Telesat today announced its financial results for the three and six-month periods ended June 30, 2019. All amounts are in Canadian dollars and reported under International Financial Reporting Standards (“IFRS”) unless otherwise noted.
For the quarter ended June 30, 2019, Telesat reported consolidated revenues of $231 million, an increase of 9% ($19 million) compared to the same period in 2018. When adjusting for the impact of foreign exchange rate changes, revenue increased by 8% ($16 million) compared to the same period in 2018. The increase was due to higher revenue related to the Telstar 19 VANTAGE and Telstar 18 VANTAGE satellites, which entered into commercial service in August 2018 and October 2018, respectively, combined with an increase from short-term services provided to other satellite operators.
Operating expenses of $38 million for the quarter were 5% ($2 million) higher than the same period in 2018. When adjusting for the impact of foreign exchange rate changes, operating expenses were 3% ($1 million) higher. The increase was primarily related to higher cost of sales. Adjusted EBITDA1 for the quarter was $197 million; an increase of 10% ($19 million) compared to the same period in 2018. When adjusting for foreign exchange rate changes, Adjusted EBITDA1 increased by 9% ($16 million). The Adjusted EBITDA margin1 for the second quarter of 2019 was 85.2%, compared to 84.3% in the same period in 2018.
Telesat’s net income for the quarter was $135 million compared to a net loss of $6 million for the quarter ended June 30, 2018. The $142 million difference was the result of a higher non-cash gain on foreign exchange arising principally from the translation of Telesat’s U.S. dollar denominated debt into Canadian dollars, gains on financial instruments, and higher operating income in the second quarter of 2019.
For the six months ended June 30, 2019, revenue was $454 million, an increase of 2% ($9 million) compared to the same period in 2018. When adjusted for changes in foreign exchange rates, revenues were slightly higher ($2 million) compared to 2018. The increase was primarily due to revenue related to the Telstar 19 VANTAGE and Telstar 18 VANTAGE satellites, offset by lower short-term services provided to other satellite operators, lower equipment sales and lower revenue from certain customers in the resource sector. Operating expenses were $77 million, an increase of 4% ($3 million) from 2018. The increase was primarily due to higher, non-cash, share-based compensation expense. Adjusted EBITDA1 was $384 million, an increase of 3% ($11 million) or, when adjusted for foreign exchange rates, an increase of 1% ($5 million). The Adjusted EBITDA margin1 for the first six months of 2019 was 84.7%, compared to 84.1% in 2018.
For the six months ended June 30, 2019, net income was $307 million, compared to a loss of $21 million for 2018. The increase in net income for the year-to-date was principally the result of foreign exchange gains in 2019, arising from the translation of Telesat’s U.S. dollar denominated debt into Canadian dollars compared to foreign exchange losses in 2018, and greater gains on financial instruments in 2019 when compared to 2018.
“I am pleased with our financial and operating performance in the second quarter of 2019,” commented Dan Goldberg, Telesat’s President and CEO. “Our Telstar 19V and 18V satellites, as well as certain short term satellite services provided to another satellite operator, contributed to top line growth relative to Q2 last year, and our continued operating discipline resulted in an increase in both Adjusted EBITDA1 and our Adjusted EBITDA margin1. In addition to a favorable second quarter, we also continue to make strong progress on our advanced Low Earth Orbit (LEO) satellite constellation. Last week we signed a Memorandum of Understanding with the Government of Canada (GoC) to ensure access to affordable high-speed Internet connectivity across rural and remote areas of Canada via the Telesat LEO Constellation, an arrangement we expect will generate $1.2 billion in revenue over a 10 year period. Additionally, the GoC will contribute $85 million to Telesat to support the development of the Telesat LEO Constellation through the Strategic Innovation Fund (SIF). Looking ahead we remain heavily focused on continuing to increase the utilization of our in-orbit satellites and executing on our key growth initiatives, particularly our LEO program.”