites from financing activities. Payments for satellites and other property and equipment from investing activities during the three months ended December 31, 2017 was $57.5 million.

Financial Outlook 2018

Today, Intelsat issued its 2018 financial outlook. The guidance detailed below excludes the expected financial statement impact of ASC 606 summarized above. As we implement ASC 606, we will provide supplementary disclosure on a quarterly basis to allow for same basis period-over-period comparisons. For more information on Intelsat’s plan to implement ASC 606, please see Expected Impact of Accounting Standards Codification Topic 606, above, and in ourQuarterly Commentaryissued today.

Revenue: We expect full-year 2018 revenue in a range of $2.060 billion to $2.110 billion. In addition, in 2018 we intend to reclassify $16 million in expected revenue from network services to our government customer set due to clarification of end-use applications. This change is reflected in our full-year 2018 customer set revenue expectations, as follows:

• Stable to a decline of 3 percent in revenue from our media business;

A decline of 5 percent to 8 percent in revenue from our network services business; and

• An increase of 2 percent to a decline of 1 percent in revenue from our government business.

Adjusted EBITDA: Intelsat forecasts Adjusted EBITDA performance for the full-year 2018 to be in a range of $1.560 billion to $1.605 billion.

Cash Taxes: We are currently evaluating the impact of the recently enacted U.S. tax reform. We expect to provide cash tax guidance later this year. Please see the section above “Implications of U.S. Tax Code Changes.”

Capital Expenditures: Intelsat issued its 2018 capital expenditure guidance for the three calendar years 2018 through 2020 (the “Guidance Period”). Over the next three years we are in a cycle of lower than average required investment due to timing of replacement satellites and smaller satellites being built.

We expect the following capital expenditure ranges:

• 2018: $375 million to $425 million;
• 2019: $425 million to $500 million; and

2020: $375 million to $475 million.

Capital expenditure guidance for 2018 through 2020 assumes investment in seven satellites, three of which are in the design and manufacturing phase, or recently launched. The remaining four satellites are replacement satellites for which manufacturing contracts have not yet been signed. In addition to our satellites funded through capital expenditures, we plan to launch two partnership satellites in 2018.

By early 2019, we plan to have completed the investment program in the current series of Intelsat Epic^NG high-throughput satellites and payloads, thereby increasing our total transmission capacity. By the conclusion of the Guidance Period at the end of 2020, the net number of transponder equivalents is expected to increase by a compound annual growth rate (“CAGR”) of approximately 5 percent, reflecting the net activity of satellites entering and leaving service during the Guidance Period.

Our capital expenditure guidance includes capitalized interest, which is expected to average approximately $40 million annually over the Guidance Period.