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New Skies Continues To Outperform Expectations

By | August 27, 2003

      New Skies Satellites [NYSE: NSK] continues to show healthy revenue numbers, which are above most analysts’ expectations. In its second quarter results announced on Aug. 12, the operator announced quarterly revenues of $54.7 million, a figure that New Skies CEO Dan Goldberg proclaimed as a “record revenue performance” for the company.

      Robert Peck, a satellite equity analyst at Bear Stearns, said in a research note: “New Skies reported revenues of $55 million for the quarter, coming in higher than our $52 million estimate. The outperformance was driven by increased demand for government users and news gathering organizations due to the conflict in Iraq.”

      The second major landmark for the operator was the fact it generated positive free cash flow of $26.3 million in the second quarter. At the same stage last year, it generated negative cash flow of $18.3 million. The operator is likely to generate close to $60 million in positive cash flow in 2003.

      Overly Optimistic

      Despite the positive numbers and New Skies maintaining its guidance in terms of full-year revenue numbers, market conditions will remain tough for the operator. Tom Watts, a satellite equity analyst at SG Cowen said in a research note: “Though we expect New Skies to experience an upturn in 2004, as is the case throughout the industry, our previous estimates were overly optimistic that more revenues would come from new business due to NSS-6 and NSS-7. Accordingly, we are taking our 2004 revenue estimates down to $254 million from $280 million, which represents top line growth of 15 per cent versus 27 percent, which we previously projected.”

      He continued: “We expect continued weakness in the FSS sector until early 2004 when economic recovery should enable major media companies to expand their purchases of satellite capacity. Nevertheless, we have begun to see signs of an upturn with the results of PanAmSat and Intelsat.”

      Revenue and Application Mix

      In terms of where New Skies is generating revenues, it has a nice mix across the different regions. It generates just under 40 per cent of its revenues from the North American market. Europe and India make up 20 percent, as does the Middle East and Africa. Revenues from Latin America hover just over the 10 per cent mark. In terms of applications, video represented just under 40 per cent of total revenues, voice and data transmission 44 per cent and Internet-related applications 19 per cent of total revenues.

      Peck observed: “The importance of having such revenue diversity across applications and regions should not be underestimated, especially given the volatility of certain regions around the globe. The diversity allows New Skies to execute on its numbers despite the tough economic times.”

      New Skies continues to have a strong backlog of orders. It increased its backlog in the quarter to $700 million, an increase of $4 million from the previous quarter. The company also has a strong balance sheet. It has debt of around $53 million and a credit facility of around $300 million.

      –Mark Holmes

      (Contact: Tom Watts, SG Cowen, e-mail:; Robert Peck, Bear Stearns, e-mail:

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