Telesat Reports Results for the Quarter and Year Ended December 31, 2015

Telesat Holdings Inc. (“Telesat”) today announced its financial results for the three month and one year periods ended December 31, 2015. All amounts are in Canadian dollars and are reported under International Financial Reporting Standards (“IFRS”) unless otherwise noted.

For the quarter ended December 31, 2015, Telesat reported consolidated revenue of $257 million, an increase of 13% ($29 million) compared to the same period in 2014. During the quarter, the U.S. dollar was 17% stronger than it was during the fourth quarter of 2014, resulting in a positive impact on the conversion of U.S. dollar denominated revenue and a negative impact on the conversion of U.S. dollar denominated expenses. When adjusted for foreign exchange rate changes, revenue increased by 6% ($13 million) compared to the same period in 2014. The increase in revenue was principally from short-term services provided to other satellite operators, international consulting services, and equipment sales.

Operating expenses of $51 million were 11% ($5 million) higher than the same period in 2014 or 4% ($2 million) higher when taking into account changes in foreign exchange rates. The increase was primarily related to higher revenue related expenses and higher cost of equipment sales. Adjusted EBITDA1 was $208 million, an increase of 14% ($25 million) compared to the same period in 2014, or an increase of 7% ($12 million) when adjusted for foreign exchange rate changes. The Adjusted EBITDA margin1 was 81.1% for the fourth quarter of 2015 compared to 80.6% for the same period in 2014.

Telesat’s net loss for the quarter ended December 31, 2015 was $29 million compared to a net loss of $26 million for the same period in 2014. The higher net loss in 2015 was principally due to an almost entirely non-cash loss on foreign exchange of $126 million (compared to a loss on foreign exchange of $102 million in the same period in 2014) which resulted from the weaker Canadian dollar relative to the U.S. dollar and the resulting unfavorable translation of Telesat’s U.S. dollar denominated debt into Canadian dollars. The higher net loss was also due to lower non-cash gains on the changes in the fair value of financial instruments and higher tax expense in the 2015 quarter compared to 2014, partially offset by an increase in operating income.

For the year ended December 31, 2015, consolidated revenue was $955 million, or $32 million higher compared to 2014. During 2015, the U.S. dollar was 16% stronger than it was during 2014. When adjusted for foreign exchange rate changes, revenue decreased by 2% ($23 million) compared to 2014. The decrease was due primarily to lower revenues from the energy and resource industries and certain international markets, as well as lower equipment sales. Operating expenses were $184 million, a decrease of 2% ($4 million) compared to 2014 or 7% ($14 million) lower when adjusted for foreign exchange rate changes. The largest contributors to the operating expense reduction were lower share-based compensation expense and lower cost of equipment sales. Adjusted EBITDA1 was $778 million, an increase of 4% ($32 million) compared to 2014, or a decrease of 2% ($13 million) when adjusted for foreign exchange rate changes. The Adjusted EBITDA margin1 for 2015 was 81.5% compared to 80.9% in 2014.

Telesat’s net loss for 2015 was $267 million, compared to net income of $13 million for 2014. The negative year-over-year variation was principally due to an increased, almost entirely non-cash, loss on foreign exchange of $540 million (compared to a loss on foreign exchange of $241 million in 2014) which resulted from the weaker Canadian dollar relative to the U.S. dollar and the resulting unfavorable translation of Telesat’s U.S. dollar denominated debt into Canadian dollars. The net loss was also due to lower non-cash gains on the changes in the fair value of financial instruments and higher tax expense in 2015 compared to 2014, partially offset by an increase in operating income and lower interest expense.

“I am pleased with our financial and operating performance in 2015,” commented Dan Goldberg, Telesat’s President and CEO. “Although revenue and Adjusted EBITDA1 grew on a reported basis relative to the prior year, they declined roughly 2% after taking foreign exchange rate changes into account, a decline that reflects headwinds in certain markets we serve, particularly the energy market. Nonetheless, we achieved a reduction in operating expenses and an expansion of our Adjusted EBITDA margin1 , continued to generate a significant amount of cash, and maintained our industry-leading contractual backlog. On the operating side, we launched and brought into service Telstar 12 VANTAGE; announced the procurement of Telstar 19 VANTAGE for the Americas, a significant portion of which is under long term contract to Hughes Network Systems LLC (“HNS”); and announced the procurement of Telstar 18 VANTAGE for Asia, with Telesat’s longstanding partner APT Satellite Company Limited (“APSTAR”) providing the capital for slightly more than half the satellite’s capital cost in consideration for the use of slightly more than half its capacity. In sum, it was a productive year and, looking forward, we remain focused on continuing to develop our key initiatives in the year ahead.”

Business Highlights
– At December 31, 2015:
— Telesat had contracted backlog for future services of approximately $4.8 billion.
— Fleet utilization was 93% for Telesat’s North American fleet2 and 80% for Telesat’s international fleet.

– On November 24, 2015, Telesat successfully launched its latest satellite with high throughput capabilities, Telstar 12 VANTAGE. On December 15, 2015, the satellite became fully operational at its 15° WL orbital location.

– During the fourth quarter of 2015, Telesat entered into contractual arrangements with Space Systems Loral (“SSL”) and with Space Exploration Technologies Corp. (“SpaceX”) for the construction and launch of Telstar 19 VANTAGE, anticipated to be launched in the first half of 2018. This new state-of-the-art satellite will utilize high throughput capabilities to offer superior performance and will be co-located with Telesat’s Telstar 14R/Estrela do Sul 2 satellite at 63° WL, a prime orbital slot for coverage of the Americas. The satellite will have high throughput Ka-band capacity for South America, Northern Canada, the Caribbean and the North Atlantic Ocean. It will also provide high throughput Ku-band capacity over Brazil, the Andean region and the North Atlantic. Telesat entered into a long-term service agreement with HNS under which HNS will use all of the Ka-band capacity serving South America.

– In December 2015, Telesat entered into contractual arrangements with SSL for the procurement of Telstar 18 VANTAGE. The new satellite is anticipated to be launched by SpaceX in the first half of 2018. Telstar 18 VANTAGE will operate from 138° EL and expand Telesat’s coverage of growing satellite service markets in China, Mongolia, Southeast Asia, and the Pacific Ocean region. The satellite will utilize a combination of broad regional beams and high throughput spot beams in Ku-band to maximize throughput and spectral efficiency. It will also provide extensive C-band coverage of Asia that reaches from India and Pakistan in the West to Hawaii in the East, enabling direct connectivity from any point in Asia to the Americas. Telesat’s longstanding partner APSTAR will provide the capital for slightly more than half of the satellite’s capital cost in consideration for the use of slightly more than half of the satellite’s capacity.

– Read the full financial report.