OTTAWA — Despite modest growth in both revenue and earnings and a decrease in operating expenses, Telesat Holdings Inc.’s net income for the second quarter of 2015 was almost half its income for the same quarter last year. In addition, the weaker Canadian dollar resulting in higher foreign exchange rates contributed to a significant net loss for the first six months of 2015, Telesat said Thursday when the company released its financial results for the first half of the year.
Overall, Telesat’s net loss for the six-month period ended June 30 was $98 million, compared to a net income of $80 million for the first half of 2014. According to Telesat, the reduction in net income for the first half of 2015 was principally due to a first-quarter non-cash loss on foreign exchange arising from the translation of Telesat’s U.S. dollar-denominated debt into Canadian dollars.
For the second quarter of 2015, Telesat reported consolidated revenue of $227 million, an increase of $1 million compared to the same period in 2014. Taking into account the stronger U.S. dollar (it was 13% stronger in Q2 2015 than it was during Q2 2014, according to Telesat) and adjusting for foreign exchange rate changes, Telesat’s revenue decreased by 4% ($9 million) in the second quarter of 2015, compared to the same period in 2014. According to Telesat, its revenue decrease in Q2 2015 was mainly related to lower revenue from the company’s international satellite services and lower equipment sales.
Telesat’s operating expenses in the second quarter of 2015 were $44 million, which is 4% ($2 million) lower than the same period in 2014 or 9% ($4 million) lower when taking into account changes in foreign exchange rates. The company’s adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) was $185 million in Q2 2015, an increase of 1% ($2 million) compared to Q2 2014, or a decrease of 3% ($6 million) when adjusted for foreign exchange rate changes.
In terms of second-quarter income, Telesat’s net income for Q2 2015 was $56 million, compared to net income of $108 million for the same quarter in 2014. According to Telesat, the reduction in second-quarter net income was principally due to a reduced foreign exchange gain and an increased loss in the fair value of financial instruments compared to 2014.
Looking at financial figures for the first six months of 2015, Telesat’s consolidated revenue was $456 million for the first half of the year, a decrease of 3% ($12 million) compared to the same period in 2014. When adjusted for foreign exchange rate changes, revenue decreased by 7% ($34 million) in the first half of 2015, compared to the first six months of 2014. Telesat said the revenue decrease was due primarily to short-term services provided to other satellite operators in the first half of 2014 that did not recur a year later and lower equipment sales compared to the same period in 2014.
The company’s operating expenses in the first half of 2015 were $89 million, a decrease of 4% ($4 million) compared to the first six months of 2014 or 9% ($8 million) lower when adjusted for foreign exchange rate changes. Adjusted EBITDA was $371 million, representing a decrease of 3% ($10 million) compared to the first half of 2014, or a decrease of 7% ($28 million) when adjusted for foreign exchange rates.
“Telesat had a solid second quarter notwithstanding weakness in certain markets we serve,” Dan Goldberg, Telesat’s President and CEO, said in a press release. “Although revenue and adjusted EBITDA grew on a reported basis relative to the second quarter last year, they declined 4% and 3%, respectively, after taking foreign exchange rate changes into account. “Nonetheless, we achieved a reduction of operating expenses, a modest expansion of our adjusted EBITDA margin, and continued to generate a significant amount of cash from our operating activities.
“Looking ahead, the Telstar 12 Vantage satellite remains on schedule and we anticipate its launch toward the end of this year. Our industry-leading contractual backlog provides visibility into the stability of our future revenue and cash flow, and anticipated growing demand for satellite services positions us well to expand our activities going forward,” Goldberg added.
According to Telesat, as of June 30, the company had contracted backlog for future services of approximately $4.6 billion.
Telesat’s second-quarter and first-half 2015 financial results can be viewed by clicking here.
