Q2 2023 Telesat Corp Earnings Call
Your patience.
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This conference is being recorded.
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All participants. Please standby you know my thing is ready to begin with.
Ladies and gentlemen, welcome to the conference call.
Quadro 2023 financial results I'll tell us that.
Our speakers today would be Dan Goldberg, President and Chief Executive of startups, Telesat, and Andrew Brown, Chief Financial Officer.
I would now like to turn the meeting over to Mr. Michael Leyba.
Director of Treasury and risk of money. Each ma'am. Please go ahead Mr. <unk>.
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 does he tell us that actual results may differ materially from the results contemplated by the forward looking statements as a result.
Certain.
For a discussion of known risks he tell us its annual and quarterly reports filed with the SEC and SEDAR Telesat assumes no responsibility to update or revise these forward looking statements I will now turn the call over to Dan Goldberg, President and Chief Executive Officer. Okay. Thanks, Michael This morning, I'll share some thoughts.
On our financial results and give an update on the business I'll, then hand over to Andrew who will speak to the numbers in detail and then we'll open the call up to questions. As we noted in our earnings release, we've had a busy first half of the year for tracking our guidance received FCC validation on C band clearing which allow.
With us to recognize approximately U S $260 million in the quarter and completed some meaningful additional debt repurchases that we think strengthened our balance sheet and create value for shareholders.
But certainly the Big news was our announcement. This morning that we've selected M. D E as prime contractor for the Telesat Lightspeed satellites and that by leveraging the advanced technology, they've been investing in we're able to reduce our capex on the project by roughly U S too.
Billion dollars, while fully maintaining the revolutionary capabilities of the network that we think are going to make it so disruptive and successful in the market.
Lightspeed is now fully funded to global service delivery, given the company's own equity contribution certain vendor financing and aggregate funding commitments from our Canadian Federal and provincial government partners. The government financing commitments are subject to a number of conditions, including completion of <unk>.
Firmer toward due diligence and the conclusion of definitive agreements, which we're aiming to get done by the end of the year recognizing that could take a little bit longer I want to thank our government partners for their strong and consistent support of lightspeed and their recognition of the manifold public interest benefits that flow.
From the project.
I wanted to say a few words about why this approach with M. D E. There's so much more capital efficient and why we ultimately pivoted and made the move to M. D. A.
The game changing development here is the digital beam, forming an antenna that M. D. H has developed we considered a digital beam former some years ago. When we first evaluated technology options for lightspeed, but our engineers felt that it wasn't ready for prime time, that's a technology development risk at the time was.
Two great. That's why when we selected M D. A to bill being antennas way back then the intent is M. D. A prototype to them was going to go for original planned formed beams using analog technology, which is to say it was an analog beam former over.
The past few years MTA has continued to invest in the digital beam former.
And late last year as we were working hard to close our business case funding, which in part entailed looking to optimize the overall lightspeed design and exercise I know I've spoken about previously we took another look at the digital beam former and came to the conclusion that it was now sufficiently.
Mature and that not only could we leverage yet, but that we had to given the massive efficiencies. It delivers the performance improvement relative to the analog one is dramatic it's a game changing to give you a sense it can create roughly true.
The number of beams versus the analog one which means we can serve our customers and cover the globe vastly more efficiently.
So for example, while the old satellite design required each satellite to have two pairs of analog beam, forming antennas to deliver the capacity and the way that we want we only need a single pair of digital beam, forming and tenants. This allows each satellite to be somewhat small.
Sure and still have the same effective capacity as the larger ones and smaller satellites almost always mean less costly satellites and that's certainly the case here in the case of Lightspeed. The MTA satellites are roughly 75% of the size of the earlier versions we were.
During the digital beam former also creates a better link between the satellite and the user terminal, which further improves the performance and the efficiency of the overall network. The satellites will continue to have four optical inter satellite links which we've always emphasized as important to dynamically and.
Rapidly route our users traffic anywhere on Earth, and which also provides great resiliency throughout the network.
In addition to the digital beam former MTA also as it has been investing heavily in the digital processor that is tightly integrated with the digital beam former.
MTA has been doing all of this because they see a big opportunity to build Leo satellites as the industry transitions in that direction and to their credit they have already been quite successful winning last year, a highly competitive process to be the prime contractor for the globalstar Leo constellation.
That Apple is funding and using NGA has world class capabilities in high volume satellite manufacturing and is heavily focused on winning more business as a prime which is why they won the apple opportunity and why they're going to be building. The lightspeed satellites to work with M. D E and many of our other suppliers at all.
Already started.
The first wants to take place in mid 'twenty 'twenty, six and that will enter global service in late 2027. The total capex for Lightspeed is approximately U S $3 $5 billion and if we meet our plan, we expect to grow our revenue and adjusted EBITDA by.
Several multiples and achieve and.
I R. R on the project roughly 30%.
Organize an investor day, and presented a number of conferences in the near term. So that we can give investors greater insight into our plans.
It would be hard to overstate how pleased we are with the arrangements we've put in place for Lightspeed and how can we already get out there with customers investors and others. It's been a long road much longer than we anticipated certainly much longer than I anticipated with COVID-19 and the Sip.
<unk> changed constraints and inflation that COVID-19 brought representing real obstacles, but we've always said, we see a huge opportunity in the global enterprise broadband market and that we were laser focused on finding the most compelling path forward, given where we've landed it's been well worth the wait.
I want to thank my colleagues at Telesat genuinely world class professionals in every key discipline technical regulatory commercial finance legal for their resilience dedication and ingenuity.
I think as hitting an absolute home run here.
Throughout our 54 year history, we've always leveraged our deep engineering expertise and leaned into innovation to adapt in a dynamic market and meet our customers ever evolving, but always mission critical requirements Telesat Lightspeed is just the most recent example of that.
Been a real privilege for me to work alongside the World Class team here and we're all now just 100% focused on executing the plan so with that I'll hand over to Andrew and then look forward to addressing any questions you may have.
Thank you Don and good morning, everyone I would now like to focus on highlights from this morning's press release and filings. However, as Don said, it's been a long road.
Obviously with our announcement of Lightspeed, we are so excited to be in a position to move forward with our program.
Now focusing on our financial performance in the second quarter of 2023, Telesat reported revenues of 180 million adjusted EBITDA of 139 billion and for the six months ended June 30 of 'twenty to 'twenty three we generated cash from operations of 102 million and we had one 5 billion of cash on the balance sheet.
In the second quarter of 2023, when compared to the same periods in 2022 revenues decreased by 7 million to 180 million operating expenses decreased by 7 million to 52 million and adjusted EBITDA decreased by 8 million to 139 million.
<unk> EBITDA margin was 77, 1% compared to 78, 4% in 2022.
Between 2022, and 2023 changes in the U S. Dollar exchange rate had a positive impact of 5 million on revenues and negative impact of 1 million operating expenses and a positive impact of 4 million unadjusted EBITDA when adjusted for changes in foreign exchange rates revenues decreased by $12 million operating expenses decreased by $8 million.
And adjusted EBITDA decreased by $12 million.
The revenue decrease was mainly due to a termination and serviced by a south American customer combined with a reduction in revenues from one of our North American D. T. H customers. This was partially offset by increased revenue from the work we are performing for NASA related to satellite satellite communications in low Earth orbit.
The decrease in operating expenses is primarily due to lower noncash share based compensation, partially offset by higher costs associated with the procurement of third party satellite capacity required to support certain customer networks interest expense increased by 19 million during the second quarter when compared to the same peer.
In 2022, the increase was due to an increase in interest rates in our U S term loan B facility combined with the foreign exchange impact of U S. Dollar denominated interest expense. This was partially offset by the impact of the repurchase of notes in 2020 trade combined with the impact of the maturity of one of our interest rate swaps in September .
Of last year.
In the second quarter, we recorded a gain in foreign exchange of 67 million as compared to a loss of 19 9 billion in the second quarter of 2022.
Against that the trade months ended June 30th was mainly the result of a weaker U S dollar to Canadian dollar and the resulting favorable impact on the translation of our U S. Dollar denominated debt net income for the second quarter of 2023 was $520 million compared to a loss of $4 million in the prior year.
<unk> of 524 was principally due to C band clearing proceeds recognized in the quarter of Canadian 345 million combined with a positive variation in foreign exchange on the comparison or a desk to Canadian dollars and the gain on repurchase of debt of Canadian 158 million. This was partially offset by higher interest.
And some higher tax expense.
For the six months ended June 30th the cash inflows from operating activities were $102 million and the cash flows used in investing activities were $67 million in terms of capital expenditures incurred they were primarily related to a low earth orbit constellation Lightspeed and the newly acquired F for satellite.
Guidance is you would have noted in our earnings release. This morning, we were very pleased to maintain our previously provided revenue and adjusted EBITDA 2023 guidance. The guidance assumes a Canadian dollar to U S dollar exchange rate of 1.35.
<unk> continues to expect that full year 'twenty revenues to be between $6 19 billion and 710 billion in terms of adjusted EBITDA Telesat continues to expect between $500 million to $515 million.
In respect to expected capital expenditures as a result now over a lightspeed announcement, we now expect our twenty-three cash flows used in investing activities to be in the range of 175 minutes to $2 25 million.
We will provide any further updates at the time of our Q3 call.
Looking at cash to meet our expected cash requirements for the next 12 months and so the interest payments on capital expenditures with approximately 1.5 billion of cash and short term investments at the end of March as well as approximately 200 million U S dollars of borrowings available under our revolving credit facility.
Approximately 1 billion of cash was held in our unrestricted subsidiaries. In addition, we continued to generate an ongoing significant out of cash from our activities at.
At the end of the fourth quarter leverage as calculated under the terms of our amended senior secured credit facilities was $5 six nine times to one telesat has complied with all the covenants in our credit agreement and indenture as Don has also indicated in the second quarter and included in the subsequent period, we have repurchased debt with a principal aggregate amount.
U S 296 million by way of open market purchases at a cost of $156 $9 million. So combining the prior repurchases totaled 22, we have now reported as a total amount of 456 million U S dollars at an aggregate cost of 200 and towards the trade point $9 million. In addition to.
It's also resulted in interest savings of approximately $27 million annually.
Just to add since the end of 2020, when telesat, we paid approximately $340 million of our term loan overall debt has been reduced by approximately 24%.
A reconciliation between our financial statements and financial Covenant calculations is provided in the report we filed this morning. Our 6K provides the unaudited interim condensed consolidated financial information in the NDA. The nongovernment. Her subsidiaries shown are essentially the unrestricted salt with minor differences.
So with that I will conclude our prepared remarks for the call I'm very happy to answer any questions. You may have and with that now I'll turn it back to the operator.
Thank you.
We'll now take questions from the telephone lines. If you have a question using a speaker phone. Please lift Julien said before missing your selling expense.
A question. Please press star one on your devices ski Pam you may cancel your question at any time by pressing star two.
The one at this time, if you have a question.
We have with pause while the participants register for questions. Thank you for your patience.
The first question is from Mike. Please from Jpmorgan. Please go ahead.
Yeah.
Hi, good morning, Thanks for taking the questions.
Dan I appreciate all the color and commentary earlier on the MTA contract, what youre getting out of that different from before but I guess just to be really clear here for some of us that Oh, that's a smaller satellite technology.
You will have the same roughly the same amount of capacity in this network than the prior network I just want to confirm that and then what are you not getting if anything for spending $2 billion less than that.
A few other problems.
No. Thanks, Mike No I mean, it's as we said this constellation by leveraging our this more advanced digital beam former it's got the same effective capacity. We we were not going to settle on that we've got a really good understanding at least.
We think we do of what the market needs what our customers are looking for they need to concentrate capacity dynamically around Europe , and so we didn't trade off any of that.
Which is the beauty of this.
So we still have for ourselves, which we've always said is important in terms of our ability to dynamically route traffic around the world and have greater resiliency throughout the network and gives us a lot more scope in terms of rolling out landing stations and so.
No I didn't even talk about it in my remarks schedule Havent compromised schedule at all you know the good thing about working with M. D. A.
As the prime satellite contractors that we've always been working with M. D. E. On this program I mean, they already had a big part of the program with the intended that they were going to build so.
Yeah, No I mean.
You know look what can I tell you I mean, we've we've been beavering away in the background I mean, we've been you know doing all sorts of things to close the business case.
And some of that we talked about really explicitly like like engaging with investors on incremental equity contributions and the like we also said maybe a little more elliptically that we were you know looking at other ways to optimize our the constellation the network.
And ultimately you know, we really hit pay dirt there. So anyway, yeah, I know, where it's equally capable and as I said in my remarks, with a digital beam former and our CTO.
When lean is sitting with me here too and Dave can talk more about it the link is better between the spacecraft and the user terminal when it's transmitted with this digital beam former and that you know is kind of above my pay.
Hey, great in terms of how that works, but but anyway. The analog antenna has to kind of squint at the user terminal at lower elevations in the digital one doesn't and it just it just improves the link.
But just to be in a month just to be Super clear here is there anything that you're not getting.
And the answer is simple no works as well too.
Just simple no it's as simple as okay from a capability perspective from a flexibility perspective I mean.
Yeah, and and if anything I think we're gaining stuff I mean, yes with with three X. The beams on each satellite we've just got so much more scope to route traffic around and look we looked at this technology years ago, but but but we I mean, you know tell us that.
We're not the most risk embracing organization on the face of the Earth.
I think we're forward leaning, but we don't you know get get overly aggressive.
So we took a pass on it the thermals were too high.
I mean, there's all kinds of stuff, but in any event I mean M D. A capped.
Investing and they're leveraging some of the work that they did on the analog beam former which is another reason why we're not taking any schedule hit us.
So yeah, no. It's just a home run.
Got it. Thank you for that and then I don't know who wants to take this one but I'm, hoping some folks can maybe just bridge some funding gaps for me here, So $3 5 billion total.
One 6 billion Telesat equity, we all can do math on how much money has moved over there to date, but I'm wondering can you give us that number rough round I'm encouraged I'm assuming C band proceeds will help fund that and then additional money moving over I'm. Just wondering if you can fill that in a little bit.
Let me try to fill it in and if there are still gaps which is often the case after I respond to questions that had been in.
The finance folks.
But a couple of things and we tried to be clear about this in the release, we're fully funded for right now 156 satellite. So the deal that we've announced with M. D. A is for 198 satellites. The U S. Three and a half billion is for the 198 satellites, but right now.
With the cash that we have including the cash that we've already invested in this project Oh and I should note. The C band proceeds that stuff that we're expecting to get you know real soon here with the cash that we have in the C band proceeds that are coming with the money that we've lined up.
With our Canadian Federal and provincial partners, we've mentioned that we've got some vendor financing, which.
Which is not a significant as our own equity contribution or was the government contributions so with all of that money. We've got enough money. We're fully funded for 156 satellites plus we built a non trivial amount of contingency in there.
Air because that's kind of how we roll so that gives us enough money for the 156 satellites, which gives us full global coverage in a really good high performing constellation, but but but we've committed to MDA for another 42 satellites that will fund the current.
Plan is using the existing cash flows of lightspeed once lightspeed gets up and running in a few years' time. So that's the plan and so then the math should work so the capex just to be real.
Clear here the Capex for the $1 56 satellite constellation is about U S $2.7 billion. The total program cost.
Is about three and a half billion U S. For the 156 satellites, such such Capex plus everything else is about $3 5 billion plus some contingency that I mentioned and then when you look at the funding there's about you know one point.
6 billion equity contribution from Telus shot and just to be clear that's cash that we've already put into the project cash that is already available outside of the restricted group for Leo The C band proceeds that are coming in that covers all of that 1.6.
And then the the government contributions.
<unk> are about $2 billion U S. And then as I mentioned, there's some vendor financing as well so that that's what gets us there.
Can you break up the government financing and the vendor or give us one of those pieces.
<unk> already candidate and expect is that the same from last time is what I'm asking is there anything changed well I mean, if you do the math.
So so we've said that it's approximately 2 billion U S, which at current exchange rates is about $2 7 billion Canadian pre.
Previously what we said is that the government of Canada had committed to about 1.44 billion.
Canadian dollar contribution come back.
$400 million of Canadian contribution. So so there's an incremental 900 million there that we've been in advanced discussions with our government partners about so so that's kind of you know the government piece and where we're not free right now to break down exactly.
<unk> you know how much is coming from different sources, but but but wont be able to talk well be able to talk more about that in the future and then the vendor financing you know we're subject to confidentiality obligations.
With you know our suppliers.
It's some hundreds of millions of dollars, but we can't be more specific than that at this time I will say, it's not M. D E M D as holding their call I think shortly after ours and I'm sure they'll get asked them. So.
So you.
You know we chose M D a because.
No. They got this great technology and they're leaning in hard in building in wanting to be a Leo prime, but we didn't select them because of vendor financing commitments.
Thank you and just just a quick into clarity if they can all be answered. This is still going to be funded built.
In unrestricted subsidiaries and then in the future you might consider bringing everything back together.
Yeah, nothing has changed there in terms of how and where we're funding. This we've you know.
Yeah, I mean, what what happens in the future in terms of restricted group versus unrestricted group you know we're not.
We're not saying anything about that there you know they they.
At some point in the future it could all come back together or we could you know continue to finance.
Those activities separately, but but but theres nothing about today's announcement that changes any of that.
Thank you.
Okay. Thanks, Mike.
Thank you. The next question is from Walter Piecyk from light shed. Please go ahead.
Thanks.
Dan just to confirm the that incremental government.
Piece of the puzzle is not the revenue commitment that exist right. This is no no no no.
And I mean, no we've got.
A capacity commitment from the federal government of Canada.
It's 600 million Canadian over a 10 year term, we've got a separate commitment from the government of Ontario, That's 109 million Canadian dollars over a five year term and again, we've talked about this before the way those things are structured we think that you know.
That.
But the amounts are essentially going to get doubled when we take that pool of capacity that's subject to those funding arrangements and enter into agreements here in Canada with Isps and the like but know that those amounts are separate so its 900, then I understand I respect that.
Can't really disclose it but cost wise, obviously is it going to look as attractive as what we saw from the government of Canada.
It's a great question. So this approximately 2 billion U S dollars of government funding, we said, it's subject to the completion of confirmatory due diligence and getting definitive agreements in place, where we're going to need to work with the government.
To agree fresh terms for all of that I I believe it's going to continue to be you know attractive financing.
But we'll update everyone.
On that okay. So so yeah.
Fine.
And then just just the overall numbers it was definitely helpful to.
Recognizing your Capex is even lower for the initial launch and they get rid of the revenue popcorn.
But the overall number then in terms of what you've outlined it sources relative to the uses.
It seems like you don't even need the operating cash flow to get to that to the full.
You said 198 constellation so weird.
The operating cash flow Walter to get to fund the <unk>.
You know U S three and a half a billion dollars plus contingency for the 156, but we're going to need.
Roughly another 800 million U S to fully fund the incremental 42 satellites plus the launch could.
You said two why is that you said $2 7 billion for the for the 156 right. So if I just take 1 billion six plus $2 billion.
Oh right right $2 7 billion for the Capex about thrown at about $3 5 billion for the total program cost.
Contingency is all yeah yeah.
It's a little confusing because the total program costs for the $1 56 is roughly equivalent to the capex for the 198 the numbers are the same.
Okay.
I'm going to ask the first the J P. Morgan <unk> question in a different way you had these presentations.
Were very helpful. In terms of sizing the market you know $3 65 billion Tam and you kind of broke it down and talked about your percentages.
Has anything changed in terms of how you look at that Tam relative to this new constellation is an increase the Tam does it decrease the Tam.
Because I assume or growing the size of that Tam is we hit you know.
Commercial date that might be a little bit later than what I first kind of a forecasting back in 'twenty, one just thoughts on that.
So or thoughts about the addressable market the size of the market the amount of of share. We can take in that market are unchanged again, I mean, we deliberately have have designed to constellation that allows us to do everything that.
We had been planning to do under the prior plan you know if if you if you dissect what we've said about the adjustable market in the past order of magnitude you know its about 400 billion, we think out in the I think we said 2025 timeframe.
Roughly we've said about half of that 400 billion is kind of direct to consumer which is not the market that we're focused on we've always been real clear we're focused on the enterprise and the government services market. So that's roughly the other half of that Tam. We've said, if we get you know.
2% of that which we don't think is the most ambitious you know kind of perspective that will be hitting our business plan.
And so I.
I was thinking around that but I.
I hate to say it again question that is on that yeah, I have that I'm glad to see the $4 30 is reaffirmed as as you know timeline on that but I think maybe what's the follow on messages like you know you've had a delay you have a new vendor.
There's been a lot more conversation about I.
I guess, what people are calling directed device markets more of the consumer thing Theres I mean, Oregon on his that dish call.
I was talking about S band, although theyre not financed you know I think you've got some legato spectrum I don't know what's going on at Viasat is there an opportunity.
Perhaps to partner with one of these other players get access to some additional spectrum and modify this constellation.
To the extent that you can address that broader 430.
$430 billion market you identified in for 2025.
So here's what I'd say about that first off the 430 doesn't include the direct to handset market, which is some of what I know dishes focused on but but these satellites right now really been optimized frankly, just like our prior satellite design they're off.
Optimize to do a high throughput broadband connectivity for the enterprise market and and we have squeezed out every watt of power Ah and directed it to that market and we've and we've sized the satellites.
We optimize them for that mission in order to change the mission it just wouldn't make any sense.
Now, having said that if we had access to S band spectrum or L band spectrum could we leverage you know the bus the processor a potentially the internist, although the incentives might look different yeah, we could potentially do something like that but right now we do.
Just got to stay laser focused on the huge.
Market that's in front of us that we know well that we've been serving for years that we've been out there engaging with customers you know about lightspeed for quite some time. So so Walter that's our focus now could the Tam be a little bit and is there a drop is there a drop dead date, when you'd have to work something.
With an S band on L band owner.
We're off to the races, where we're already moving forward with M. D. E. On this where we're we're not you know if you look at there's some great opportunity here with some third party, bringing that spectrum and some capital. Then then it would just be almost kind of like an adjacent network that might leverage lights.
Bead in terms of routing traffic around and whatnot, but but you know that yeah.
Just thinking about at the half question you know, we we've talked about this before in terms of the Rev. Commitments that you know when we were waiting for tell us to get in the ECA all that stuff, but it impacted your ability to get signature. So I assume that this is going to kind of open up that.
Are you you know how how do you envision disclosure in terms of as you get incremental revenue commitments for the new constellation individual press releases updating on a quarterly basis, how do we get yeah yeah.
This develops.
All of that will be transparent about the deals that we're signing so that folks will have visibility we understand how important that is.
Awesome. Thank you okay. Thanks.
Thank you.
The next question is from Iran that Sydney from BNP Paribas. Please go ahead.
Hello, gentlemen, thanks for taking my questions and first of all congrats on getting a lightspeed program constant reconstituted and funded lots of skeptics so definitely hats off.
Just wanted to.
Nail down a couple of details on the funding the equity side.
So just to make sure I got my math right. The existing cash balances that you have right now is probably somewhere in the range of about 1 billion. One U S. You're getting another $260 million from some of the C. Band proceeds that gets you close to $1 4 billion U S. So is that is it fair.
To say that you have another a U S dollar 200 million or so of additional equity that you need to contribute either from the from.
From the operating you know operating cash flows in order to get to your $1 6 billion.
U S of equity funding.
Andrew This is Andrew I'll take that acres that are laid out very clearly that we're totally found the one 6 billion is already there today and that is comprised of as you say the cash we have we have currently we've got a C band proceeds coming in Canadian 345 million, but also during the course of the program we have been investing in the developed.
And overtime, so that number includes stock that's falling.
And also got so I think altogether I think we're in good shape I think the key point, we don't need any more cash to come in today for us to say, we are fully funded and the cash that comes in today its something for the future but for today, we're fully funded.
Got it. Thank you Andrew and then and then in terms of the I noticed that you havent laid out any future debt buyback authorizations.
Is it fair to say that given you're fully funded is it fair to say that future operating cash flow you're generating is it's still you know, it's still sort of likely to be used for debt.
Debt buybacks.
So.
What would I say.
Look we've been doing a fair amount of debt repurchases and we highlighted that in the earnings release, and we think that it's been a really smart thing to do with the cash that we have that that we don't have we haven't had.
A higher value use for at the time and rather than it just build up in the restricted entity. It just made a ton of sense to us to be repurchasing that that back because we thought you know it's trading at attractive values and it was a good way to strengthen our balance sheet and create equity value for the shareholders and.
All I would say is going forward, we're just gonna be pragmatic about it.
As we go forward if we if that continues to be the highest value opportunity for that cash. Then then we would consider a more debt repurchases, depending on where the debt trading and the like if we had other attractive uses for that cash building.
A G O satellite or some other some other Houston and then we would consider that but I mean, so long answer, but suffice to say we feel good about the debt repurchases that we've done in the past and going forward will just be Oh, I'm, just kind of pragmatic about it Andrew Yeah, I know just to compare Mcdonough said, that's absolutely correct.
You know face value with pork that we purchased $456 million back as he mentioned and that gives the gains of $222 million, but we're very focused on the overall debt that's why it through in that.
Since <unk> come back to the end of 2020, we reduced overall debt by 24%. So in addition to all the activities of Lightspeed getting going in the future of the company. We're very very focused on responsible about the debt we have today.
Yeah.
Got it. Thank you and then the last question for me in terms of obviously you have a lot of work to do to finalize the agreements et cetera.
So two other topics one is the structure of the remaining.
900 million in financing do you do you anticipate that to be at the Lightspeed subsidiary and then secondly.
Do you are you know.
Beyond all of this what are the other I guess, it risks or dependencies remaining I'm getting all the agreements are sorted out what keeps you up at night at this point. Thanks.
So we expect that all of the government funding.
Funding will be yes over you know on the unrestricted side Leo that was always.
The plan and it continues to be the plan.
As far as what else keeps us up at night.
Look we've got to close the funding with our government partners I'm highly confident that we'll achieve that but it's got to get done and it's gotta get timely done and then we've got a ton of work to do we're going to be hiring a whole bunch of people and ramping up.
Our staff are really moving out with M. D. A in a big way, we're gonna be ramping up our sales and marketing team as we do more heavy engagement with the customers I mean, it's all of that and we've got you know our day to day business that we're running two and never take our eye off the ball on that.
So anyway I mean, we're just so excited to be finally, you know on our way and we can stop talking about you know when are we going to be fully funded when can we get going I mean, it's just so liberating after all this time they have the.
Funding lined up to have a great plan.
With M D E and the rest of our partners. So so from this point forward. It's it's just all about really focused execution.
Congrats on all the best Okay. Thank you.
The next question is from it.
Oh God.
Your line. Please go ahead.
Yeah. Thank you for taking the question can you talk about the life of these satellites given the slightly smaller does that impact you know.
I'll sort of duration all still constellation.
It's a good question no same same capability from a lifetime perspective.
Which is to say you know we've specced.
That the satellites.
Meet their performance.
Specifications for effectively 11 years.
Do we expect them to.
Maybe go longer yeah that that's been our experience in the past and I think the experience of others in the past, but but from a spec perspective, our contract with M. D. A.
It's it's.
Comparable to the prior plan that's 11 years.
Got it thank you.
Hello on you've given an.
Estimate given capex. So can you just talk about you know.
On my math, assuming some duration can you taught on EBITDAR number because it sort of given the inputs till I get to go to 3 billion is that unreasonable.
It's not unreasonable we've tried to provide some kind of high level, you know building blocks.
But where we're going to quickly move pass that so we mentioned that we will schedule an investor day before the end of the year, we definitely plan to be presenting at more conferences, where we can you know meet with investors.
One on one end and a share a whole lot more information about what the business case looks like.
Great. Thank you.
Thank you. The next question is from Mr. Eisenberg.
Please go ahead.
Hi, Thanks for taking my question and then Dan and congratulations on the announcement with M. D. A.
Yeah.
All my questions have already been asked here, but did have a couple more I was hoping to robin here on the math pardon me some of the information you gave it's definitely been very helpful.
One remaining question I have I'm, just trying to close the gap a little bit between I guess uses of proceeds and I mean, the MTA and out but it seems like the Canadian 2 billion $2 1 billion dollar contract and to kind of reconcile that with the numbers that you specified poorly via digital.
Satellite I mean things like that.
Pretty big Delta there, we probably open a bunch of what a contingency it would be I mean, so is there another significant vendor in the mixed or another kind of part of the.
Also I guess I'm trying to get a yeah, yeah, yeah, no I mean, all of it it's there aren't too many moving parts. Its the satellites. It's the launch vehicles, it's the global ground infrastructure at some upgrades that we need to make at our facilities here in order to operate you know this global constellation.
There's some I T systems that need to get put in place.
We've got some money for a further user terminal development that that's kind of bad.
And when you add it all up and and and you know.
We've been rigorous in terms of building up the business case, that's kind of where it comes into and then yes. As we mentioned we do have some non trivial contingency in the plan because that just seems to be the prudent thing to do we hope we don't spend it I mean, that'd be really nice, but we budge.
It for it.
And our our funding covers it.
We think we've been very prudent in that.
Build out in terms of contingencies and looking at all of the elements that I just outlined that without proper funding not just at the NDAA contract itself.
Got it and then as far as the I guess revised roster of terms with the government of Canada, and Quebec, and I understand there's probably some moving parts. There but are you able to clarify just I guess the status of that relationship to me I think previously you've had a term sheet and an MLA in place respectively with the two that had some contingencies related to the ECA financing so.
Guess, what the ECA financing Don I guess I'm, just wondering I mean will there be some forthcoming disclosures of those documents.
Documents are acute structures Oh, yeah, no absolutely I mean, all we will provide.
Lots of all of the material information relating to the structure of that funding what when it's available I mean, that's that's we've got you know.
Commitments from these government partners, who I Gotta say have always been strongly supportive.
Of Lightspeed.
But as we mentioned you know now.
They've got a finished their confirmatory due diligence because you know they they've already spent quite some time understanding the project that they've got to do some confirmatory diligence around the M D a path.
And then we've got to get definitive agreements in place and the like.
And so you know, we're all very focused to getting that done.
And in short order and I guess, the other thing I'd say is the government has and when I say the government or government partners federal and provincial have always been really supportive of our program.
And I got to think that certainly now that M. D. A which is also a Canadian company with a big footprint here in Canada now that M. D. A is taking on a much greater role in the project and you know, it's it's roughly two and a half times a bigger contract for M D a which.
<unk> built.
Building out more facilities.
At their facility in Quebec, hiring a whole lot more people a whole lot more IP development here in Canada.
Now like the anchor for M D as new digital satellite platform, which they hope to export around the world. So driving more exports just all of that I guess the point is if our government partners our Canadian government partners.
Liked them were strongly supportive of the old path, we got to think that with this new path.
There'll be even more supportive still and I do want to emphasize we didn't pick M. D. Eight because their Canadian we picked M. D. Because there are genuinely world class Prime for a high volume Leo satellite constellations why they won the Apple a contract.
Apple Globalstar contract, but it doesn't hurt either that their Canadian so anyway. So that that's how we think about it but we'll we'll provide lots of clarity on that government funding once once it's in place.
I appreciate that and the last final question I mean, one.
Probably anticipated.
With the timeline of the operational Leo project in 2027 relative to your debt maturities back 26, I'm curious if you've given any thought.
To potential structural changes that you might put in place prior to that I'm going to capitalize on our growing backlog on the LIFO side.
As far as we find out that I mean, I guess I'd say.
That's the schedule that we announced today, it's it's fully consistent with the schedule that we had under the prior plan. So there's nothing new about the timing of of you know our plans with M. D. A that that really alter any of that.
Where were you know fully cognizant of kind of you know the maturities its still some years out there obviously in terms of when these maturities are coming up and I think we've been making it easier still with all of these debt repurchases that that we've been doing so anyway I mean, our expectation is.
We've got some time, our lightspeed business certainly.
Is going to develop our G O business will continue to evolve as well the whole landscape is continuing to evolve so showing that event I mean, we'll we'll speak more about that going forward.
But there's certainly nothing that we announced today that alters in any way or thinking about it and certainly.
We already had a really strong business case with lightspeed.
The heated business case, that's so much more capital efficient, it's only got a strengthened.
The overall company and that that just I think puts us in a better place going forward.
Forward you know no matter how you what lines you are thinking about the business.
I appreciate that thanks again.
Hey, thanks.
The next question is from MS. Hello, Joe Nowicki Almay Reyes. Please go ahead.
Hey, guys congrats on the.
On a fully funded now how good question Dan.
Maybe just to parse some of the language you gave on debt buybacks from the prior caller you said that he continues to be the highest value opportunity for cash, but there may be other attractive uses of that cash that you would consider so what other.
Alternative uses of the cash what do you consider I D O business.
Well I mean, it's it's it's just to say that.
Look I mean, it's all about.
Strengthening the business like how how we always think about the use of cash it's all about strengthening the business creating value.
For shareholders are and and and providing great service to our customers and so we.
We're always looking for ways to grow our business in a way that is I hope smart and prudent it it turns out to be the case that we have and ordered a G. O satellite in quite some time I think we've always been very disciplined in terms of how do we.
Think about Capex and the use of cash and how we run our business with our high operating margins and whatnot, but.
But we don't foreclose the opportunity that in the future there could be a good opportunity to make some investments on the in the restricted group a that could be a new G. O shop late I don't know it could be something else that would strengthen the business and meet all of those objectives that I.
<unk> talked about to date.
Nothing has come across our plate.
Which is why we've used the cash to repurchase debt well, we just wanted to be clear that that's something we can do but we don't want to mislead folks that that's all we're going to do with the cash war, where we're gonna be open minded and opportunistic and that's all we were trying to say.
That makes sense.
And then with respect to the 42 satellites that are not part of the 156, you said that comes out of operating cash flow.
At what point will you have the operating cash to finance, though is that in five years. When you were fully run rated or or is it.
Andrew do you want to talk about the timing of our assumption. So yeah. Indeed, you you answered the question yourself actually that indeed, but when we're fully global coverage. We're actually lightspeed is off with customers, we will be generating cash flows and that's what our models show that being pretty conservative that we would be able to fund that from a cash coming on.
Feed itself, that's why we don't feel we need any any external financing whatsoever right now.
Understood and then the hungry option.
I guess, what is the timing around that.
And what would you look for before exercising that option.
Yeah, well there listen I mean, we've built in a lot of capabilities to scale up our network over time, if if if it'll be totally demand driven.
And so we you know we think it's a really smart thing to have the rights there in the MDA contract to order additional satellites. If if if we've got the business case to do it.
We don't have to we've also built you know into our regulatory rights the ability to scale up our constellation and so this.
This is all about future optionality to continue to grow the constellation, but that'll purely be a function of what the demand environment looks like at the time with 156 satellites and then 198 satellites, we have a massively capable net.
Work that can deliver multiple terabits of capacity to users. Our focus right. Now is you know getting not taken up and then them, we'll think about ordering incremental satellites and expanding.
And lastly, I know, you're you're still negotiating the I guess the financing with the government, but in terms of the split between I.
Debt and preferred is that is that still similar.
Do you think that there might be more warranty might taken and the rest of the business.
It's something that we really need to work through with our government partners Hum. We thank everyone. Here is you know around the table were raw.
Truck did we know each other well they've been strong supporters of the project.
I think we've tried to be good custodians of the capital that's entrusted with us. So so we've got to work through all those details with the government and then and then we'll share all that with with.
With the market.
Great. Thanks, so much for taking the questions. Thank you.
I think we've got time for maybe one more question.
Thank you. The next question is from Bill Wise and Pascal. Please go ahead.
Thanks, very much and congratulations on the announcement today.
Most of my questions have been answered, but is there any update on any more thoughts you have on the impact of the dish echostar merger on on tell us that's business and just renewals going forward.
I think it has no.
No impact on us.
The work that we do.
With dish and Echostar.
We've obviously followed that situation closely I think we have a really good relationship.
With dish with Echostar, but no we don't think that that combination changes in any way.
The.
The work that we do with them.
Yeah.
That's it thank you.
Okay, well, thank you and listen thank you all for your time today, we look forward to speaking with you again, when we issue our Q3 numbers and we really appreciate.
The ones time and all the good wishes. So thank you very much. Thank you very much.
Thank you.
Confluence has melinda.
Gonna kill lines of this time and we thank you for your participation.