RRSat Raises Outlook for 2009 Financials

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  Space News Business

RRSat Raises Outlook for 2009 Financials

By PETER B. de SELDING
Space News Staff Writer
posted: 04 November 2008
04:56 pm ET






PARIS
— An Israel-based company on the front lines of the global satellite telecommunications market reported record third-quarter revenues, increased backlog and higher profit margins and concluded that its customers believe satellite television is too important a service to do without, even in a global financial crisis.

RRSat
Global Communications, which leases capacity on more than a dozen telecommunications satellites and sells it to radio and television programmers, also raised its outlook for 2009.

In an Oct. 30 conference call with investors – Omer-based RRSat is traded on the U.S. Nasdaq exchange – Chief Executive David Rivel said there are no signs of weakening in any of RRSat’s markets.

“We have seen no change in the behavior of our customers,” Rivel said. “Our sense is that television delivery is mission critical to our customers. A decision to stop broadcasting is a significant decision that would put a channel out of business.”

RRSat’s
results reinforce statements made by large satellite-fleet operators that the business, while not recession-proof, is at least resistant to even a sharp economic downturn because broadcasters don’t dare shut down programs.

RRSat
is more exposed to short-term economic phenomena than the large satellite operators because its contracts typically are of shorter duration. If a global economic slowdown were to force new satellite-television channels to slow their growth or shut down, RRSat would be one of the first to feel the effects.

The company reported backlog of $178.5 million as of Sept. 30 up 2.6 percent from June 30. Some $19.8 million of this relates to contracts that expire in 2008, and $71 million is for contracts expiring in 2009. The rest is for contracts that run out to as far as 2016. The average contract length is 26 months, Rivel said.

For the three months ending Sept. 30, RRSat reported revenue of $20.1 million, a 34 percent increase over the same period a year ago. The sharp increase is in part due to the increased value of the U.S. dollar compared to the New Israeli New shekel.

RRSat
Chief Financial Officer Gil Efron said the company forecasts full 2008 revenue will be around $78 million, and that in 2009 the company expects to surpass $100 million in revenue. The company’s operating-profit margin will remain around 20 percent, he said.

RRSat
said it booked 13 new contracts in the three months ending Sept.30, seven from existing customers and six from new ones including television channels in
Africa
,
Russia
and
Asia
. Rivel said RRSat is optimistic about its near-term prospects in
Russia
following the company’s contract to book satellite capacity from satellite-fleet operator Gascom of Moscow.

“We have no debt, and we can use our cash to take advantage of opportunities in the market,” Rivel said. RRSat has announced its intentions to purchase teleports in key markets.

RRSat
announced in March that it was purchasing the satellite operations of Bezeq, an Israeli telecommunications service provider, for $15 million in cash. The purchase includes Bezeq’s 26.5-acre EmekHa’ela Teleport in
Israel
, as well as Bezeq’s television and radio distribution center and a satellite communications services operation that distributes Inmarsat mobile satellite services. RRSat said the Bezeq operations it is buying reported $7 million in revenue in 2007.

Rivel
said the purchase has not yet been completed but would be finished by mid-November.