Intelsat SA (I) Q1 2018 Results - Earnings Call Transcript

Intelsat SA (I) Q1 2018 Earnings Call May 1, 2018 8:30 AM ET

Executives

Dianne J. VanBeber - Intelsat SA

Stephen Spengler - Intelsat SA

Jacques D. Kerrest - Intelsat SA

Analysts

Sebastiano C. Petti - JPMorgan Securities LLC

Anthony Klarman - Deutsche Bank Securities, Inc.

Jason Kim - Goldman Sachs & Co. LLC

Michael Vincent Pace - JPMorgan Securities LLC

Giles Thorne - Jefferies International Ltd.

Lance Vitanza - Cowen & Co. LLC

Arun A. Seshadri - Credit Suisse Securities (USA) LLC

Wilton Fry - RBC Europe Ltd.

David Phipps - Citigroup Global Markets, Inc.

Chris Quilty - Quilty Analytics

Operator

Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Intelsat SA Q1 2018 Earnings Conference Call. At this time, all participants are in a listen-only mode. Following management's prepared remarks, we will host a question-answer-session. As a reminder, this conference call maybe recorded for replay purposes.

It is now my pleasure to hand the conference over to Ms. Dianne VanBeber, Vice President of Investor Relations. Ma'am, the floor is yours.

Dianne J. VanBeber - Intelsat SA

Welcome, everyone, and thank you for joining Intelsat's first quarter 2018 earnings conference call. Earlier this morning, we issued our earnings release and published a quarterly commentary, both of which are available at intelsat.com. The quarterly commentary provides the investment community with the information and context that you need to analyze our results in advance of our earnings call, maximizing time for Q&A with management.

During today's call, we will discuss adjusted EBITDA and other financial metrics not prepared in accordance with U.S. Generally Accepted Accounting Principles, including EBITDA, related margins, and free cash flow from operations. We provide reconciliations of these metrics to the most directly comparable U.S. GAAP measures in the earnings release and on our website. This is our first quarter reporting revenue under the Financial Accounting Standards Board Accounting Standards Codification Topic 606, Revenue from Contracts with Customers.

In today's opening remarks, we will primarily focus our discussion on our underlying performance, which excludes the effects of ASC 606 and which are substantially non-cash in nature. Please refer to our earnings release and quarterly commentary if you're interested in the impact of ASC 606 on current quarter performance.

Additionally, our conversation today will include forward-looking statements that reflect our current expectations for future industry conditions, as well as our business strategy, market trends and positioning, and expected future financial performance. These forward-looking statements are subject to risks and uncertainties, many of which are outside of our control. Please refer to the Safe Harbor statement included in our annual report on Form 20-F for the year ended December 31, 2017, and our other SEC filings for information about some of the factors that could cause our actual results to differ materially from our expectations.

Finally, please be aware that our conference call today is open to the investment community and media, with the media invited to participate in listen-only mode. Members of the media are not authorized to quote either directly or in substance any participant in the call, who is not a representative of Intelsat. Our call is hosted today by our CEO, Stephen Spengler; and our Executive Vice President and CFO, Jacques Kerrest. Following opening remarks by Steve, we'll open the call for questions. Steve?

Stephen Spengler - Intelsat SA

Thanks, Dianne. Our first quarter results line up to our expectations. We made solid progress on initiatives that are designed to achieve stability in our core business. At the same time, we continue to scale new managed services that we believe will drive our future growth. In terms of our financial performance, post ASC 606, first quarter revenue was $544 million. All of our remaining discussion in these opening remarks excludes the effects of ASC 606.

In the first quarter, our revenue was $519 million, a decline of 4% as compared to the first quarter of 2017. Revenue reflects the ongoing trends including non-renewals of certain data media and government services, and the effects of lower pricing on wide-beam renewing services. These declines were partially offset by solid growth in mobility services.

Adjusted EBITDA was $392 million, also a 4% decline as compared to the first quarter of 2017. Adjusted EBITDA margin was 76% of revenue. This quarter's highlights includes two wins in government services. The contracts demonstrate our first operational priority of fully leveraging our network in global scale for maximum return.

First of note, we won the contract to provide the infrastructure for the American Forces Network for another period of up to five years. The network will use six satellites and five teleports from Intelsat and its subcontractors to provide the service. The win retires some of the renewal and pricing risk in the government business that we noted in last quarter's call, providing a bright spot early in the year.

The second win was a new FAA payload which will be hosted on our upcoming Galaxy 30 replacement satellite. Intelsat positioned our reputation for the highest quality in flight operations and the tempo of our satellite replacement programs to win this 10-year Aircraft Precision Navigation Payload (00:04:57). These two programs are great examples of why we think 2018 is off to a good start.

Clearly, the C-band proposal to the Federal Communications Commission is top of mind for many investors. We continue to advocate our market-based proposal to all interested parties, including our customers, Capitol Hill and members of the telecommunications sector. We've had a number of meetings with representatives from the FCC. Their public comments and actions indicate an interest in our proposal.

We believe that the entire telecom industry and our customers will benefit from the accelerated timeline that our market-based solution provides. It ensures the quality of the services that we provide to our customers, certainty and control, and expediency for all stakeholders. We believe adoption of our proposal would accelerate the deployment of 5G wireless services in the United States, accomplishing a significant public policy goal.

The process going forward will, no doubt, be a complicated series of events. The FCC controls the process, the timeline and the ultimate order. For that reason, as we answer questions today, we'll refrain from addressing topics that require speculation and stick to the fundamentals of our proposal.

With that, we're ready to answer your questions.

Question-and-Answer Session

Operator

Thank you, sir. And our first question will come for line of Phil Cusick with JPMorgan. Your line is now open.

Sebastiano C. Petti - JPMorgan Securities LLC

Hi. This is Sebastiano Petti on for Phil. Thanks for taking the question. I know, Steve, you mentioned that you're trying to refrain from answering speculative questions or topics. But just given recent comments from FCC commissioners about clearing 200 megahertz to 300 megahertz of spectrum versus your 100 proposal, I mean what is the potential you or SES come up with a new proposal, with a path to that goal before an NPRM is issued this summer? And how do, I guess, you envision the network or your product evolving over time to clear that perhaps, and what's the timeframe?

Stephen Spengler - Intelsat SA

Well, you're right. I don't really want to speculate on what's going to happen in the coming months, because it is going to be a complicated process with the FCC. But let me just say this, we do believe it's possible to clear more than 100 megahertz over time. But it really is going to be a matter of timing, cost and complexity. It's not a small undertaking.

And as we assess that potential, our priority is always to maintain quality of services, continuity of services for our customers. And so, what we have focused on so far is what we believe we can do in a very short timeframe and that's the 100 megahertz. We've stated that that 100 megahertz could be made available within 18 months to 36 months after an order from the FCC.

Sebastiano C. Petti - JPMorgan Securities LLC

Okay. And just a quick follow up. Anything, I mean, regarding your network architecture that would – that limits, I guess, the availability of the spectrum or the 100 megahertz plus?

Stephen Spengler - Intelsat SA

Well, we said all along that to make this change, it is a complex endeavor, but we believe it's doable. We would have to make modifications in our network. Of course, SES would have to do the same and our customers' network would have to be modified. And we envision those modifications to be things like additional equipment at downlink earth stations, perhaps we may need to relocate some facilities, and we even anticipate that there may have to be some changes in the configuration of our satellites in space now and then going forward.

So, there's a great deal of complexity in doing this, but we do believe that it is – we're able to accomplish this in the timeframe we've indicated.

Sebastiano C. Petti - JPMorgan Securities LLC

Great. Thank you for taking the question.

Stephen Spengler - Intelsat SA

So you're welcome.

Operator

Thank you. And our next question will come from a line of Anthony Klarman with Deutsche Bank. Your line is now open.

Anthony Klarman - Deutsche Bank Securities, Inc.

Hi. Thanks. Couple of questions. First, in the quarterly commentary, you've again called out Horizons 3e and mentioned some pre-commitments that you're signing on there. And if we trace back to the prior commentary, you made similar remarks. And I guess, I'm wondering if you could talk a little bit about the differences in H3e, given that it seems to be experiencing a level of pre-launch commitments that weren't seen by Intelsat 35e and Intelsat 37e, and it actually looks more like Intelsat 29e.

And can you just remind us the markets it's going after and the product set that is being seen as so attractive to get this level of pre-commitments?

Stephen Spengler - Intelsat SA

Yes. I think you're right in your assessment that it has a similarity to Intelsat 29e and that we're getting some success and some pre-launch well ahead of the launch. We envision the satellite which covers the Asia-Pacific region to be primarily focused on the wireless sector in the maritime customer base. When we talk about maritime, we would include government and commercial maritime in that order.

So, initially what we've seen here is demand from the wireless sector. We announced a fourth quarter contract in the last call. We did mention a contract that we got in Q1 in the last call as well, and we've echoed that again in this release. So the first major orders have come from mobile operators in the Asia-Pacific region that are using it for cellular network extensions in their marketplace.

So we're encouraged with this initial start, but we do think that as always there's going to be diversity of services on the satellite. And because of the coverage of ocean areas and air routes, we do expect that maritime and other mobility services will be growing on the satellite over time.

Anthony Klarman - Deutsche Bank Securities, Inc.

Great. I'll try to limit myself to the one follow up here. So maybe I'll ask a quick one for Jack. Just a clarifying question on the EBITDA and with the new accounting change, the ASC 606. If we annualize the quarterly impact from ASC, does that give us a good run rate of what we expect the non-cash impact to be for the year, or were there special things in 1Q?

And then from a covenant perspective, will you be using the EBITDA with the ASC impact in it as you calculate incurrence capacity levels and debt capacity levels at the various entities?

Jacques D. Kerrest - Intelsat SA

Yeah. Thank you, Johnny (sic) [Anthony] (00:12:02). The answer to your first question is, yes, I think we indicated in the last call that for the full year it was going to be $100 million to $210 million for the year. So I think if you multiply the first quarter by four, you get there too. Regarding the covenants; covenants – our pre-ASC 606 covenants are usually measured on the FASB at the time you sign the agreement. So, it won't change anything pre or post ASC 606.

Anthony Klarman - Deutsche Bank Securities, Inc.

Thank you.

Stephen Spengler - Intelsat SA

Okay. You're welcome.

Operator

Thank you. And our next question will come from the line of Jason Kim with Goldman Sachs. Your line is now open.

Jason Kim - Goldman Sachs & Co. LLC

Oh, thanks very much. At various investor conferences at (00:12:54) the fourth quarter earnings, you mentioned that the company would entertain a more holistic approach to the balance sheet. Is that still the case? Also, your security prices have moved around quite a bit recently. How does that impact your approach to the balance sheet? Does it create more opportunities to perhaps consider doing something soon or to take advantage, or is there too much uncertainty with respect to the FCC process and you'd rather wait until you get more clarity?

Jacques D. Kerrest - Intelsat SA

Yes. Good morning, Jason. Yes, I think it's going to be a priority for us to trying to figure out holistic solutions for our capital structure in 2018. But I also want to remind you that we have maturities; the next maturity is going to be in October 2020. So, we have time to evaluate our alternatives here.

Obviously, we are not disclosing in advance what actions we're going to take, but we are studying different alternatives to try to help our capital structure overall. In terms of the C-band, as Steve indicated, we don't control the timing. And I think it would be fair to say that we need to actively manage our capital structure without looking and try to speculate on the timing of the C-band.

Jason Kim - Goldman Sachs & Co. LLC

Sounds good. And then quick follow up on the Horizons 3e. It's nice to see the momentum on the satellite initially. But given there is a JV, can you just remind us what the accounting will be for that satellite once you start generating revenues and EBITDA?

Jacques D. Kerrest - Intelsat SA

Yes. We will recognize 100% of the revenue and we will recognize 50% of cost of sales to JSAT, so.

Jason Kim - Goldman Sachs & Co. LLC

Got it. Thank you.

Stephen Spengler - Intelsat SA

You're welcome.

Operator

Thank you. And our next question will come from the line of Mike Pace with JPMorgan. Your line is now open.

Michael Vincent Pace - JPMorgan Securities LLC

Hi. Good morning. I think in the quarterly commentary you mentioned that at least a third of the government renewal, as you put at risk, was completed in the first quarter. And I just would like a little more color on exactly what that means to the financials. Does that mean a third of the annualized impact is baked into the first quarter? And in the context of that, just the bigger trend line for EBITDA – adjusted EBITDA for 2018, is it fair to assume that the first quarter is the low watermark for the year?

Stephen Spengler - Intelsat SA

Okay. Mike, let me take the government question first, and I'll let Jack address the EBITDA question. What we had indicated earlier is that, 2018, we would have a higher than normal renewal pool in our government business, and we estimated that to be about 15% of the 2017 revenue stream or about $55 million.

And what we're saying, with our initial success in the first quarter, so far we've retired about a third of that risk. So, that's off the table. We feel good about our competitive success in those situations, as we've been able to differentiate our offerings and achieve value pricing in those renewals. So, we have more to do, but it's off to a positive start so far.

Michael Vincent Pace - JPMorgan Securities LLC

Steve, can I just follow up on that, is that...

Stephen Spengler - Intelsat SA

Sure.

Michael Vincent Pace - JPMorgan Securities LLC

So I think you mentioned the American Forces Network as a win as it relates to this.

Stephen Spengler - Intelsat SA

Yeah.

Michael Vincent Pace - JPMorgan Securities LLC

But are you saying that, the win was that you renewed it, so the volume is not going away. But we should still think of that things were signed at lower rates, lower pricing than the previous contract. Is that the right way to think about it?

Stephen Spengler - Intelsat SA

I think the right way to think about it is, one, we delivered value to our customer; and so we were able to continue the service we've been providing the service for many years. And so, yes, the volume is still there and we were able to get pricing that we think was fair for our offering, and it is consistent with what we had put into our guidance for our business.

Michael Vincent Pace - JPMorgan Securities LLC

Got it.

Stephen Spengler - Intelsat SA

Okay.

Jacques D. Kerrest - Intelsat SA

Yes, Mike. Regarding the EBITDA for Q1, I just want to remind you that last year, throughout the year we benefited from two big variables in terms of the expenses. The bad debt became a credit as opposed to an expense and also incentive compensation was obviously less than the prior year because of our performance throughout the year.

So I think, just all this to say that, 2018, we will have or we expect to have at least a little bit more bad debt to at least more common (00:18:12) with normal expectations that we have every year. And also that we are accruing, as we start the year, at a full incentive for the employees.

So all this to say that, yes, it should be the lowest quarter throughout the year, but we have to monitor obviously our revenue as you know. But if you compare Q1 2017 to Q1 2018, there's very little movement beside some of the two variables that I mentioned earlier.

Operator

Thank you. And our next question will come from the line of Giles Thorne with Jefferies. Your line is now open.

Giles Thorne - Jefferies International Ltd.

Thank you. I had a C-band question, I'm very sorry. But we're all quite keen to know, not least (00:19:08) how the economics of any windfall will be divided between yourself and SES. And I appreciate you're not going to give the specifics, but at least some kind of framework would be useful as to how that JV vehicle will distribute any windfall. Is it a function of invested capital or current EBITDA generated from C-band services, or any kind of color would be very useful.

Stephen Spengler - Intelsat SA

Okay. Giles, we're fine with C-band questions, so don't hesitate to ask them. But this particular one is very speculative, I would say, at this point in time, but it's also proprietary between Intelsat and SES at this moment. So, I'd rather not say publicly what the ideas are at this point in time.

I think if you look at our presence in the marketplace, I mean ours meaning Intelsat and SES, you'll see that we both have substantial businesses here and provide a lot of the services to the media sector. And so, a lot of areas (00:20:18) would be taken into consideration when we look at how proceeds could be ultimately split in the future.

Giles Thorne - Jefferies International Ltd.

Okay. Fair enough. And so, one follow-up on C-band. You're rightly linking the C-band reforming proposal to the expediency and efficacy of 5G in the U.S., and you're not the only one pushing the (00:20:42) 5G story in U.S. (00:20:44) at the moment, given recent events. We've seen across the satellite industry quite large stakeholders talking of the role, the potential role of satellite in the 5G ecosystem.

So my question is, to what extent you have an appetite to inject satellite's role in 5G or Intelsat's role in 5G into your potential market-based solution for C-band reforming? And basically what I mean is, would you try and segue in or inject in some kind of sale of cellular backhaul capacity into your conversations with potential purchases or lessees of your C-band?

Stephen Spengler - Intelsat SA

That's a very interesting question, a very interesting idea, and it ties to what we've been talking about which is, our belief that satellite will play a very important role in the future 5G networks. 5G is envisioned to be ubiquitous and to cover the globe. And of course, that's going to take a long time to reach remote and rural parts of the world with these 5G services. And that is why satellite plays a critical role in enabling 5G-type services, whether it's broadband or whether it's IoT in all regions of the world.

We've been very active in the 3GPP arena, where the standards are being written. And quite positively, last November, that standard form included satellite as part of the roadmap for the development of the standards; and I think that's a recognition of how important it is. Whether this becomes part of the transactions, I can't speculate on that. But we do anticipate, being a participant and an active participant, in enabling 5G around the world with many, many mobile operators, not just here in the United States.

Giles Thorne - Jefferies International Ltd.

Thank you very much.

Stephen Spengler - Intelsat SA

Okay. You're welcome.

Operator

Thank you. And our next question will come from Lance Vitanza with Cowen. Your line is now open.

Lance Vitanza - Cowen & Co. LLC

Thanks, guys, for taking the question. I wanted to ask you, I guess, about two things really; Epic revenue contribution in the quarter and how quickly that is growing or you expected to grow. And then just if we could drill down a little bit on the mobility segment, and I apologize I've not made it all the way through the quarterly commentary; I did see some comments there.

But last fall, I believe revenues at mobility were running at around $200 million in terms of an annual rate. But could you update us on where that stands now, and do you have a sense for how quickly end market consumption is growing? And lastly, how quickly would you say unit pricing in mobility is declining, and do your contracts insulate you from those price declines to some extent?

Stephen Spengler - Intelsat SA

Okay. Let me see if I can get all that, because there's a lot there, Lance. First of all, mobility is about 12% of our total revenue. Over the last 12 months, it's been growing in the strong teens in terms of percentage. So, it is a growth sector of the business. We feel very good about our position across all mobility segments and maybe I can just step through them. When you think of maritime mobility, the two primary segments are cruise and also commercial shipping.

In cruise, right now we know that Intelsat provides services to about 80% of the 300 cruise ships in the world and that is either the exclusive provider to that ship or a large provider to those ships. And so, that's a very good position for us and there's a lot of growth potential in that segment. We believe our fleet is well positioned to support that growth in the coming years.

In commercial maritime, that has also been a growth segment for us. We have some excellent distribution partners in that segment that are leaders in that area. We've talked about them before. We have just signed up a new maritime distributor in Asia and that was noted in our commentary. So, we still consider leadership in that sector. And of course, in aeronautical broadband, we continue to serve some of the major operators there as those networks grow and expand.

Other areas in mobility include land mobility where we're working with Kymeta to start developing land mobility services, which we believe will be very important over the long term with connected car. And of course, our government sector is very active in mobile services for ISR, UAVs and other types of services. So, it is an important sector.

As it ties to our network, our mobility services are directly related to Intelsat Epic and our IntelsatOne managed services, our IntelsatOne Flex service in particular. So, we built out the Intelsat Epic network to enable many of these mobility services. And so, we're seeing mobility across all of our Intelsat Epic satellites. But it is complemented, as we've talked many times, by other parts of our fleet where we have flexibility in moving beams around or have the ideal capacity in certain regions. The IntelsatOne Flex service enables a simpler implementation for many distribution partners. It allows them to focus on sales, marketing, customer support, while we manage the network and take the complexity out of managing a multi-spot, multi-beam configuration. So, it's very important.

I think the last part you asked about was pricing in the sector, and I think it is true that pricing is competitive in this sector, especially on the large volume, longer-term deals. We're glad that we have assets like Intelsat Epic with lower cost base that allows us to compete in those areas. So, we do expect that to be the case going forward. But of course, we're always focused on maximizing the value we bring to customers beyond just the price. And in many cases, that relates to the flexibility of the network, reliability, the coverage and other elements that we bring to the table.

Lance Vitanza - Cowen & Co. LLC

Thanks.

Stephen Spengler - Intelsat SA

You're welcome.

Operator

Thank you. And our next question will come from the line of Arun Seshadri with Credit Suisse. Your line is now open.

Arun A. Seshadri - Credit Suisse Securities (USA) LLC

Yes. Hi. Thanks for taking my questions. First, just wanted to get a sense for your CapEx levels, you've obviously put out until 2020. But if you look at your manifest in terms of satellites, just so decent amount of room, it seems like, for you to take CapEx down further. Maybe if you could provide us some high-level comments around that, that would be helpful.

Stephen Spengler - Intelsat SA

CapEx, as you noted and we've talked about right now is in a period where we're experiencing a lower run, in particular because we're coming to the end of this phase of the Intelsat Epic network deployment with the Horizons 3e satellite yet to be launched. We're also in a phase where we're beginning the replacement of our North American Galaxy satellites. These are smaller, less costly satellites. And so, we have a period of time where there is a natural lower run rate of CapEx over the coming years.

Obviously, CapEx is an important area that we focus on and we are continuing to see ways that we can optimize CapEx and spend our money most wisely. We're encouraged by innovation and competition that we're seeing in the marketplace. Competition in the launch sector which is lowering the cost of launch and we will benefit from that, we see in the future years; and also innovation in space.

We've talked in the past about the evolution of spacecraft and the movement towards more flexible, software-defined satellites that can be built much more quickly, deployed more quickly, and to enable very high capacity satellites with a lower cost per bit. And we're starting to see those ideas come into reality in terms of network designs and approaches from the manufacturers that we think we'll be able to benefit from in the coming years.

So, we're continuing to focus on CapEx as part of our overall financial discipline and we're glad that we're into the stage right now where we can leverage the flexibility that we currently see.

Arun A. Seshadri - Credit Suisse Securities (USA) LLC

Okay. Thank you for those comments. And then secondly, in terms of cash taxes that you still have, given out sort of a full update in terms of where you expect. Can you talk about things at a higher level, maybe Jack, in terms of where you see – I mean, do you think cash taxes differ materially from what it has been in year past? Or if you can't at this stage, can you tell us sort of roughly when you expect to be concluding your analysis? Thanks.

Jacques D. Kerrest - Intelsat SA

Yeah. Thank you. Yeah. So you know we've said this in the last call, we're working with our advisor to determine the impact of the new U.S. tax laws on our structure. Remember that we are Luxembourg-based company; and therefore, all the interest that we pay on our debt is deducted there. But we do have a U.S. entity which makes it a complex structure, and that's why we're working with our advisor to try to figure out the impact.

I think, as you know, we used to say, we pay about $30 million of cash taxes a year. We're not in a position today to tell you what we're going to be anticipating in the next future. But we believe that by the end of next quarter, we'll be clear with the market. We think it's going to be a little higher, but we can't give you a number today.

Arun A. Seshadri - Credit Suisse Securities (USA) LLC

Okay. Thank you.

Stephen Spengler - Intelsat SA

You're welcome.

Operator

Thank you. And our next question will come from the line of Wilton Fry with Royal Bank of Canada. Your line is now open.

Wilton Fry - RBC Europe Ltd.

Yeah. Hi. It's a question for Jack. Would you consider using convertible bonds when you're looking at options for the (00:31:28) balance sheet? Thanks.

Jacques D. Kerrest - Intelsat SA

(00:31:31)

Dianne J. VanBeber - Intelsat SA

Convertible bonds.

Jacques D. Kerrest - Intelsat SA

Thank you, Wilton. I think this is obviously one of the alternatives that we could be looking at. It's much too early to say. As I said before, we are looking at several possibilities and opportunities in the marketplace. And obviously, the effect of higher stock price and higher debt level in our structure certainly helps. But we're not going to comment at this time on which instruments and which part of the capital market we're going to be tapping.

Wilton Fry - RBC Europe Ltd.

Understood. Thank you.

Stephen Spengler - Intelsat SA

You're welcome.

Operator

Thank you. And our next question will come from line of Anthony Klarman with Deutsche Bank. Your line is now open.

Anthony Klarman - Deutsche Bank Securities, Inc.

Hi. Just a follow-up question. I wanted to make sure I understood an answer that you gave on mobility, and talking about it I think the number was around 12% of total revenue which I didn't think was a number that was (00:32:47) seen or heard before. And I guess I was wondering, if that sounds like a faster run rate when we think about what the pace of run rate, revenue recognition on things like Epic had been, could you just give some context behind that number?

Stephen Spengler - Intelsat SA

Well, mobility is – as I mentioned, it is underpinned by Intelsat Epic, but it's also using the broader fleet. It includes our broad beam satellites, our steerable Ku satellites, even some inclined orbit satellites for that matter; and it uses a lot of our terrestrial infrastructure as well. So while it is going to track generally with Intelsat Epic, it incorporates a lot of other elements of our network. And I think it relates to the high fill factors that we have in our wide-beam and our growth in Epic over time.

Anthony Klarman - Deutsche Bank Securities, Inc.

Okay. Thanks. And then maybe just a housekeeping; I apologize if I missed it. But I think on the prior few calls, you've given an Epic backlog to us. What was that level and/or what was the change from prior quarters?

Stephen Spengler - Intelsat SA

Right now, the Epic backlog is approximately $1.1 billion at the end of the first quarter of the total $7.6 billion backlog. And that's the current backlog on the books; of course, we've booked more than that over time.

Anthony Klarman - Deutsche Bank Securities, Inc.

Right. So I think, last quarter you had talked about $1.25 billion in bookings and $1 billion in backlog. And so, the backlog has grown from $1 billion to $1.1 billion. And I guess, I'm just trying to make sure I triangulate this correctly. Would that imply that your pace of signings on Epic is in excess of what your revenue recognition is, a backlog coming into the revenue line at this point?

Dianne J. VanBeber - Intelsat SA

I think you're asking for a book-to-bill on Epic and we're not providing that at this point, Anthony. But I think the idea is that we'll provide some of these disclosures on an annual basis. So we'll give you a full update at year-end, so you can see what the contribution was at that point.

Anthony Klarman - Deutsche Bank Securities, Inc.

Perfect. Thanks, Dianne.

Operator

Thank you. Our next question comes from the line of Giles Thorne with Jefferies. Your line is now open.

Giles Thorne - Jefferies International Ltd.

Hi. I thought I give it another go and I've been given another question. So my question is, there was – coming out of Satellite 2018, there was some debate as to the exact nature of your distribution relationship with OneWeb. If we go back to the original announcement, it's worded that you've got exclusivity to distribute in aviation and maritime, and that feels like a fairly vanilla variable cost-type relationship.

But what's come out of Satellite is the idea that SoftBank has – in its role as master distributor, has underwritten the entire OneWeb payload and that Intelsat has effectively entered into a fixed cost take-or-pay agreement, which is something quite different in nature. So, any color there would be useful. Thanks.

Stephen Spengler - Intelsat SA

Sure. There are two aspects to our agreement with SoftBank and OneWeb. One is the distribution agreement which you correctly note, that is with SoftBank, and it is for aero mobility services as well as maritime mobility services, oil and gas services, and government services. And so, we have the distribution rights and responsibilities in those areas and we're working very actively with SoftBank to develop and to pursue go-to-market strategies in those areas. And it does include a take-or-pay commitment that was announced in reference when we did the original deal with OneWeb.

The other part of the agreement is development of interoperable capabilities. And so, OneWeb has that responsibility to develop terminal capabilities for a LEO/GEO satellite terminal that we believe will be instrumental and really leveraging the strength of both networks in enabling many of the applications that we see in the future for OneWeb services and our GEO services.

Giles Thorne - Jefferies International Ltd.

Very clear. Thanks, Steve.

Stephen Spengler - Intelsat SA

Okay. You're welcome.

Operator

Thank you. And our next question will come from the line of David Phipps with Citi. Your line is now open.

David Phipps - Citigroup Global Markets, Inc.

Hi. Thank you for taking the question. Can I ask a C-band question that we get asked a lot by investors, what proportion of that Intelsat would own of the C-band spectrum, if it were sold in the structure that's being out and we most often hear 45% to 60%. So, it'd be fantastic if you could give us a harder number.

Stephen Spengler - Intelsat SA

Yeah. As I referenced in an earlier question, that is not something that we are sharing publicly right now because it's between us and SES and the IIB Consortium (00:38:03) to determine that and to manage that. But I did, as I said earlier, point to the marketplace and you can see that Intelsat and SES both have substantial positions in the North American C-band media market; and therefore, you may be able to estimate the relative value of that business and share.

David Phipps - Citigroup Global Markets, Inc.

Fair enough.

Stephen Spengler - Intelsat SA

You bet.

David Phipps - Citigroup Global Markets, Inc.

Fair enough. That skews towards that end (00:38:34). And then second, when you reaffirm the guidance, the guidance is excluding the effects of the new accounting standard, but we're reporting it to the new accounting standards. And so, what I've gotten from some questions from investors during the call is, did you beat (00:38:51) because you were ahead of consensus, meaning, was consensus on the new standard or was it on the old guidance? So I'm just curious as to why the new guidance isn't updated to reflect the new reporting standard?

Jacques D. Kerrest - Intelsat SA

Yeah. Thank you, David. Let me just say this. Obviously, the ASC 606 is a big change for us as a U.S. public company, but you realized that, in fact, it will make it easier over the years to compare us with our competitors and our peers because it, in fact, aligns the U.S. accounting standard with the international standard.

Now, we chose to adopt this ASC 606 as of January 1, 2018, but we also chose to report on a post basis throughout this year, only not – and we didn't restate last year. So this year, every quarter you're going to have this post ASC 606 and a pre ASC 606, so you can compare to 2017. The guidance that we gave is a guidance pre ASC 606.

So if I'm correct, the consensus, for instance, for the year does not include ASC 606. I think we ended up, for instance, in revenue at $519 million; I think the consensus was $520 million. So, I think consensus reflected a pre ASC 606 and that's what we said in the last call. I hope that's helpful.

David Phipps - Citigroup Global Markets, Inc.

Okay. That's helpful. And then, the last – just a clinical item on the capital structure, so the 6.75%. Was the $46 million the remainder of what was left or is there still a small (00:41:00) that will mature on June 1 (00:41:03)?

Jacques D. Kerrest - Intelsat SA

Yeah. So there was $64 million outstanding at the end of the first quarter. In fact, as of tomorrow, there will be $31 million outstanding and that will disappear on June 1 of this year. So, the 2018 maturity at Lux will not be on the books anymore.

David Phipps - Citigroup Global Markets, Inc.

All right. Those are my questions. Thank you.

Stephen Spengler - Intelsat SA

Okay. You're welcome.

Jacques D. Kerrest - Intelsat SA

You're welcome.

Operator

Thank you. And our next question will come from the line of Chris Quilty with Quilty Analytics. Your line is now open.

Chris Quilty - Quilty Analytics

Thanks. Just a follow-up on the government business. Obviously, in Q1 that was a big chunky piece for the balance of the year on the recompetes. Are you dealing with smaller slices, or do you also have large contract vehicles? And I'll do a follow-up.

Stephen Spengler - Intelsat SA

Yeah. There are a number of actual large renewals in our pool in 2018. So we retired, as I said, about a third of that, but we have a few more to do and competing actively on those renewals.

Chris Quilty - Quilty Analytics

Got you. And the second question, I think I've picked up on increasing mention of government mobility, applications. And can you talk to us about both military ground equipment to support Epic as well as contract vehicles, either new or proposed, that may help your efforts there?

Stephen Spengler - Intelsat SA

So, we have been providing services for ISR which is intelligence, surveillance and reconnaissance missions for years now, including UAV missions and unmanned missions. So, that is still a core part of what we provide to our government customers. And we are active in taking those services to the next generation of services and many of our customers have already adopted Intelsat Epic, which is viewed as a very high performance system into a very small antenna on a lot of these aeronautical platforms.

And so, there is a great deal of innovation in antenna systems and modems right now that the government customers will benefit from. We have the contract vehicles with both proprietary customers as well as other customers across the government and the BoD to deliver these services. So, we think that this is still going to be an area of high demand, high opportunity. There's potential in the global government space for these kinds of services as well. And so, it's an area that we're really trying to develop additional value for our government customers.

Chris Quilty - Quilty Analytics

And just to clarify, does it become an area of net growth or is this an area where you're seeing wide-beams getting knocked down and replaced by Epic; and net-net, it's neutral to down?

Stephen Spengler - Intelsat SA

It depends on the mission. In some cases, our wide-beams are still very appropriate and deliver the kinds of services our customers need. In other cases, Intelsat Epic and the architecture around Intelsat Epic is more advantageous. So, we do think this is a net growth area for the business. There are still platforms being developed and manufactured. I'm talking about aerial platforms utilizing Ku-band capabilities. And if you just look at the growth of just the air platforms or the airframes, we expect that that's going to drive connectivity needs into the future.

Chris Quilty - Quilty Analytics

Great. Thank you.

Stephen Spengler - Intelsat SA

You're welcome.

Operator

Thank you. Ladies and gentlemen, this concludes our question-and-answer session for today. It is now my pleasure to hand the conference back over to Mr. Stephen Spengler, Chief Executive Officer, for some closing comments or remarks.

Stephen Spengler - Intelsat SA

Thank you, everyone, for joining our call today. Thank you for your questions as well. We look forward to meeting with investors at upcoming investor and industry events occurring over the next several weeks. So, thank you very much.

Operator

Ladies and gentlemen, thank you for your participation on today's conference. This does conclude our program. You may all disconnect. Everybody have a wonderful day.