Welcome to Via Satellite’s first financial quarterly wrap-up, which condenses all of our quarterly reporting into one convenient location, along with additional insight and analysis for our premium subscribers. Please keep in mind that the following analysis pertains to companies that report their quarterly results to the public and, even more specifically, to companies that Via Satellite has covered in the news. The complete roster of companies may change slightly from quarter to quarter, depending on our coverage.

2020 Third Quarter Overview:

The global COVID-19 pandemic began to take a more immediate and direct toll on commercial satellite industry revenues during 2020’s third financial quarter, as losses due to the plummet in air travel and cruise ship activity this past summer finally made their way to corporate balance sheets. That said, Q3 losses weren’t nearly as catastrophic as some had predicted and some operators even managed to report subscriber and government business increases to offset the damage.

Similar to what the industry experienced during the early stages of the 2008 Great Recession, an increase in global government and military spending has definitely helped the more diversified commercial satellite companies stay afloat during a sustained economic crisis. The good news is that the COVID-19 pandemic has a definitive end – the rollout of a vaccine, which appears to be happening much sooner than expected. The bad news is that the impact of COVID-19 on the commercial markets is much more sudden and has already caught up to government market gains. This was made abundantly clear in the incoming revenue tallies reported across the board in the third quarter.

Airlines took a brutal beating during the summer months along with operators with significant In-Flight Connectivity (IFC) investments. On average, satellite operator revenues were flat or down in the high single digits, with Iridium being the exception (thanks to new business on a new constellation). The timing for COVID-19 couldn’t be worse for major global operators who are spending to meet FCC requirements to vacate C-band spectrum for 5G in order to cash in on billions in promised payouts.

Unfortunately for operators, their government and military business may start to slow down just as the commercial and mobile markets start to emerge from the COVID-19 crisis. Some of the U.S. operators have positioned themselves to compete for nationwide rural broadband and 5G government contracts, which is smart considering that these will remain key elements of the incoming Biden administration’s economic recovery plan. It is yet to be seen whether or not these rural connectivity programs will change under the direction of a new FCC Chair.

The ability for operators to predict the future has been hampered by several COVID-related delays in manufacturing and the push back of launch dates for much-needed new satellites. This scenario makes the oncoming threat of SpaceX’s massive Starlink Low-Earth Orbit (LEO) constellation loom larger for those trying to establish defensive positions in the LEO market.

For commercial satellite manufacturers, the 2020 Q3 situation was very much the same as it was for operators – companies with more critical investments in aviation and air travel performed worse than companies who rely more on government and military spending. Government business is booming, as is made clear by nearly universal increases in net sales among the major manufacturers. But, as previously mentioned, inflated government and military budgets may not last for much longer as the U.S. government shifts its focus on economic recovery and political parties clash over budget austerity.

As with the FCC in relation to telecommunications operators, it will be interesting to see if a change in NASA leadership brought on by the incoming Biden administration will have any impact on the increasingly lucrative civil space and space exploration business opportunities for manufacturers.

– Jeffrey Hill, executive editor, Via Satellite

The Bottom Line

Operators: 

Intelsat — Intelsat Government Segment Sees 13% Growth in Q3

• For the three months that ended September 30, Intelsat on Nov. 6 reported total revenue of $489.4 million, down 3% compared to the same time period in 2019.
• Net loss attributable to Intelsat was $15.9 million, compared to a net loss of $148.3 million for the same period in 2019.
• Intelsat’s Government customer segment was the only segment that saw revenue growth in Q3, with $108 million in revenue, up 13% from the same time period in 2019. Network Services revenue of $170 million was down 6% from Q3 2019.
• In Q3, Media (Broadcast) made up 42% of Intelsat’s revenue, slightly down from the 44% it made up in the same time period last year.
• Reported $36.4 million worth of reorganization costs (Chapter 11) for the quarter, primarily for professional fees.

Iridium — Iridium Surprises Investors with Resilient Q3, Raises 2020 Guidance

• Raised its full-year 2020 guidance to approximately $355 million in expected operational EBITDA and a net leverage of approximately 4.0 times operational EBITDA.
• Reported $151.5 million in Q3 revenue, an increase of 5% compared to the same period in 2019.
• Reported an increase of 67,000 billable subscribers – a 13% jump representing a single-quarter growth record for the company. Ends the quarter with 1,429,000 total billable subscribers

Telesat — Telesat Reports Q3 Revenue Decline, Expects to Name LEO Contractors by End of Year

• A 15% decrease in revenue for the quarter compared to the same period 2019. Revenue of $202 million Canadian dollars ($151 million), compared to CA $237 million ($178 million) in Q3 2019.
• Broadcast made up 51% of Telesat’s revenue; enterprise services 46%; and consulting/other 3%.
• Telesat’s backlog is $CA 2.8 billion ($2.1 billion), and fleet utilization is at 81%.
• NEW – Telesat announced Nov. 24th that it is merging with its majority shareholder Loral Space to form a public company.

Eutelsat (Q1) — Eutelsat Holds Steady in Q1 Results, Prepares for Broadband Growth

• Reported 315 million euros ($368 million) in revenue — down less than 1% from the same time period in 2019.
• Broadcast made up 62% of revenues. Data & Professional Video made up 13% of revenues; with Government Services at 12%; Fixed Broadband 7%; and Mobile Connectivity 6%.
• Government Services and Fixed Broadband saw revenue gains during the quarter, and the other verticals saw revenue decreases. Mobile connectivity experienced the greatest decrease, with revenues down 7% compared to 2019.

SES — SES Chooses Not to Split Networks Business

• Nine-month revenue total to the end of September was flat  (1.41 billion euros or $1.65 billion) — virtually the same as what it achieved in 2019 during the same period.
• Nine-month net profits saw an almost 40% fall at 154 million euros ($180 million), down close to 100 million euros compared to the same nine months last year, mostly due to restructuring and C-band expenses.
• Video accounted for around 832 million euros ($972.9 million), which was an 8% revenue decrease compared to the same stage last year. Video now accounts for less than 60% of SES’s overall revenues.
• SES Networks business generated around 577 million euros ($674.8 million), a 6% increase compared to the same stage last year.
• SES announced that it will not separate its Networks business at this time.

Hughes/EchoStar — Hughes Pushes Back Jupiter 3 Timeline

• Confirmed that it is pushing back the launch of its Jupiter 3 satellite to 2022 due to manufacturing delays.
• Hughes reported $467 million in revenue, compared to $464 in the same time period of 2019.
• Hughes subscriber growth streak continues. It grew its consumer customer base by about 38,000 subscribers, and had approximately 1,580,000 subscribers at the end of September. This includes 364,000 subscribers in Latin America.
• EchoStar reported total revenue of $473.5 million during the Q3 of 2020. Revenue was roughly in line with the same time period of 2019.

Viasat (Q2) — Viasat’s Mark Dankberg to Transition Away from CEO Role

• Reported $554 million in revenue for the quarter, down 6% from Q2 2020, due to decrease in IFC business due to COVID.
• Net income was $2 million for the quarter, compared to $3.2 million in Q2 2020.
• Government Systems segment reported $260 million in revenues in Q2, down 13% from the same time period the year prior. Satellite Services was the only segment to see Year-Over-Year (YOY) segment growth, with a 5% increase.
• Chairman and CEO Mark Dankberg, who co-founded the company in 1986, confirmed he is transitioning into the newly created position as executive chairman of the company. President and COO Rick Baldridge has been named president and CEO.

Manufacturers:

Lockheed Martin — Lockheed Martin Space Sees Government Business Boost in Q3

• Reported 6% increase in Q3 2020 net space sales, totaling $163 million.
• Through three quarters, Lockheed Martin Space remains approximately $620 million ahead in net sales from where it stood this time last year.
• Lockheed Martin Space reported a 20% YOY, $61 million decrease in operational profits due to lower equity earnings from the corporation’s investment in United Launch Alliance (ULA).

Northrop Grumman — Northrop Grumman Space Segment Posts 17% Sales Increase in Q3 

• Space Systems sales increased 17% from Q3 2019, to about $2.2 billion. Space sales have increased 13% Year to Date (YTD).
• Space sales were driven by higher volume on restricted programs, Next Generation Overhead Persistent Infrared (Next Gen OPIR) and NASA Artemis programs.
• Big contracts for the quarter: a $13.3 billion contract for the Ground Based Strategic Deterrent (GBSD) program; and a U.S. Space Force contract for the rapid prototyping phase of the Evolved Strategic SATCOM (ESS) program.

Boeing — Boeing’s Space Segment Holds Steady as Company Takes Overall Revenue Hit

• Boeing Defense, Space & Security reported $6.8 billion in revenue, down 2% from $7 billion in Q3 2019.
• Won a contract extension for the International Space Station (ISS) for NASA during the quarter.
• Backlog for the segment was $62 billion, with 30% representing orders from customers outside the U.S.

Airbus — Airbus Defense and Space Reports Q3 Revenue Decline, but Increased Orders for 2020

• Defence and Space segment revenues were down 11% in the quarter from Q3 2019, at 2.4 billion euros ($2.8 billion).
• YTD order intake for Airbus Defence and Space still up 35% from the same time period last year.
• Airbus’ Full-Year 2020 guidance was withdrawn in March and Airbus did not issue new guidance on commercial aircraft deliveries or EBIT because of the continued impact of the pandemic and associated risks.

L3Harris — L3Harris Reports Growth for Space and Airborne Systems in 3Q

• Reported 6.5% revenue growth in the Q3 of 2020 at $1.25 billion in revenue, an increase of $76 million from Q3 2019.
• The company highlighted momentum in its Space segment with key awards including a $119 million contract for the Ground-Based Electro Optical Deep Space Surveillance (GEODSS) system upgrade from the U.S. Space and Missile Systems Center.
• Space segment gains partially offset by a decline in Aviation Systems due to COVID-19-related impacts.

Maxar — Maxar Continues Revenue Increase Streak in Q3 2020, Delays Legion Launch

• Reported $436 million in revenue, an increase of $23 million compared to the same period in 2019. Net income was reported at $85 million, compared to Q3 2019 with a reported net loss of $26 million.
• Space Infrastructure segment revenue grew $19 million, while Earth Intelligence segment revenue declined by $8 million.
• Adjusted EBITDA in Q3 2020 was $112 million, a slight increase compared to a adjusted EBITDA of $109 million in Q3 2019.
• Confirmed that the first WorldView Legion satellites launch will be slightly delayed, due to the COVID-19 pandemic and fitting in the launch with SpaceX‘s launch manifest.