Q2 2021 Telesat Earnings Call
[music].
This conference is being recorded so it goes to the homes that don't go as you see.
Please standby your meeting is about to begin good morning, ladies and gentlemen, welcome to the conference call to report the second quarter 2021 financial results for Telesat.
Our speakers today will be Dan Goldberg, President and Chief Executive Officer of Telesat, and Andrew Brown, Chief Financial Officer of Telus that I would like to turn the meeting on which Mr. Michael Lysaght director of Treasury and risk management. Please go ahead, Mr. Bill ISO.
Thank you and good morning.
Earlier today, we issued a news release containing tell us that's consolidated financial results for the three and six month periods ended June 32020.
Does she has released its available intelligence website at Www Dot tell us that.
We also filed our quarterly report on form 6K with the SEC. This morning.
Our remarks today may contain forward looking statements.
<unk> actual results may differ materially from the results contemplated by the forward looking statements as a result of known and unknown.
Risks and uncertainties.
For additional information about risks.
The risk factors section of our annual report on form 20-F 2020 fiscal year.
Quarterly reports on form 6K, all of which can be obtained on the FCC.
Right.
The information today that we are discussing.
So our expectations as of today.
Subject to change except as required by securities laws, Telesat disclaims any obligation or undertaking to update or revise this information whether as a result of new information future events.
I will now turn the call over to Dan Goldberg, Telesat as President and CEO.
Okay. Thanks, Michael This morning, I'll discuss our second quarter and first half results and give an update on the business I'll, then hand over to Andrew who will speak to the numbers in more detail and then we'll open the call up to questions.
Sharing our Q2 results to the same period last year and adjusting for foreign exchange rate changes revenue and adjusted EBITDA were both down 3% and our adjusted EBITDA margin was 79.2% essentially flat compared to the prior period.
Comparing first half results and adjusting for FX revenue was down 5% adjusted EBITDA was down 4% and our adjusted EBITDA margin was 79, 6% slightly higher than the 79, 3% in the prior period.
The reduction in revenue and adjusted EBITDA for both the quarter and the first half of the year was principally the result of a slight reduction of service for when it tell us that's north American Dth customers no.
Non renewals from certain enterprise customers, including maritime and Aero customers for the first half year comparisons and lower consulting revenue.
Turning to some key metrics backlog at the end of the quarter, which I should note excludes backlog associated with our telesat Lightspeed constellation was $2.4 billion and fleet utilization was 80% the $2.4 billion as a Canadian dollar number and the other door.
Our references all make in my remarks. This morning will also be to Canadian dollars.
Looking at how our revenue broke down on an application basis for the quarter broadcast was 51% of total revenue enterprise services, 47% and consulting and other 2%.
And on a geographic basis for the quarter North America accounted for 81% of revenue Latin America, and Asia were each 7% and EMEA was 5%.
Turning to our Telesat lightspeed constellation we've made a couple of big announcements in the last few days about the program yesterday, we announced that the government of Canada plans to make a 1.44 billion dollar investment and Lightspeed and last week, we announced that the government of Ontario is committing a hunt.
The $9 million to use tell us that lightspeed to provide high capacity broadband connectivity to remote communities throughout the province, the Ontario commitment will bring our contractual backlog on lightspeed, so far to over three quarters of $1 billion.
And with the investment by the government of Canada announced yesterday and our other sources of financing.
Telesat now has arrangements in place for approximately $4 billion of funding for the program. We expect the balance of the funding required to come primarily from the export credit agencies. We're presently in advance discussions with we hope to be in a position to make announcements on this remaining funding in the knee.
Victor.
Lastly, I'm pleased to say that we're on track for telesat to become a public company later this quarter or early in the fourth quarter last week, we obtained the FCC approval, we needed and l'oreal disclosed last Friday that it's already received sufficient proxy votes from its shareholders in support of the transaction.
Igniting that those votes are still replicable.
All shareholder meeting for the final vote will occur as scheduled to take place later this month.
It's 23.
Some its been a busy first half of the year, we've made a significant amount of progress on our key strategic initiatives and having done. So we're in a very good position with respect to both the financing of our revolutionary Lightspeed constellation and becoming a public company with that I'll hand over to Andrew and look forward to addressing any questions.
Yes.
Thank you Dan good morning, everyone.
Now I'd like to focus on highlights from this morning's press release and filings in the second quarter of 2021, <unk> reported revenues of 188 million adjusted EBITDA was $49 million and generated $54 million of free cash flow with almost $1.5 billion of cash on the balance sheet at quarter end.
For the second quarter of 2021 compared to the same periods of 2020 revenues decreased by 28.
That $8 million operating expenses increased by $11 million and $57 million.
Adjusted EBITDA decreased by 16 billion to $1.49 billion. The adjusted EBITDA margin was 79, 2% compared to 79, 1% in 2020.
Between 2000.22021 changes in the U S. Dollar exchange rate had a negative impact of Turkey on revenues and a positive impact of $2 million in operating expenses and a negative impact of 11 million on adjusted EBITDA.
When adjusted for the changes in foreign exchange rates revenue decreased by $7 million for 2021 compared to 2020 operating expenses increased by 14 million and adjusted EBITDA decreased by $5 million.
Contributing to the decrease in revenues, excluding the impact of foreign exchange was a slight reduction of service for <unk>, North American Dth customers non renewals from certain enterprise customers are lower consulting revenues.
The increase in operating expenses was principally the result of $16 million increase in noncash share based compensation combined with higher wages due to the hiring of additional employees primarily to support a satellite feed program. These increases were partially offset by higher capitalized engineering and lower bad debt expense in the trade months ended June 30.
2021.
Depreciation and amortization decreased by 4 billion compared to the same periods of 2020. The decrease was mainly due to the end of useful life for accounting purposes.
Satellite is 2020.
Interest expense decreased by five minutes in the second quarter when compared to the same periods. In 2020. The decrease is mainly due to lower interest rates on the rates on these assets 2021, the gains or losses on financial instruments with that changes in the fair values of our interest rate swaps and the prepayment option on a senior a senior secured notes.
In the second quarter of 2021, we recognized the gain of 4 million related to financial instruments and.
In 2021, we also recorded a gain on foreign exchange of 41 million during the second quarter compared to a gain of 125 million in the second quarter of 2020.
Net income was 61 million in the quarter compared to net income of $162 million in the second quarter of 2020 tax expense decreased by $2 million during the quarter when compared to the same period in 2020 was largely due to lower income before taxes in 2021.
For the first half of 2021, the cash inflows from operating activities of $1.54 billion cash outflow was used in investing activities was 19.1 million virtually all of the total capital expenditures related to our low Earth orbit constellation.
As we have previously advised for 2021, we expect our cash flows used in investing activities to be the range of $1.14 billion in U S dollars to 160 million U S dollars, including capital expenditures to further advance our likely program, while we progress our financing arrangement.
Back to the progression of our financing or maybe meaningful additional capex. This year in connection with Lightspeed as you move into full production, we expect to happen in the coming months I mean look our.
Our capex guidance at that time.
To meet our expected cash requirements for the next 12 months, including interest payments and capital expenditures with almost $1.5 billion of cash and short term investments at the end of June as well as approximately $200 million of borrowings available under our revolving credit facility.
Approximately $567 million in cash was housing our unrestricted subsidiaries. In addition, we continued to generate a significant amount of cash from ongoing operating activities.
At the end of the quarter leverage as calculated under the terms of the amended senior secured credit facilities was 546 times to one <unk> has complied with all the covenants in our credit agreement and indenture, a reconciliation between our financial statements and financial Covenant calculations is provided.
Also in the report filed this morning.
On April 27, <unk> issued U S 500 million of 565% senior secured notes due in 2026, we also announced yesterday that <unk> received $1.4 billion investment from the government of Canada to support our Lightspeed project. This is a significant step we believe that with in the near term allow tell you Seth.
To secure the remaining financial commitments required to which our <unk> satellite fleet is fully financed.
<unk>, Canada has invested U S 600 in Turkey.
And these unrestricted subsidiaries to fund the development of the <unk> project.
And as indicated at the time of our note issue in April we will invest 500 million ways.
Restricted subsidiaries.
So that concludes our prepared remarks for this call and that would be very happy to answer questions. You may have and so we will turn it back to the operator, Thank you very much.
Thank you.
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And the first question is from I ruin Seshadri. Please go ahead from credit Suisse. Please go ahead.
Yes, hi, Thank you for taking my question and congratulations on this investment.
From the government of Canada.
Just had a just a couple of questions on the business plan for Lightspeed.
Dan You mentioned that you had approximately $750 million in commitments. So far all then for lightspeed.
Is that a roughly a 10 year or no or little bit longer sort of contract.
And would it be fair to say that you have.
That represents something like 75 million annually or something like that in terms of in terms of annual commitments and then can you talk a little bit more about the overall plan.
You know in terms of by the time of launch what's your expectations in terms of total commitments an annual contract.
Okay. Thanks for the question so on the backlog Yeah that was the right number in my remarks, I said you know over.
$750 million Canadian dollars total backlog.
As far as kind of the the tenor of that in one I guess I'd say I think it almost understates.
What what we think those contracts that make up that 750 are ultimately going to lead to some $600 million of that number is.
The deal with the government of Canada that we announced I don't know a year or so two years ago, and if you'll recall in that and that's over 10 years, but the way that works is the government of Canada has committed to $600 million, we agreed to create a pool of capacity I think it's 140 gigabit chip.
Policy over Canada, and then we agreed to make that capacity available to Canadian Isps.
A really low rate and so we expect that that capacity pool is going to get taken up.
And if and when it does it should lead to roughly another $600 million of contractual commitments. So kind of the way, we think about that 600 million commitment things go well if things goes we expect it should be like two extra that number and that's kind of how the Ontario deal that we announced last Friday.
It works that one is for $109 million, but it's over a five year period and it's the same concept we agreed to create a pool of capacity make it available at a low rate, we expect that'll get taken up. So there again, we think that you know that 109 million should actually lead to about two <unk>.
In contract value over that five year period, and then we've got another contract with another customer on the access that we announced some time ago that that is the other kind of contract that that we already have in place.
And that.
We don't have any.
Or have any targets that we're going to announce in terms of what we want the total what we expect the total contractual backlog to be but suffice to say.
Our objective as we move through the construction process and start to launch the satellites is that we will be signing and announcing other customer commitments.
Can you just kind of you've seen telesat in action for the last bunch of years, we we like to presell capacity and Derisk. These programs and that's going to continue to be a big focus of ours.
Yeah.
Great. Thank you for that color then that was very helpful.
And then just wanted to spend some time to the other the other topic, we've been hearing some questions about and has been.
What happens with what some of your key contracts that are coming due in 'twenty, two and 24 with your large north American customer on the Dth side can.
Can you sort of is it possible to give us some more granular breakdown of the revenue that could potentially be rolling off in 'twenty, two and 'twenty four and sort of what your state of play with you know what.
With that customer are in terms of in.
In terms of discussions and anything you can add to sort of help us with what the modeling impact of that.
Well I mean, we've all.
He's been loads really for competitive reasons to give.
Too much.
Granular.
Information around when those contracts come up and what they're producing.
Obviously, just given where.
We're aware of the competitive environment.
But look we've you know we've always said a good way for analysts to get a handle of kind of what's coming up win is to go back and look at you know when we launch these dth satellites or or payloads on the satellite.
It's dedicated to Dth customer.
They tend to be 15 years from the in service date of that satellite so.
That should give everyone a pretty good feel of of you know when those contracts are coming up so the first one that comes up is.
Is our Anika three.
Contract, that's with with dish that comes up sort of Q2.
Next year.
And and and well you know well see I really don't have a good feel right now about kind of the likelihood of renewal on that I think you know we're gonna be pressing.
Get a better sense of how dish is thinking about that.
We've already certainly started.
Giving consideration to what we would do with that.
Ku band payload it didn't renew all or some of it and I think that we certainly got opportunities.
With other customers in Canada, and the U S for that capacity.
If we get some or all of it back.
And then the next one that comes up is yeah, roughly about two years from now.
<unk> would be our NIM at four contract with Bell.
We've started some discussions with bell, but still don't have a.
Clarity at this point.
<unk> on where that's going to end up so anyway, I mean, that's that's kind of where things sit and you know as we learn more from the customers about.
What their intentions are well will you know.
Sure that when the time is right.
Got it. Thank you then just one question on that is it is it relatively from a timeline standpoint in terms of options with with extending those contracts.
Obviously some of those satellites are are approaching your and end of life.
Is there an option to potentially launch an MSP or other ways of extending the satellite life in the event of a contract extension or would you or do you think those will have to be.
You know new satellites that that'll have to be launched to extend the potential contract extension.
Sure.
Really at this point in time, if we got going.
Anika III for instance, I mentioned that the contract with dish.
It kind of comes up in.
In Q2 of next year, but the satellite itself.
No.
He has an expected life of roughly about another four years. So we certainly got time to replace it or extend its life. So.
And that's.
That's kind of the satellite with the earliest expected end of life. So we have even more time on the other one so yeah certainly if if if you know it makes sense for us and it's what the customer wants we've got time to do that.
Okay. Thank you very much.
Thank you. The next question is from Mike pace from Jpmorgan. Please go ahead.
Hi, good morning, and thanks for taking the questions Daniel.
Dan you talked about having $4 billion of funding to date for the Leo constellation I'm, assuming that's Canadian dollars. So correct me if I got that wrong, but the question is does it just to be clear what that includes obviously yesterday's announcement, but does that include.
The expected.
Restricted payment from the U S $500 million secured bond deal that I believe has yet to happen and the government of Quebec, So everything that you've kind of announced to date and then just to clarify I think you said that.
Do you expect to export credit facilities to make up the remainder of that so I can do the math, obviously with the total funding or total needs versus what you have but can you kind of size the export credit facilities, because there's other things like operating losses and interest expense and things like that I'll I'll stop there.
It helps them follow ups.
Yeah, no. So a couple of things and thanks for the questions. Mike. So you have a 4 billion was a Canadian dollar number so what at current exchange rates is about $3.2 billion something like that.
Yes.
Bond proceeds are part of that number same with the government of Quebec investment same also I should say with the U S. C band proceeds.
That we expect to get so all of that and then.
What else can I say, Oh, you asked about kind of order of magnitude on our expectations for ECA financing.
So we're still in discussions with the <unk>. So you know we're.
We're not done there, but I don't know order of magnitude.
U S dollars to 5 billion something in that Zip code.
Got it and then in the term sheet that you guys filed last night I recall seeing some language that additional cash equity contributions needs to come in for the government of Canada.
Finalize all of this.
And I guess.
The number was blank in the term sheet, so would everything that you've announced to date satisfy that right, meaning the RP that we just discussed or would it require additional equity in the air quotes here.
Yeah.
Yeah, My General counsel.
Yeah, we did redact that number when we made the filing and what would I say, so one mostly.
Covered.
And what we described in the press release that kind of lays out.
That's sort of built up to that 4 billion Canadian number we talked about and then we look we've redacted the number but what I would say is in the scheme of the total funding required for lightspeed.
The number that equity incremental equity contribution that the term sheet references is not material.
In terms of the overall funding for Lightspeed.
Got it and then I know you've talked about this in the past on calls, but I think it would be good to do it again because of new credit investors.
Taking a look at the company.
Over the last few months can you just remind us.
In your opinion, just the competitive advantages of your Leo constellation.
Versus.
Other folks and whether its satellite size cost useful lives bandwidth capacity.
The network priority spectrum rights and on the latter on the priority spectrum rights like who will you have priority rights over.
Okay.
So boy I'm, almost tempted to get off the transcript from the last quarter call.
Read it.
And I would say to folks like.
We've talked about this on the last call and and folks should take a look at it and you highlighted Mike a lot of of the key features but yeah I'll take a little time here and reiterate it and I'll start with the spectrum. So yes, we've got a price.
40, <unk> rights to you know over four gigahertz of K E band spectrum and.
And we enjoy that priority over everyone.
Overall, the other NGL so.
Well the Leo commercial operators I would say that includes face action, one web and hyper.
For instance, so.
So yes.
Those priority rights. We think are important are valuable and that too we have priority over and we enjoy those rights through Canada, who has this priority filing at the ITU then you know you get into.
Beyond the spectrum, you get into the weeds of our constellation design and the markets that we're focused on and you touched on some of that but I think I'd start there which is we.
Strongly believe that we're gonna have and our customers are going to have a competitive advantage in the market verticals that were focused on.
And in those market verticals are they're all enterprise markets as well.
We're purposely consciously.
Design this constellation to serve those enterprise markets, which is to say not the consumer market and as I think I said on the last call. That's fundamental right. When you start designing a constellation you have to make.
So bunch of trade offs, when you optimize your constellation to serve in our case the enterprise market.
Versus what I would say you know for for Starlink Spacex for Amazon Typer. Their focus has been leased certainly what they've been saying publicly the consumer broadband market. So recognizing that our focus has been different we designed our concert.
Relation to give us a competitive advantage in the enterprise market and that means.
We designed our orbits to.
Allow us to very efficiently.
Both get full global 24 by seven coverage of the Europe, but at the same time not waste capacity over the polar regions. We think it's impossible. We think it's important to have coverage over the poles because you're.
Aero users' Youre maritime users your government users want.
Coverage of the polls, but you only need so much capacity up there. So we've got this hybrid orbital architecture that that that has densify capacity over those parts of the world where the people are so theres orbital architecture, which we think we've got a very clever and innovative design and then.
The satellites themselves they're in.
It's somewhat higher orbit somewhat starlink and <unk>.
Amazon are talking about and what that allows us to do is it allows us to cover you know with each satellite more of the Europe.
But not requires many satellites, which means that you know we're more kind of capital efficient, we've got a little bit higher which means our latency is going to be a little bit higher, but but we think it's trivial the incremental agency, we're not way up where MEO is or you know way way way way.
Where we're G. O is so we require fewer satellites, which means kind of less capital intensity and more coverage and then the satellites themselves. These are as I've said before pretty big very advanced highly capable satellites theyre going no lost at least 10 years.
So we've got a much longer opportunity to amortize them recover the investments that we're making and the satellites and we're not going to be on this total treadmill that some of the other folks who are going to be who satellites have I don't know a shield English redundancy less capability and need to be replaced more often than ours.
And then the satellites themselves have phased array antennas, which allow us to dynamically.
Cover and reposition our capacity dynamically which is very important.
We've got.
The ability to hop those capable beams in microseconds, which allows us to cover everywhere, but also to look after lots of customers and kind of reuse that capacity literally in microseconds, we've got all of our satellites connected.
With high capacity optical links which means that we've got the ability to serve that means all of our satellites are always on network. So they can be over the Pacific over the Atlantic they can be anywhere, but they're always connected which means we can always leverage their capabilities, which means the system is.
Incredibly reliable and redundant and which gives our customers, which also means we can route traffic in space, So superfast in and with the huge amount of flexibility and then wait there's more all.
Of our satellites are you know.
Our process payloads, they're flying computer processors, which means we have huge amounts of ability to flexibly route traffic. It means that we can make the signal more efficient and now you know our engineers without but we can basically received the signal clean out any noise in the signal.
And put it back down to where our customers want it. It's just much much much more efficient and when you take all of those capabilities, Oh, and I should say a fully integrated highly capable ground infrastructure that seamlessly integrated with the satellites and you take all of that together.
And you have an extraordinarily capable powerful agile.
<unk> system.
We think is going to give us and our customers real competitive advantage in those markets.
We're focused on and that we've been active in for decades. So anyway, I mean I can talk about this obviously for a really long time, our commercial and technical people can talk about it even longer than I can but it matters, we're providing the technical service and at the end of the day that's what.
What you got to get in the weeds on this stuff. That's what you know is going to make the difference between you know kind of who brings the best value proposition to the market for those verticals that we're focused on and it's just going to get better over time.
Charting with 298 satellites, we can scale this constellation the user terminals are coming along well and getting more and more capable and theyre going to get cheaper and cheaper.
As we use the constellation will get much more knowledgeable and efficient about how to wring more and more capacity out of it. So yeah. I mean, that's so long long long long long answer but.
That's kind of what you gotta do to explain to people.
Why do we think we're going to be so successful with lightspeed and why our shareholders are so excited about it and why you know me and my colleagues are so excited about it well.
Well I appreciate the passion all of them I'll jump back in queue, and let others ask some questions. Thanks.
Thanks, Mike.
Thank you. The next question is from Walter Piecyk from <unk>. Please go ahead.
And that was a pretty passionate description of the AR of.
So that was nice.
I love it.
One of the areas you talked about was the was the optical links.
You talked about that after talking about where you were relative to starlink.
In terms of the high it doesn't that if you're using optical link and I think I've heard some companies recently talk about using geos for backhaul in order to have that.
Kind of you know that connectivity everywhere, but if someone's using geos as opposed to your optical where you're engineering the system for the optical links doesn't that make it.
And in fact, much better than the plans that we've heard from others and then to that end can you talk a little bit about that technology like who are you using and kind of where is that does that cause I think starlink hasnt they've talked about having some type of lengths and it's you know uncertain kind of where they are with that I'm just.
Give us an update on that specific element of your type of technology, that's going to be on your Leo constellation.
Okay. Thanks for the question Walter.
So, let's see I mean for us the idea of using G O.
To.
<unk>.
Allow our leos to kind of talk to each other completely defeats the purpose of launching a leo constellation because you've just now introduced you know all of that.
Wait and see.
Into the network and you know a big Big Big.
Point of watching Leo constellation is to provide low latency services, because we think that's where the market is going so so we wouldn't do that we don't think that's a great plan.
With respect to our.
Starlink my understanding of what they've done the first bunch of satellites. They launched I believe did not have.
Inter satellite links, but I believe they said that they they've started to launch satellites with.
In our satellite links and I think their plan is to continue to do that but I don't know that much about the performance of those inner satellite links.
Bars are going to be.
Capacious high capacious lots of capacity that we're going to have at least the ability for each well go out for optical links on each of our satellite each one has.
Has throughput capability of about I'm looking at our technical guidance 10 gigabit.
What we expect.
And they can talk to the satellites behind.
Behind them in front of them from side to side and it could even reach over to a satellite one satellite over which again gives us a lot of.
Resiliency and redundancy and the like.
Tell us lenses space are prime for Tulsa Lightspeed is the company that's going to be building.
The optical links that go on our software.
Contracting that or is that does that their own internal development and is that kind of fully baked meaningful you know is there still development work between now and when you're launching two to really get that that.
Ready.
Well.
We're fortunate to have Erwin Hudson, our lead Lightspeed engineer here and there.
Room with us so Irwin a guest appearance.
So those are what Hudson.
On the optical links talus is the provider.
They do.
Procure some of the components from suppliers, but they are the primary designer and primary integrated really optical links but we've been working on this optical linked design for a couple of years, we have prototypes full prototypes built and tested and we feel like that.
We are quite far along in the design.
And we feel like that most of the risk has been reduced but they do operate at 10 gigabits in both directions. So it was a full bidirectional capability. Each satellite has 40 gigabits of inbound.
40, gigabits of outbound ISO capability, which I think is is well beyond what any other Leo satellite constellation as proposed.
Thank you Irwin.
It's starting to move away from the.
All right.
Yeah, and then maybe one more question.
Just one quick one on the on the the dish satellite Anika three.
If if directly if Directv and dish merger would that change would that improve or make it harder do you think to get a renewal out of that contract.
Well I mean.
If if dish and direct T V were to emerge.
You know I.
Got it thank getting regulatory approvals at a minimum would take a little while and this this contract coming up as I mentioned in Q2 of next year. So.
I would suspect that.
They wouldn't have an approved transaction prior to the.
The renewal date here number.
Number one number two.
No.
If if dish and Directv were to combine.
It would be a big effort it would take some quite some time too.
Move the subscribers from one of the operators over to the satellites of the other I mean, they've each got millions and millions of households throughout the United States.
And and re pointing all of those dishes and swapping out all the C. P E and.
Not only would be very very expensive, but it would be very very time consuming so anyway.
I don't think that.
Uh huh.
Directv dish combination will really have any impact on the probability of renewal for the Santa Caf III contract.
Okay. Thank you.
Thank you. The next question is from Michael Dell Genial from Blackstone. Please go ahead.
Hi, Good morning. Thank you for taking the question I just wanted to ask for an update on your capital allocation thoughts following the announcement of this big commitment from the Canadian government.
You had said in the past that when you completed the public listing that could be an opportunity to raise some equity in the public markets and I'm curious you know just based on the comments earlier.
About how you think substantially the rest of the lightspeed funding is going to be coming from the export credit. If that's something that you would still consider pursuing them and then on a related note.
Given that you seem to be very close I was just curious if you have any updated thoughts on your use of free cash flow at the restricted group I know you had said in the past that kind of debt reduction was somewhat down.
List of priorities, but now that the funding for Lightspeed, yes is becoming clearer.
You know if you have any updated thoughts on that thank you.
Yeah, Michael it's Dan Thanks for the question.
So you.
We've just got to be.
Because of all the rules around securities offerings and whatnot, we like General Counsel was glaring at me from across the table, we have to be very careful about what we say about intentions of issuing public equity. So I think at this point, particularly given that we said that we expect all of them.
Set to be public later this quarter early fourth quarter, I will demure and.
Not.
And not address that one as far as priorities for in the restricted group in terms of how we use our capital maybe I'll take the first crack at that and then Andrew if you want to chime in but then we talked about this on the last call in and Michael I don't think you got it.
Exactly right when when you said that you know we've got debt reduction way down on the priority list. We don't think about it that way I think what we've always tried to be careful to say is our are our first.
Our first desire.
Is to use the cash that the.
The business generates to reinvest in the business and so are our first of course in a smart accretive way.
Okay.