Q1 2022 Telesat Corp Earnings Call
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[music].
Please standby your meeting is about to begin.
Good morning, ladies and gentlemen, welcome to the conference call to report the first quarter 2020 to 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 Telesat.
I'd like to turn the meeting over to Mr. Michael <unk> director of Treasury and risk Imagine mentioned. Please go ahead, Mr by myself.
Thank you and good morning. This morning, we filed our quarterly report on form 6K, with the SEC and on SEDAR.
Our remarks today may contain forward looking statements. There are risks that tell us that actual results may differ materially from the results contemplated by the forward looking statements as a result of known and unknown risks and uncertainties.
No.
Can you tell us its annual and quarterly reports filed with the SEC.
That assumes no responsibility to update or revise these forward looking statements.
Now I'll turn the call over to Dan Goldberger, President and Chief Executive Officer.
Thank you Michael good morning, everyone.
This morning, I'll share some thoughts on the quarter.
Date on the business I'll, then hand over to Andrew who will speak to the numbers in detail.
Then we'll open the call up to questions in the past I think there's probably been too much overlap in what Andrew and I have it.
Third in terms of financial performance, So I'm really going to try to focus my comments on the key developments in the quarter and the key objectives, we're working on.
So as noted in the earnings release, we're off to a good start for the year, but as you know we had a key contract with the dish network on our Anika three satellites that came up for renewal at the end of last month as I suggested would likely be the case on our Q4 earnings call in March we ended up getting.
So renewal just renewed a little more than half the capacity. They had previously been taking although at a rate that's lower than what they had been paying the renewals for two years with an option to extend for an additional year beyond that.
Currently we entered into a contract with another longtime customer for almost all of the capacity that this didn't renew.
City that will be used for broadband connectivity for the cruise market.
With the dish when you walk in the separate agreement for cruise services, we are well positioned to deliver on our guidance for the year.
Taking a step back and looking at the market for satellite services more broadly it appears to us that the level of activity and the demand for services is somewhat stronger than what we saw at this time last year with a pricing environment that we would describe as broadly stable with COVID-19 restrictions easing.
We've seen more demand in the Aero and maritime markets and it appears also that higher energy prices may be leading to a bit of an uptick in activity in that market as well with an 84% capacity utilization rate at the end of last quarter. However, one of our challenges tends to be finding available capacity.
On the fleet to satisfy some of the opportunities we're seeing out there.
Shifting gears in March and April we purchased Telesat unsecured notes with an aggregate face value of 60 million U S dollars, something we believe will be accretive to the company and signals our confidence in our future prospects.
Consistent with our covenants the notes that we purchased will be canceled we've been authorized by our board to purchase up to an incremental $100 million face value of additional telesat that.
Finally, turning to Telesat Lightspeed last month, we shared the current lightspeed business plan with the export credit agencies and now are fully reengage with them to secure their commitments for the program. The plan is for 188 satellites plus 10 in orbit spares, which keeps us within the same.
Capex envelope, we were working with previously notwithstanding the cost increases we've seen from supply chain shortages and other inflationary pressures.
Last call I said, we expect it to have a much better sense of where things sit with <unk> by the end of June and we're still focused on that timeframe.
We remain enthusiastic about the prospects for Telesat Lightspeed and remain heavily focused on completing the financing and commencing the full scale construction of the program. So with that I'll hand over to Andrew and then look forward to addressing any questions. Thank you Dan and good morning, everyone. I would now like to focus on highlights from this morning's press release.
Filing in.
In the fourth quarter of 2022, Telesat reported revenues of $186 million adjusted EBITDA of 46 million and generated cash from operations of $43 million with over $1 5 billion of cash on the balance sheet at quarter end for the fourth quarter of 2022 compared to the same periods in 2021 revenues decreased by <unk>.
<unk>.
$6 million operating expenses increased by 24 million to $64 million and adjusted EBITDA decreased by 6 million to $1 $46 million. The adjusted EBITDA margin was 78, 4% compared to 79, 8% in 2020 one.
Between 2021, and 2022 changes in U S. Dollar exchange rate had a minimal impact on revenue operating expenses and adjusted EBITDA. The revenue decrease was primarily due to adoption of service from one of Chinese That's North America direct to home customers somebody adoption determinations on contract renewal of certain services and a decrease in it.
Sales to Canadian customers.
It was partially offset by increased services provided to customers in the mobility market as it continues to recover from the impact of COVID-19. The increase in operating expenses was principally due to higher noncash share based compensation expense and to a lesser extent.
Bad debt provision in the fourth quarter of 2021, which had the impact of lowering operating expenses in the prior period and also including some higher expenses in respect to being a public company. These are partially offset by higher capitalized engineering costs associated with the increased activity in Saudi satellite feed program interest expense increased by.
700 eaten into the fourth quarter when compared to the same periods in 2021. The increase in interest expense was primarily due to interest on the 2026 senior secured notes, which were issued in April 2021, partially offset by the impact of the maturity of one of our interest rate swaps in September 2021.
As Don had mentioned in March and April we repurchased our senior secured notes with a face amount of $60 million.
Asset purchases.
These repurchases resulted in a gain in the fourth quarter of Canadian $21 million. We will also show a Florida gave you the second quarter of approximately $17 5 million all of the knowledge, we purchase will be canceled as a result.
<unk> majors, we have authorization to purchase up to a further 100 million.
Its face value of debt.
The gain on changes in fair value of financial instruments for the fourth quarter of 2022 reflects primarily changes in the fair values of our interest rate swaps and prepayment options on our notes the loss on changes in fair value of financial instruments for the fourth quarter of 2021, primarily reflecting changes in the fair values of our interest rate swaps.
Payment options.
For the fourth quarter of antibody to the cash inflows from operating activities were $43 million and the cash flows generated from investing activities of $47 million included about $65 million by way of receipt of the remaining faithful USD bond peering process with virtually all of the capital expenditures relating to our low earth orbit constellation guidance.
As you will also have noted in our earnings release. This morning, we are reiterating our previously stated 2020 guidance our guidance reflects the Canadian dollar to U S. Dollar exchange rate of 1.3 for 2020 to 25 consensus full year revenues to be between 770 million $75 million <unk> expects adjusted EBITDA to be between $5 20.
$45 million in 2022.
With respect to expected capital expenditures and as a result of noted we are continuing to work at this time to finalize our financing on contracts with our key suppliers for now we expect our 2022 cash flows used in investing activities to be in the range of $100 million.
$20 million, including capital expenditures before to advance our Lightspeed program.
Once we have greater visibility around the construction and financing.
Luxury program with a fly to Florida update other.
<unk> capital expenditures for the year, which could increase substantially.
To meet our expected cash requirements for the next 12 months, including interest payments and capital expenditures with approximately $1 5 billion of cash and short term investments at the end of December as well as approximately $200 million of borrowings available under our revolving credit facility approximately $1 billion in cash was held in unrestricted subsidiaries.
In addition, we continued to generate a significant amount of cash from the ongoing operating activities.
At the end of the fourth quarter leverage as calculated under the terms of our amended senior secured facilities are 567 times to one telesat has complied with all the covenants in our credit agreements and adventures a reconciliation between our financial statements and financial Covenant calculations is also provided in the reports we filed this morning for fixed.
<unk> provides the unaudited interim condensed consolidated financial information and DNA. The nonpayment for our subsidiaries shown are essentially the unrestricted subsidiaries with some minor differences.
That concludes our overall prepared remarks for the call and that will be very happy to answer any questions.
It may have turned back to the operator.
Thank you.
We will now take questions from the telephone lines. If you have a question and you are using a speaker phone. Please lift your handset before making your selection.
If you have a question. Please press star one on your devices keypad to cancel the question. Please press star two.
Press Star one at this time, if you have a question there will be a brief pause while participants register thank you for your patience.
Yeah.
And your first question is from Jason Kim from Goldman Sachs. Please go ahead.
Hi, This is Julia on for Jason.
Funding what are the additional steps that need to happen in order to complete the financing and we continue to hear about the supply chain and inflation issues across all market. How are you thinking about your earlier investment needs now versus your initial plan.
Hey, Julien.
Dan Goldberg.
So, let's see a couple of things so lightspeed financing fundamentally we've been saying this for a while.
The.
The missing piece right now that we need to close on.
Are the discussions that we're having with the export credit agencies. So I think we've said that.
We've already sort of lined up and these are Canadian dollars. It was like $4 2 billion.
Our financing between the cash that we have the contributions that we've made already the commitments we have from the government of Canada.
Government Tibet.
And things like that and so.
We've talked about.
Capex envelope.
For the program of about 5 billion U S. Dollar so so in any event.
The heavy focus is concluding those discussions with the export credit agencies.
History here as we were you know I think making good progress with the <unk>.
In Q4.
And then early in Q4, we've got bitten by these supply chain issues, which caused delays in some inflationary.
Pressures on the program and so.
If you've followed.
The history here we spent.
A lot of Q4 and a good chunk of the early months of this year.
Working with Telus to update the schedule reformulate the program and our other suppliers too so.
So anyway so.
But having now kind of updated.
<unk>.
Program and work through those issues were now back reengage with the export credit agencies and so what I think I said on our last call what I said.
Earlier. This morning is that we're hoping that by the end of June we're going to have a pretty good sense of where were sitting with the ECA is that's kind of the timeline that we're trying to drive towards right now.
And then you know on.
Inflationary pressures.
Yeah.
We've been dealing with those.
And I think that.
What we've done is we're moving forward with a with a constellation of and.
And this is the plan that we're speaking to the export credit agencies about it's 188 satellites in orbit plus 10 other in orbit spares to provide some redundancy and resiliency.
And obviously all the ground facilities that are integrated with the network and all the launch vehicles in the software.
The platforms that we need all of that is kind of covered in that kind of 5 billion U S. Dollar number. So that's how we're addressing it as it's a hugely capable.
Enterprise grade focused constellation. So so we feel good about it so that's where we are.
All right now.
Awesome. Thank you.
Two more questions on <unk> III, it's good to see the partial or no obligation also leasing out the rest of the capacity.
I think in the past you said that dth contracts generally generally generate around like 79 Canadian dollars of annualized revenue and EBITDA.
In the current construct how much is an F. Three satellite generating in revenue and EBITDA now and how should we be thinking about that run rate.
For the next few years.
Yeah. No. So you are right. We have said that you know are just kind of typical dth contract.
Sort of generates that sort of revenue profile about 70 million Canadian.
And and yes, we're very pleased with the renewal that we got with dish and probably even more pleased still how quickly.
We're able to.
Get the rest of that capacity under contract from generating revenue, we're not going to though provide kind of a new run rate on <unk> three we've given guidance for the year.
Certainly closing the dish renewal and entering into that other big contract for all those crude services makes us feel.
Quite comfortable about about the guidance that we've given Andrew reiterated it just a few moments ago.
But beyond that we're not going to give kind of more granular information about about what.
<unk> is going to be throwing off going forward.
Got it makes sense. Thank you and then on Nymex five that's coming up for renewal in 2024.
A few years out but in your view are there any differences between <unk> five and I got three in terms of the importance to your customers.
Yes, we think we think there are real qualitative differences and we talked about some of those with annick.
We were talking to the.
To the market about the Anika three renewal now and I guess three was used to support <unk>.
Services for dish.
Just that.
You talked about this a lot before that really werent kind of quarter Theres central.
Multi channel.
Offering it was used for kind of a more niche market. It was used for.
Ethnic broadcast services, mostly.
Not English.
And really kind of a niche market.
That's not true really for any of our other dth satellites.
Five.
Fish, which is very much kind of supporting there.
Our core.
Directv.
Services that are kind of made widely available for for their subscribers and that would also be true for the other dth contracts that we have with Dell, but we are for sure. So that's three was.
Yeah. It was kind of different in that regard it is providing important services, but services that really weren't core to the main dth offering of dish.
Thank you and then my last question is regarding the bond buyback program is there any reason for the size of 100 million USD face value program that was authorized and then.
Your initial bond buyback and focus on the unsecured bonds and are they going to be your focus going forward.
I guess, given where they're trading now.
But as far as the amount.
I'm, sorry, My General counsel.
As far as the amount.
Yeah, I don't know, we just sort of felt that was appropriate I mean, we look at the amount of cash that we have available for all the different things that we wanted to do.
And so I don't know there wasn't really any exact science to it.
I just felt like the right amount.
I mean, obviously in the future if we change our mind you wanted to do something different that we can do something different.
But as far as kind of I don't know if the tranches.
October sort of being open minded about that and well and look we're also I should say, we're not committing to buyback any debt we've been authorized to buyback that we've made the purchases that we made in March and April I think it's good for the company to have.
The flexibility to do it we're just being pretty transparent with everyone that we have that authorization, but but the fact that we have the authorization doesn't necessarily committed to doing anything.
Great. Thank you so much.
Thank you.
Thank you.
The next question is from Arun Seshadri from Credit Suisse. Please go ahead.
Hello, everyone. Thanks for taking my questions.
First I wanted to ask in terms of the the I guess reduction in scope of Lightspeed can you talk about whether there are any.
Do you expect to use the full 5 billion U S.
For a one third reduction in scope, obviously youre dealing with.
<unk> cost of the overall program, but is there any scope for a reduction in the in the in the required funding.
I doubt it I mean I think we've.
Look we're well advanced in the development of this program so.
It doesn't feel like it doesn't I mean, we're not people that like to spend more than we need to.
I don't think so.
I think.
Frankly, I think what we're doing is very capital efficient and you just looked at the amount of capacity that we're going to deploy in the amount of capital that's required to deploy that much capacity I mean this constellation.
We'll have something like 10 terabits of capacity, it's more capacity that exists if you aggregate all the in orbit Geo satellite. So I mean, it's completely disruptive in terms of the capability that we're bringing and I'd note just in terms of capital efficiency I think unlike some of the other.
Sure.
Lower orbit satellite programs that are moving forward. These satellites are our real long.
Large complex capable satellites that have.
Our service life of 10 years, plus another year, just for launching getting them into their final orbit in orbit testing and my wife can show. So we actually feel really didn't love obviously, the inflationary pressures that we're seeing out there, but but even with them.
We think that what we're bringing to market is going to be.
Disruptive in terms of the.
Quality of service that will deliver in the price at which we can deliberate still achieving the kinds of returns that we need to achieve so.
That's a long winded answer but the short answer is no I don't think there's really a lot of scope to bring that number in.
Got it thank you for that and then.
And then just a broader question, obviously with the moving to the right of Lightspeed timing.
You're obviously, you're also seeing kiper.
<unk> come in at a similar time now I think you had probably a one to two year lead over them.
Which is which has sort of gone by the wayside somewhat so just first your thoughts on that and second given.
Given the Lightspeed has moved to the right. What are your what are your current thoughts on the Geo satellite fleet and and sort of a longer term capex envelope.
That that you would need to sort of deploy in order to keep.
Keep that.
Keep that business and in good shape.
So I'll start with your first question about about hyper.
Look we always believed that that Amazon the serious about about building out typer and.
Frankly, you know a one year head start or whatever I don't think that's.
Really that material in terms of our our competitive positioning we are building a constellation that is very much focused on and built for this kind of <unk>.
Enterprise and government market to tell us that it's been serving for the last 50 years for sure Piper is going to be providing services to some of those verticals as well, but I think theyre constellation's really more optimized for the primary market, but they are focused on serving which is more of the consumer broadband market.
And you know it looks like right now, they're not going to be having polar coverage. There are some limitations. There. So you know.
Our business cases intact.
Fundamentally it is a big big market, we know this market well, we know the customer as well.
We've engineered our constellation to give us and I think our customers certain competitive advantages in the verticals that we're focused on backhaul.
For Isps and mobile network operators, the Aero market the maritime market the government market really happy I didn't talk about it in my in my comments, what we landed that that.
Really interesting contract with NASA.
<unk>.
It took place in Q2, but we announced it.
Action.
We mentioned it in this earnings release as well so so.
With the ability that we've had and I don't know.
Hope everyone's getting delayed I mean, I haven't heard from a single satellite operator in the last 12 months.
Whether there.
New.
Entrant, whether theyre, a long standing operator, just everyone's kind of getting moved to the right a little bit mostly for the same reasons that we have been moved to the right.
Supply chain issues and.
And whatnot.
So that's how we think about kite Brendan on G O and replacement Capex and whatnot.
We're just kind of taking them one at a time, we're never going to replace the satellite.
Unless we feel like we've got a sound business case to do it right I mean, when we invest money.
It's always with a view towards achieving the kinds of returns that.
Our shareholders have come to expect in that and that we've been able to generate.
Over are fairly long history in this market and so and so that's what we're going to do going forward, we'd never say.
Going forward, we're going to replace every single one of our Geo satellites, we're really going to take them. One at a time as these satellites come up for renewal, we look at the existing book of business, we're engaged with the customers and we make a judgment about whether or not it makes sense to do it on the dth side.
That's going to be mostly about where we ended up in conversations with.
<unk> Shah and Bell with respect to each of the satellites that we're using to support their services and as we said before there are some new technologies out there that might mean that we can extend the life of some of these satellites.
Without having to do.
Scale replacement Intelsat.
So there's a bit of a pioneer.
Spending in the life of one of their Geo satellites, we've looked at that technology to we've also said in the past that.
Particularly some of these dth satellites the the current contract term for our customer.
It comes up.
Long before the end of life Saba when it comes up and I'm thinking of satellites, but the mix shift from energy one so so in any event.
But that's how we're thinking about it.
And then we've also said in the past look were still strongly pursue if there are attractive opportunities to build new geo satellites, but never mind.
Replacement.
And that we're going to continue to.
To think about too.
Provided that there is good compelling business case that underpins it.
Got it.
Got it. Thank you that's all I had.
Thank you. The next question is from Rob <unk> Garg from double line. Please go ahead.
Yeah. Thank you for taking the question can you just talk about the utilization if I saw it picked up from 80% to 84% but.
Right.
What are some reduction in supply or just walk us through that pick up in utilization.
And the last bit of what you said to fill it out for me, but I think Chris got it.
The increase in utilization factor increase usage reduction.
Well, it's a great question so so.
We probably should have called this out we took our Anna Kessler and our satellite.
At the beginning of this year and put it in what we call inclined operation. So you're you're kind of backing off on your station keeping a little bit to preserve fuel, it's something that satellite operators routinely do to extend the life of their satellites that are nearing the end of their lives we had another.
I'd like that and it's one that's been an inclined operations for quite some time, but when we report utilization we're reporting utilization on station.
Vasily.
Great question I'm glad you asked it.
So what happened was we ended last year with an 80% utilization rate, we put anecdote one excellent our inland climbed operations in January probably of this year. When we did that we then removed that satellite.
Our utilization calculation precision debt capacity and a couple in our on average was.
Lower utilization than on average the rest of the fleet and it had the effect when we removed it from the utilization calculation. It brought up the fleet wide utilization to 84%, but if we corrected it and did an apples for apples comparison.
It would've been flat utilization would have been 80%.
Uh huh.
For Q1, so so thanks for asking it and in the future or something like that happens, we'll do a better job of calling it out so that so that people don't have to wonder.
Got it. Thank you on doing a follow up just trying to triangulate on Dave I know you probably can talk about the specifics, but just looking at the 2023 backlog.
It seems like it's only picked up an incremental $10 million between euro and then today.
Am I missing anything just to get a sense of how big that contract in the maritime contract is is that the right way to think about it.
Thanks.
No.
It's another good question.
But when we signed this contract in Q2.
And so it didn't get picked up.
Q1 backlog number.
Just going to ask me again in Q2.
We report our Q2 numbers.
Just not there right now because that backlog calculation gets done for contracts that are in place at the end.
Before the end of March 31st.
And so yes that contract got signed in April .
Very helpful and just last question the 750 million on the neo backlog.
You know what.
How quickly do you expect that to ramp.
Is that is the getting the ECA deal a big piece of.
Selling that capacity in the future.
What kind of timing can we think about the ramp of the <unk>.
The old capacity.
So.
Maybe I could just on the question.
In terms of increasing the backlog do you mean or I suppose yes, increasing the backlog, yes for sure.
I think our customers you know we've already got a material amount of backlog on Leo.
With the sudden 50 million that we've reported to date, but it is certainly the case that once our financing.
In place we've started the full scale production.
The constellation.
We'll be signing more contracts with customers pre launch.
We're going to be very focused.
Before any satellite is launched or have that backlog number meaningfully higher than the 750, where it sits today.
We'll be reporting out along the way.
Great. Thank you very much.
Thank you.
Thank you. The next question is from Tijuana.
<unk>.
From Imperial capital. Please go ahead.
Hi, guys.
I have two questions. The first one is.
Regarding guidance I, just wanted to unscramble that a little bit.
You're obviously correct.
Parsons from desktop.
And.
We're able to come off the excess capacity are all okay from that satellite.
New York contract that's about it.
Does it mean that we.
We could be looking towards the higher end of guidance.
As you move through the year.
Are you confident that you can hit that given.
Given that you've had two.
Two positive things because I believe you said on the last call that.
You didn't get the cash contract towards the low end of guidance. So just some comments around the back would be helpful.
I'll take that Andrew will probably kill me.
But.
Yes. Your recollection is right. What we had said was that the guidance range that we gave kind of embrace the full range of outcomes with dish and haven't gotten that renewal and having having entered into that other contract. Yeah. We we feel quite comfortable that we're within the rate.
<unk>, here's the part Randy will tell me yes.
Probably more.
Gives us a better feeling that we're trending more towards the upper end of the range. So still only the end of I mean, what are we today may six so still have a whole lot ways you know to go.
Go through the year, but when we said in our earnings release, we feel like we're off to a good start and can reaffirm the guidance, we feel good about where we sit and it probably gives us a little bit more confidence that on balance.
We're yeah, we're kind of more on the upper side than the lower side sounds good then.
[laughter] okay.
Hey.
Hum.
If you can talk about broadly.
It's obviously delays all over the place on Leo constellation.
And that is.
Is it right to assume that.
This is actually good for <unk>.
That's nice.
And in that sense.
Is it possible that we could potentially see some more business.
Hum.
Come to the Geo side over the next coming years.
Just trying to understand the trajectory of the business obviously.
Timing out of them.
You know higher single digit.
Your.
Starting to see some stabilization.
On the revenue and EBITDA upfront so.
Just.
Maybe talk about the opportunity that's out there.
That's not in the near term.
Yeah I'd say.
Ill do the macro thing first maybe.
For the legacy satellite operators as a whole.
And yeah, I think you know the longer these new disruptive constellations are kind of pushed to the right.
It creates more opportunities for us.
The G O assets too.
Full and hopefully though.
It will start to see some better pricing dynamics.
As asset utilization rates across the industry get tighter with respect to telesat.
We'll have to see.
Set in.
My opening comments that we're actually seeing an uptick in activity.
But we can't always capture given that our utilization rate is pretty high I would say certainly the fact that we sold all of that Anika three capacity that came back to us so quickly.
<unk>.
It's certainly a sign that there are particularly in certain markets.
Getting to be some capacity shortages you would think that you believe in the laws of supply and demand that that that those shortages should translate over time to some improved.
Pricing dynamics, we haven't really seen it yet we've seen it I'd say a little bit on the margins and a good way.
In some markets.
And again all of these markets are not uniform. So you get out you know for instance, it feels right now like there is some capacity shortages building up on some of the key cruise markets the Caribbean maybe the med.
We don't have a ton of capacity there.
As there are other markets still that you know like Africa for instance.
Still seems to be.
More supply.
We as providers would want right now so I don't know I mean on balance.
It can't be a bad thing for us.
The geo operators, including total soft, but we're not prepared to sit here right now and say yeah. We are.
Materially changing our outlook, but on balance I think its supportive we'll put it that way.
I think that's all I have thank you very much for your time.
Thank you.
Thank you. The next question is from Brandon <unk> from Kennedy Kennedy. Louis. Please go ahead.
Hi, Thanks for taking the questions.
Mentioned, a couple of times that you're seeing a lot of demand, but you're actually having a hard time supplying it based on your utilization.
You're only at 84% utilization. So can you help me understand what the Delta is there and whats preventing you from selling another 16% is it just the location of their satellite or is it meeting some redundancy in orbit.
Yeah, no it's exactly what I was just referring to.
We provide we are.
Capacity that serves all sorts of different markets some of those markets.
There is greater demand right now and so I think we probably have.
More excess capacity is in some of those areas that have been a little bit more challenging and I mentioned Africa, a moment ago, we've got some outstanding capacity over Africa.
No.
There are opportunities there, but if that capacity where available over some other markets.
We'd be able to sell it a whole lot more quickly. So so that's what it is and I think candidly if you look at our.
Utilization rate.
It's pretty favorable I think relative to probably the industry as a whole right. Now if you look at probably you know just kind of utilization rates across the industry.
I got to believe it's lower than 80% right now.
So that's what our our challenges and it felt like you're throwing the towel, we're always trying to get to 110%, but that's the reality of the situation.
If you go back and look at our utilization rates that we've been reporting when we report them every quarter and have for decades, and we've done a good job I think it's trended up a little bit.
Even through the pandemic and all of that so.
So anyway with that that that's that's what explains it and I also I don't want to overstate its felt like were achieved.
She's with demand right now.
Cant satisfy all of them.
Noting.
Trend, which is we are seeing an improvement in certain verticals and in certain geographies, which is good.
But we can't always satisfied.
Case in point.
Ukraine right now.
Been heightened demand for some government services there've been some users that have had to come off of Russian satellites that need to be accommodated.
On other satellites some of those requirements you know folks have reached out to us on and we just simply don't have the available capacity to meet those requirements. So so that's an example of what I'm talking about.
Okay. That's helpful. And then I know you don't want to give specific numbers on contracts on F. Three but I mean could you give me a sense generally is if they're trading from broadcast enterprise on a given satellite for the same amount of capacity, but how does pricing typically compare between those two.
Use cases.
Hi.
No.
So kind of assuming generics.
The thing that we did with <unk>.
Uh huh.
Dish right I mean, it's it's.
It's not you can't extrapolate really from from one to the other and so.
Yeah, it's it's.
I'm trying to avoid the question it's just there.
There.
Yeah, I mean, but the.
The dish renewal.
You know that's got its own dynamic around that and then and then these other.
I'm looking at.
Colleague of mine for some help here, but I'm I'm sorry, just.
Yes.
It's hard to say if it were just some other you know.
A transformed has come up it was for kind of more generic.
Broadcast services I'll pick a market Latin America or something like that.
It's terribly dissimilar to what we would see if we were selling in the broadcast video market kind of writ large but but.
We put.
The dynamics around the dish renewal in a different category.
Okay understood and then just a last one from me it seems like Youre seeing some benefit from Arab maritime coming back perhaps in terms to reopen if we just looked at where we are now for that vertical compared to where we were pre COVID-19.
Sorry back do you think we are at this point.
You know what that's a great question and I wish our chief commercial officer, we should because and I'm, hoping that someone else in the room can help me here, but I saw stopped it said something like well only.
70% of it.
Only 70% of the crews are trying to back in the water.
Going out with the.
Passengers and whatnot.
Bandwidth requirements that they have which like more than 100.
Well over a 100% of where they were pre pandemic I mean, it doesn't take a rocket scientist to figure out why everyone. Just wants a whole lot more bandwidth. It it was me, but the bandwidth requirement.
With meaningfully higher like at the end of Q1 then.
It was pre pandemic, even though there are only about 70% of the cruise ships out there. So here again, not a surprise everyone wants more bandwidth.
And at the inexorable trend.
And then yeah.
Certainly accelerated that and if you're out on a ship you need to.
<unk> have access to zoom.
All of that you're using cloud services. So that's kind of what it looks like in <unk> and we believe that's kind of the future.
Broadband connectivity demand that's why we're building tell us that lightspeed.
And that's why we're so bullish about it.
Okay, great. So it sounds like some room to run there still on the crude side.
The Aero side.
Oh I'm sorry.
I haven't seen kind of a direct numbers livestock, but certainly its way back up.
I mean, its way back up.
Yes.
Obviously, no passengers and planes.
And in demand.
As bandwidth demand is eclipse, where we were pre pandemic. My gut is we probably have been I'm not I'm not sure. We're probably trying to back but we'll have to look at that and we'll be we'll try to be prepared to talk about that on our next call.
But clearly the dynamics are improving which is why.
I called it out in my opening remarks.
And we've definitely been a beneficiary.
Some of that so far this year.
Great. That's all for me thank you.
Thank you.
Thank you. The next question is from a work.
From like Chad. Please go ahead.
Thanks, Dan you mentioned things being back on track with the ECA is can you just.
Provide a little bit more color on what that means.
And whether that.
We should infer anything in terms of timing.
Well.
What it means is that.
As we said before.
Back in October when we.
We are informed by tell us that they couldn't support the schedule.
That they had previously shared with us and when they also.
Sort of warned us that Theyre also these pricing pressures, we had already been in very advanced discussions with the export credit agencies, and we had to pause those discussions because the business case that they were being asked to underwrite needed to get updated as a result of the news that.
We heard from towers, and so when I say that where we engage with them.
What I mean by that is we have a new schedule we have.
New.
I should say our current plan and.
And we've shared that with them probably right before Easter.
Which allowed us to unpack.
And so you know.
We're back at it with them we've had.
You know.
Multi hour sessions with them on.
Technical updates commercial updates financing updates regulatory I mean, everything so so that's what.
When.
<unk> said that were fully re engaged.
With them and then I said from a timing perspective, they've got work to do.
They've got technical advisors commercial advisors and they've got.
Processes that we need to respect and and so there.
Absorbing all the information that we've shared with them and in what.
We've said from a timing perspective is that we hope to have.
No.
Good sense for where we're standing with them.
Kind of around the end of Q2.
So our Q2 is June 30 is kind of thing. So so that's that's where we are.
We've shared a lot of information.
And they're doing their work and we've told them that.
We want to get moving quickly.
We think there is an awesome market here.
And we want to get out of it. So so that that that's you know.
So that's where thing got it.
You also announced I think recently something with naphtha naphtha.
I believe that's related to the Leer project.
But just in general like as things developed with develop going forward with ECA tell us that things kind of progress.
Where do you expect to have prelaunch success in terms of signing up contracts.
And how would that pace look you know over the next whatever six to 12 months.
Yeah.
Well you know what.
I think verticals, where you know.
We think that there are some good opportunities for us.
Prelaunch opportunities it'll be you know on the.
Trust real side, so broadband connectivity that can be big rural broadband programs that tell us that lightspeed is going to be really well.
Well positioned to serve.
It'll be.
Working with mobile network operators some of that.
Again, it's all rural Rural Rural it'll be network extension for Isps and mobile network operators, we think in both developed and developing countries. We think that the maritime market is going to be another promising market for.
<unk>.
Prelaunch deals.
Okay.
Arrow.
A longer sales cycle, just given all the regulatory.
Complexity around serving the Aero market with all the certifications you need and how long it takes to deploy.
Terminals on planes and all the requirements around that I still think there are opportunities there to do prelaunch stuff and I think that lightspeed is gonna be revolutionary for.
The Aero market just given the.
The flexibility of the network the optical.
Optical.
Satellite and our satellite links that we have our ability I think no other system to concentrate a gigabit 10 gigabit chip capacity around airports and in high density flight corridors.
And then on the government side it'll be interesting I mean governments have their own very busy teen kind of procurement rules in cycles.
But I'm still cautiously optimistic there obviously with Allied nation certainly.
No.
The activities in Ukraine, right now underscored the importance of.
Resilient.
Equities.
I think low latency.
Resilient.
Our satellite connectivity and I think that our governments are showing a renewed interest in spending.
And then.
And understanding how integral spaces to I hate to say, it but kind of modern warfare.
And whatnot and so so it'll be interesting I think that.
Lightspeed can be transformative for government users how much of that we can do prelaunch I think some I mean, obviously, we're doing some really interesting work with DARPA right now we're supposed to be launching two satellites.
Sort of like towards the end of this year, but to demonstrate.
The efficacy of these optical inter satellite links we announced that deal with NASA, that's more kind of inter satellite communications. This time, not with optical lengths, but with RF.
So yeah, you know and then as far as the pace and what not I don't want to say right now, we're not going to throw it in backlog targets right now four four <unk>, but you know look I think it's amazing that we already have something like three quarters of a billion of backlog.
And we haven't really started in earnest.
The full build out of the constellation so.
I mean, that's a very detailed.
To a certain extent targeted view of the market. When you came up with your in the presentation from several months ago I suppose that you know you.
Thanks.
Constellation can address 1% of our $430 billion market is that when you were when you were contemplating that was that kind of.
A thoughtful exercise built up from these you know.
This list of different opportunities that you had or was it just like look we launched this much capacity up there we're going to capture 1% like can you give us a little bit.
Yeah.
We don't really like that.
We have built up I got it thank you.
The most granular.
Our business case and demand model, we have divided the world into like I don't know 100000.
Little micro quadrants and in every single one of those quadrants, we look at all the different verticals that.
We plan.
To serve and make a judgment about whether in that little.
Micro quadrant.
Hum.
Okay.
Little micro quadrant, we make a judgment is fiber the best.
Transmission medium to meet the required as microwave is it some other satellite.
Connectivity. So that's how we built our model and.
Soon we'll be engaging with all of you guys to help you understand what we've done but no. This is not a yeah.
Well, that's $5 billion in Lightspeed will have you know I don't know.
10, Terabits globally, Yeah, we're building.
Maybe you can just add one point, maybe you should just had one 1% and people might have.
No Mark.
4 billion.
Whatever.
But no I mean.
I cannot believe that there is anyone who's been more anal and forensic and rigorous.
Building up.
Our demand model for every vertical.
And again, that's that's backhaul connectivity.
Again every little micro quadrant.
Around the Europe Arrow, that's maritime that's government and then within Aero, It's commercial it's private jets sizing every different jet and maritime its crews it's maritime transport.
Hi, and yachts at smaller yards I mean.
That's how we've done it.
So it's just amazing that Theres a focus on like <unk>.
Small dish renewals when theres a $4 billion.
Target revenue we understand.
We you know I think there.
Look we look at kind of where the stock is trading right now and our market cap and just shake our heads.
But you know shame on us we need to go out there and I understand why people care about the this renewal and we care about it too and I think we got a really good outcome there but.
We've got to get out there and share a whole lot more information on lightspeed.
Presenting at two investor conferences.
This month so.
Yes.
You'll be hearing a whole lot more from us.
And that's why we're again, we're so bullish on this opportunity.
Need to.
Work with these export credit agencies that we've been working with for some time I can tell you. The support that we've had from the government of Canada and the government of Quebec has been phenomenal.
<unk>.
They've been great partners for us when they're foursquare behind what we're doing.
So now we got to finish this work with the export credit agencies get going in and then go out and kind of proselytize.
Just with the customer community, who we've mostly been focusing our time and energy on but obviously with the investor community too.
Okay. Thank you.
Okay. Thank you everyone.
We've run out of our allotted time.
Operator.
Yes. Thank you.
So Dan you want to.
Yeah no.
It will run out of their time I think my answers were.
I'm, a long winded slashed fulsome side, but but in any event.
We appreciate everyone's time this morning.
We will be.
<unk>.
Goldman leveraged Finance conference later this month with J P. Morgan equity conference in Boston later this month. So we're looking forward to speaking with everyone about what's been happening in the business and our plans we feel like we're off to a great start.
For the year, we had a really I think.
Positive Q1 and lead some good foundations for the rest of the year and so.
With that we appreciate everyone's time, and we'll talk to you when we put out our second quarter numbers. So thank you. Thank you.
Thank you.
Conference has now ended please disconnect your lines at this time and we thank you for your participation.
This conference is no longer being recorded.
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