Q1 2024 Telesat Corp Earnings Call
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This conference is being recorded.
She holds its always you see by your conference is now ready to begin.
Michael Bolitho: Stand by, your conference is now ready to begin. Good morning, ladies and gentlemen, and welcome to the conference call to report the first quarter 2024 financial results for Telesat. Our speakers today will be Dan Goldberg, President and Chief Executive Officer of Telesat, and Andrew Browne, Chief Financial Officer of Telesat. I would now like to turn the meeting over to Mr. Michael Bolitho, Director of Treasury and Risk Management. Please go ahead, Mr. Bolitho.
Speaker Change: Good morning, ladies and gentlemen, and welcome to the conference call to report the first quarter 'twenty 'twenty four financial result for telephones.
Our speakers today will be Dan Goldberg.
Daniel S. Goldberg: Chief Executive officer of Telesat.
Shirley Brown: I'm sure Brown, Chief financial Officer of Telesat.
Shirley Brown: I'd now like to turn the meeting over to Mr. Michael <unk> director of Treasury.
Michael: Risk management. Please go ahead Mr <unk>.
Michael Bolitho: Thank you and good morning. This morning we filed our quarterly report for the period ending March 31st, 2024 on Form 6K, with the SEC, and on CDAR 5. Our remarks today may contain forward-looking statements. There are risks that Telesat's actual results may differ materially from the results contemplated by the forward-looking statements as a result of known and unknown risks and uncertainties. For a discussion of known risks, please see Telesat's annual report and updates filed with the SEC. Telesat assumes no responsibility to update or revise these forwarding accounts. I will now turn the call over to Dan Goldberg, Telesat's President and Chief Executive Officer.
Michael: Thank you and good morning.
Michael: This morning, we filed our quarterly report for the period ending March 31, 2024 on form 6K, the SEC and on SEDAR.
Michael: Josh.
Speaker Change: Our remarks today may contain forward looking statements.
Speaker Change: Risks that tell us that it's at.
Speaker Change: Actual results may differ materially from the results contemplated by the forward looking statements as a result of known and unknown risks and uncertainties for a discussion of known please see <unk> annual report and update as filed with the SEC Telesat assumes no responsibility to update it.
Speaker Change: I will now turn the call over to Daniel.
Daniel: President and Chief Executive Officer, Gary Thanks, Michael My opening remarks are quite short. This morning, given we hosted an earnings call just six weeks ago. When we released our Q4 and full year numbers I really just wanted to note that we're tracking to the 'twenty 'twenty four guidance, we gave earlier and we're moving out as <unk>.
Daniel S. Goldberg: Okay, thanks, Michael. My opening remarks will be quite short this morning, given we hosted an earnings call just six weeks ago when we released our Q4 and full year numbers. I really just want to note that we're tracking to the 2024 guidance we gave earlier, and we're moving out as quickly as we can on Telesat Lightspeed now that we have agreements in place for all the financing we need for our first 156 satellites.
Daniel: As we can on Telesat light speed now that we have understandings in place for all of the financing we need for our first 156 satellites are.
Daniel S. Goldberg: Our CapEx guidance for this year is for between $1 billion and $1.4 billion Canadian dollars, or around $750 million to $1 billion U.S. dollars, which is pretty much entirely for lightspeed. And you'll see that unfold as we report our results throughout the year. So with that, I'll hand over to Andrew, and then I'll speak to the Q— we'll speak to the Q1 numbers in more detail, and then we'll open the call up to questions. Thank you, Dan, and good morning, everyone.
Daniel: Our capex guidance this year is for between.
Daniel: 1 billion and $1 4 billion Canadian dollars.
Daniel: We're around $750 million to 1 billion U S stores, which is pretty much entirely for lightspeed and you'll see that unfold as we report our results throughout the year, so with that I'll hand over to Andrew and then I'll speak to the queue.
Andrew: Speak to the Q1 numbers in more detail and then we'll open the call up to questions and thank you Dan and good morning, everyone. I would now like to focus on highlights from this morning's press release and filings.
Andrew Martin Browne: I would now like to focus on highlights from this morning's press release and filings. In the first quarter of 2024, Telesat reported consolidated revenues of $152 million, adjusted EBITDA of $111 million, and generated cash from operations of $76 million, and ended the quarter with $1.8 billion of cash. For the first quarter of 2024, compared to the same period in 2023, revenues decreased by $31 million to $152 million, operating expenses decreased by $6 million to $47 million, and adjusted EBITDA decreased by $28 million to $111 million.
Andrew Martin Browne: The adjusted EBITDA margin was 72.8% as compared to 75.7% in 2023. The revenue decrease for the quarter was primarily due to reductions in services and a lower rate on the renewal of a long-term agreement with a North American direct-to-home customer, as well as lower revenues from certain mobility and Latin American customers and lower equipment sales to Canadian government customers. Looking at OPEX, the decrease in OPEX is primarily due to lower non-cash share-based compensation and higher capitalized engineering expenses relative to the prior period.
Andrew: In the fourth quarter of 2020 for Telesat reported consolidated revenues of 152 million adjusted EBITDA of 111 million and generated cash from operations of 76 million at the end of the quarter was $1 8 billion of cash.
Andrew Martin Browne: Interest expense decreased by $4 million during the fourth quarter when compared to the same period in 2023. The decrease in interest expense was primarily due to the repurchase of notes and Term Loan B, although this was particularly offset by an increase in interest rates on the U.S. dollar Term Loan B facilities itself.
The fourth quarter of 2024 compared to the same periods in 2023 revenues decreased by 21 billion to $1 52 billion.
Andrew: Operating expenses decreased by 6 million to $47 million and adjusted EBITDA decreased by 28 million to $111 million. The adjusted EBITDA margin was 72, 8% as compared to 75, 7% in 2023.
Andrew: The revenue decrease for the quarter was primarily due to adoption and services at a lower rate on the renewal of a long term agreement with a north American direct to home customer as well as lower revenues from certain morbidity in Latin American customers and lower equipment sales to Canadian government customers.
Andrew: Looking at Opex. The decrease in Opex is primarily due to lower noncash share based compensation and higher capitalized engineering expenses.
Prior period interest expense decreased by $4 million during the fourth quarter compared to the same.
Andrew: In 2023, the decrease in interest expense was primarily due to the repurchase of notes and term loan B. This was particularly offset by an increase in interest rates in the U S. Dollar term loan B facility.
Andrew Martin Browne: In the fourth quarter, we recorded a loss in foreign exchange of $68 million as compared to a gain of $10 million in the fourth quarter of 2023. The loss for the three months ended March 31, 2024 was mainly the result of a stronger U.S. dollar than Canadian dollar spot rate at March 31, 2024, as compared to the spot rate as of December 31, 2023, and the resulting unfavorable impact on the translation of a U.S.-denominated debt. Our net loss for the fourth quarter was $52 million, compared to net income of $28 million for the same period in the prior year. The change was primarily due to a loss on foreign exchange.
Andrew: In the fourth quarter, we recorded a loss in foreign exchange of 68 million as compared to the kind of tend to hit in the fourth quarter 2000, Twenty's rate the loss of the trade months ended March 31st Twentyfold, whereas many of the result of the stronger U S dollar Canadian dollar spot rate.
Andrew: Turkey 124.
Andrew: So the spot rate as of December 31, 2023, and the resulting unfavorable impact on the translation of our U S dollar denominated.
Andrew: So nominated debt.
Andrew: Our net loss for the fourth quarter was 52 million as compared to net income of 48 million.
Andrew: For the same period in the prior year. The change was primarily due to the loss on foreign exchange.
Andrew Martin Browne: For the quarter ended March 31st, 2024, the cash inflows from operating activities were $76 million, and the cash flows used by investing activities were $20 million. In terms of capital expenditures incurred, they were primarily related to a lower-orbit constellation, Telesat Lights. Guidance.
Andrew: For the quarter ended March 31, 2020 for the cash inflows from operating activities were $76 million and the cash flows used by investing activities were 20 million in terms of capital expenditures incurred they were primarily related to a lower orbit constellation how your satellite speed guide.
Andrew Martin Browne: As you will also have noted in our earnings release this morning, we have reaffirmed our 2024 guidance. This guidance assumes a Canadian dollar to US dollar exchange rate of 1.35. For 2024, Telesat still expects its total full-year revenues to be between $545 million and $565 million. In terms of operating expenses, excluding share-based compensation, we are still looking to spend between $80 million and $90 million attributed to Telesat Lightspeed. In terms of total interests, Telesat expects to be between $340 million and $360 million. As highlighted on our last call, we will begin the process of showing Geo and Leo separately, and we have accordingly set this out in Note 4 of our financial statement.
Andrew: <unk> as you would also have noted in our earnings release. This morning, we reaffirmed our 2024 guidance. This guidance assumes a Canadian dollar to U S dollar exchange rate of 135.
Andrew: For 2020 for Telesat still expects the total full year revenues to be between $5 45 million and five.
Andrew: 565 billion in terms of operating expenses, excluding share based compensation, we are still looking to spend between HD video to 19 attributed to the tennis I'd like to see.
Andrew: In terms of total adjusted EBITDA case, that's what he expects to be between $3 40 of it in the 360 million as highlighted on our last call. We will begin the process of Xiaomi Geo and Leo separately, we have accordingly, we set out in our in all four of our financial statements.
Andrew Martin Browne: In respect of expected capital expenditures, as we disclosed last quarter, we continue to expect our 2024 cash flows used in investing activities to be in the range of $1 billion to $1.4 billion, as highlighted, which is nearly all related to expected Telesat Lightspeed capital expenditures. To meet our expected cash requirements for the next 12 months, including interest payments and capital expenditures, we have approximately $1.8 billion of cash in short-term investments at the end of March, as well as approximately $200 million of borrowings available under a revolving credit facility.
Andrew: With respect to expected capital expenditures as we disclosed last quarter. We continue to expect our 2020 for cash flows used in investing activities to be in the range of 1 billion to $1 4 billion stand as highlighted which is nearly all related to expect expect the telesat lightspeed capital expenditures to meet our expected cash requirements for the next 12 months.
Andrew: Including interest payments and capital expenditures, we have approximately $1 8 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 revolver.
Andrew: The credit facility.
Andrew Martin Browne: Approximately $1.25 billion of cash was held in our unrestricted subsidiaries. In addition, we continue to generate a significant amount of cash from our ongoing operating activities. At the end of the fourth quarter, the total leverage ratio calculated in terms of the amended senior secured credit facilities was 5.7 times the one. Telesat has complied with all the covenants in our credit agreement and indentures. In terms of our debt repurchases, we were active subsequent to quarter end and up to May 8th, 2024, where we purchased debt with a cumulative principal amount of U.S. dollars 219.5 million in exchange for an aggregate cost of 98.9 million.
Andrew: Approximately 1.25 billion of cash was held in the unrestricted subsidiary. In addition, we continue to generate a significant amount of cash from ongoing operating activities.
Andrew: Leverage at the end of the fourth quarter and total leverage ratio as calculated under the terms of the amended senior secured credit facilities was five seven times to 110.
Speaker Change: Hey, Seth has complied with all the covenants in our credit agreement and adventures.
Speaker Change: In terms of a debt repurchases, we were active subsequent to quarter end and look to maybe 824, where we purchase that would accumulative principle amount of U S. Dollar is $298 5 million.
Speaker Change: For an aggregate cost of $98 9 million combined with the debt repurchases completed in 'twenty. Two 'twenty three Kt sat has now repurchased accumulative principal amount U S. Dollar is $806 5 million at an aggregate cost of four Turkey, $8 3 million just about including the repayment in 2020 of approximately.
Andrew Martin Browne: Combined with the debt repurchases completed in 22 and 23, Telesat has now repurchased a cumulative principal amount of U.S. dollars 806.5 million at an aggregate cost of 438.3 million. Just about including the repayment in 2020 of approximately 341 million of the expanding term loan being combined with our repurchases, our overall debt has now been reduced by approximately 24% or 1.1 billion in U.S. dollars. In addition, this also results in interest savings of approximately $55 million annually.
Speaker Change: $341 million of Steve its founding term loan b combined with share repurchases. Our overall cash has now been reduced by approximately 24% or $1 1 billion in U S dollars.
Speaker Change: In addition to this also results in interest savings of approximately $55 million annually.
Andrew Martin Browne: 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 non-guarantor subsidiaries shown are essentially the unrestricted subsidiaries of minor differences.
Speaker Change: A reconciliation between our financial statements and financial Covenant calculations has provided US a report filed this morning. Our 6K provides the unaudited interim condensed consolidated financial information in the NDA. The non guarantor subsidiaries shows are essentially the unrestricted subsidiaries with minor differences.
Andrew Martin Browne: So with that, I think we have concluded our prepared remarks for the call. I'm very happy to answer any questions that you may have. We will now turn back to the office. Thank you.
Speaker Change: So with that I think we will conclude our prepared remarks for the call I'm very happy to answer any questions that you may have we will now turn back to the operator. Thank you.
Speaker Change: Thank you.
Operator: We will now take questions from the telephone lines. If you have a question, please press star 1 on your device's keypad. You may cancel your question at any time by pressing star 2. So, please press star one.
Speaker Change: We will now take questions from the telephone lines. If you have a question. Please press star one.
Speaker Change: The device is key time.
Speaker Change: Can they cancel your question at any time by pressing star two.
Speaker Change: So please press star one at this time, if you have a question it will be a brief pause while the participants register.
Operator: At this time, if you have a question, there will be a brief pause while the participants register. We thank you for your patience. The first question is from Edison Yu from Scotiabank. Please go ahead. Your line is open.
Speaker Change: Thank you for your patience.
Speaker Change: The first question is from Edison you from Scotiabank. Please go ahead. Your line is open.
Edison Yu: Hey, good morning. Thank you for taking our questions, mainly just some housekeeping ones on the cash flows being quite strong in the quarter despite the EBITDA declining. Were there any one-time benefits here? And how do you think this kind of trend for the rest of the year? And now, I think, Eric.
Edison: Hey, good morning, Thank you for taking our questions mainly just some.
Edison: Housekeeping one on the on the cash flow is quite strong in the quarter. Despite the EBITDA declining with any one time benefits here and how do you think this country.
Edison: Yeah.
Daniel S. Goldberg: No, I think our cash flows, I think, underscore the high margins we've got. If you look at our geo business, our margins are approximately 80%. And I think it's one of the great things about existing business, notwithstanding the fact that, indeed, you know, we've identified that we will see drops this year. But that's that's the underlying cash flow.
Edison: No I think our cash flows I think underscores the high margins people cost. If you look at our NGL business. Our margins are approximately 80% and I think that's one of the great things out of our existing business. Notwithstanding the fact that to date, we've identified that we can see drops this year, but that's that's the underlying cash flow.
Daniel S. Goldberg: I appreciate the breakdown of GEO and LEO, and you've got some consulting revenue on the LEO side. Is the 1Q a good run rate to take for the rest of the year, including the contribution from LEO consulting? I don't think so.
Edison: Understood.
Edison: And then I appreciate the obviously the breakdown of G O N.
Edison: And you've got some consulting revenue in the video side is the once you have a good run rate to take for the rest of the year contribution from from Rio consulting.
Daniel S. Goldberg: I don't think so. It's not a big part of our business. At this stage, obviously, not until Leo's sort of, you know, up and in service late 2027 are we going to see meaningful revenue. Up until then, there might be some more kind of incidental stuff. We're doing some work with the US government that's sort of lumpy in nature. And I think this came from a contract that we have with NASA that we've talked about before, where we're demonstrating some features of Leo's ability to communicate with other in-orbit spacecraft.
Edison: I don't think so it's not a big part of our business.
Edison: At this stage, obviously, it not until sort of up and in service late 2027 are we going to see meaningful revenue up until then there might be some more kind of incidental stuff, where we're doing some work with the U S government that sort of lumpy in nature and I think this came from a contract.
Edison: We have with NASA that we've talked about before where we're demonstrating some features on leo's ability to communicate with.
Daniel S. Goldberg: But it's kind of low to no margin stuff, too. It's a good thing for us to be doing, to be demonstrating capabilities and tightening the relationship with an important US government user. But yeah, it's not kind of going to be a big driver of our top-line results or certainly our adjusted EBITDA for the year. And that's it. Thank you.
Edison: Other.
Edison: In orbit space crafts.
Edison: So, but it's kind of a low to no margin stuff too. It's a good thing for us to be doing to be demonstrating capabilities and tightening the relationship with the important U S government user, but yeah, it's not going to be a big driver of our topline results.
Edison: Or certainly our adjusted EBITDA for the year.
Yeah.
Speaker Change: Understood. Thank you.
Arun A. Seshadri: Thank you. The next question is from Arun Seshadri from BNP Paribas. Please go ahead. Your line is open.
Speaker Change: Thank you.
Speaker Change: Our next question is from a road.
BNP Paribas: <unk> from BNP Paribas. Please go ahead your line is open.
BNP Paribas: Yes, Hi, just a couple from me first I just wanted to understand so the government of Canada.
BNP Paribas: Senior equity I guess above the above.
Arun A. Seshadri: Above lenders and shareholders, is that right? Like, so their equity in LEO is going to be structurally senior equity ahead of existing lenders and shareholders? Sure.
Bob: Bob lenders and shareholders.
BNP Paribas: Is that right like so severe equity.
Leo is going to be structurally senior equity ahead of you.
BNP Paribas: Exactly.
BNP Paribas: And shareholders.
Daniel S. Goldberg: So maybe a couple of things. I mean, what we announced six weeks ago is that the government of Canada and we reached terms with the government of Canada on a roughly $2.1 billion Canadian dollar loan, and we disclosed what the terms of that were. It's 15 years, it picks up during construction, and carries a rate of CORA plus 475 basis points. So it's fundamentally a loan, and the government of Canada will be the kind of, you know, alongside of the government of Quebec and the vendor financing that we're getting. It'll be the sort of senior secured lender in connection with the Lightspeed Constellation and in the unrestricted group where we're building Lightspeed. So that's kind of number one.
So maybe a couple of things I mean, there you know what.
BNP Paribas: Announced six weeks ago.
BNP Paribas: Is that the government of Canada, we reached terms with the government of Canada on a roughly $2 1 billion dollar Canadian dollar loan and we disclosed.
Daniel S. Goldberg: But yes, as part of the deal, there is kind of an equity feature. The government of Canada is getting 10 warrants covering 10% of the equity in the Lightspeed project, and those warrants are struck at an equity value of 3 billion US dollars for the Lightspeed project. So anyway, I'm just trying to be responsive to your question about senior equity. It is kind of a form of equity participation in the Lightspeed project itself, as opposed to, you know, the common shares of Telesat Corporation.
Daniel S. Goldberg: So, effectively, thank you for that, Dan. That was clear. So I think what you're saying is that it is effectively equity that's got the first preference on light speed, and then the residual equity.
Daniel S. Goldberg: Yeah, I wouldn't think about it as first; I wouldn't think about it as first preference. I think about it that right now, you know, Telesat owns 100% of Lightspeed, and in the future, if the government of Canada exercised these warrants, they would be an equity participant alongside of Telesat.
BNP Paribas: What's the terms of that are it's 15 years. It picks during construction that Scott it carries a rate of core plus 475 basis points.
Daniel S. Goldberg: Okay, so you're saying that it's not structurally senior equity, then, that it's actually, you know, alongside whatever equity there is. That's right.
BNP Paribas: So it is it's fundamentally alone and the government of Canada will be the kind of you know alongside.
BNP Paribas: All of the government of Quebec and are in the.
BNP Paribas: Vendor financing that we're getting it it'll be a senior secured lender in connection with.
BNP Paribas: Lightspeed constellation and then the unrestricted group, where we're building lightspeed. So that's kind of number one but yes. It was part of the deal are there is kind of an equity feature the government of Canada.
BNP Paribas: <unk> is getting a 10.
BNP Paribas: Warrants are covering 10% of the equity in the Lightspeed project and those warrants are struck at an equity value of $3 billion U S.
BNP Paribas: For the <unk> project so so.
BNP Paribas: I'm just trying to be responsive to your question about senior equity. It's it has kind of been a form of equity participation in the Lightspeed project itself as opposed to you know the the common shares of <unk> Corporation.
BNP Paribas: So effectively you're talking about that.
Speaker Change: That was clear so I think what you're saying is that it.
Speaker Change: Yes.
Speaker Change: Effective equity.
Speaker Change: First preference on Lightspeed, and then the residual error.
Speaker Change: Uh huh.
Speaker Change: Yes, I wouldn't think about it.
Speaker Change: First I wouldn't think about it is first preference I think about it but right now you know telesat owns 100% of Lightspeed.
Speaker Change: And in the future if the government of Canada exercise. These warrants they would be an equity participant alongside of telesat.
Speaker Change: Okay, So you're saying that it's not structurally senior equity then no alongside whenever equity there that's right yeah, that's exactly right.
Daniel S. Goldberg: And then is there any, I mean, I guess, like, is there anything specific in either direction? Is it, you know, as you finish off the financing, would you... From the government of Canada's perspective, would it make sense, you know, would it make sense for them to have the entire Telesat cash flow also be as credit support or debt financing, or, Or, I guess on the flip side, would they insist that Lightspeed be separated from Telesat in order to sort of finish off the financing? And I guess if that is the case, then how would you manage solvency requirements to make sure that that happens?
Speaker Change: And then is there any I mean, I I guess like is there anything specific.
Speaker Change: Either direction.
Speaker Change: Is it.
Speaker Change: Finishing off the financing.
Speaker Change: Would you.
Speaker Change: I'm from the government of Canada perspective.
Speaker Change: It makes sense for them to have.
Speaker Change: Tire.
Speaker Change: Cash flow also beat.
As credit support.
Speaker Change: That financing or.
Speaker Change: Or is it you know I guess.
Speaker Change: Flip side would be.
Speaker Change: <unk> insists that lightspeed be separated.
Speaker Change: You know from tell us that in.
Speaker Change: In order to sort of.
Speaker Change: The financing I guess.
Speaker Change: Okay.
Speaker Change: How would you manage solvency requirements to make sure that happens.
Speaker Change: So maybe I'll start answering this and.
Daniel S. Goldberg: So maybe I'll start answering this and, um, so. First off... Just so everyone understands how this works, the government of Canada is lending us money. It's going to be in the unrestricted group, and the cash that Telesat Lightspeed generates is going to be used to support the borrowings in that unrestricted group. And so again, we've mentioned that our funding sources beyond our own $1.6 billion equity contribution are going to be borrowings from the government of Canada, the government of Quebec, and some vendor financing.
Speaker Change: So so first off.
Speaker Change: And just so everyone understands how this works the government of Canada's lending us money, it's going to be in the unrestricted group.
Speaker Change: And the cash that telesat lightspeed generates is gonna be used to support the borrowings.
Speaker Change: In that.
Speaker Change: Restricted group and so again, we've mentioned that.
Speaker Change: Our funding sources beyond our own $1 6 billion.
Speaker Change: Equity contribution is going to be borrowings from the government of Canada, the government of Quebec, and some vendor financing and so.
Daniel S. Goldberg: And so those borrowings are going to be supported and secured by or secured by our Lightspeed. Yeah, so, you know, um... Could we in the future, um, you know, uh, could, in the future, others potentially be behind the government of Canada in terms of being supported by Lightspeed cash flows? Or could, with the government's consent, something different be done? Yeah.
Speaker Change: Those borrowings are going to be supported and secured in or secured by our lightspeed activities.
Speaker Change: And so yes, so you know.
Speaker Change: Could we in the future you know.
Speaker Change: So you could in the future others potentially be.
Speaker Change: Behind the government of Canada in terms of being supported by Lightspeed cash flows or or could with the government's concern something different be done yeah.
Daniel S. Goldberg: But right now, that's kind of how it's set up. I think we've always been pretty clear about how Lightspeed's getting financed and the fact that we've got a restricted group and an unrestricted group. And I mean, fundamentally, it's being project financed, and our financing sources are the government of Canada, the government of Quebec, some vendor financing, and then again, our own meaningful equity contribution. So I hope that's helpful. And then we should probably move on.
But right now that's that's kind of how it's.
Arun A. Seshadri: Yes, you know, I think that's, that's very helpful. And then, like, can I ask one last thing, and that is, all of the financing requirements.
Speaker Change: Set up I think we've always been pretty clear about how lightspeed is getting financed in the fact that we've got a restricted group in an unrestricted group then I mean, it's fundamentally it's it's been project financed and our financing sources, our government of Canada government in Quebec.
Speaker Change: Some vendor financing and then again our own meaningful equity contribution so I hope that's helpful.
Speaker Change: And then we should probably move on.
Speaker Change: Yes.
Speaker Change: That's very helpful.
Speaker Change: I'd like to ask one last thing.
Speaker Change:
Speaker Change: Notice that the restricted payment hasn't hasn't fully been made yet just would you.
I guess the expectation is that Richard will be made and then once that's done are there any other things that need to be done to put a bow on I guess what else needs to be done from a timing standpoint.
Speaker Change: All of the financing requirements.
Arun A. Seshadri: So, the restricted payment, I think it's $125 million. $120.
Speaker Change: So the restricted payment I think it's 125 million 120.
Daniel S. Goldberg: There is a remaining restricted payment. [inaudible]
Speaker Change: Yes.
Speaker Change: There is a mammalian restricted payment of 150 120.
He may under the 150 million dollar general basket, Yeah, and we expect that will get done in the coming days, yes correct.
Daniel S. Goldberg: Yeah, and we expect that will get done in the coming days.
Daniel S. Goldberg: And then beyond that, again, we'll, you know, at this point in time, we've got all the financing lined up for the 156 satellites. We do need to conclude definitive funding agreements with those sources that I've described, the Government of Canada, Quebec, and the vendor financing. But we've already kind of started down that road and are highly confident that we're going to get there. So that's, I'd say, the final bow that needs to be tied.
Speaker Change: And then beyond that.
Speaker Change: Again.
Speaker Change: At this point in time, we've got all of the financing lined up for the 156 satellites.
Speaker Change: We do need to conclude definitive funding agreements with.
Speaker Change: Those sources that I've described government of Canada, Quebec.
Speaker Change: And the vendor.
Speaker Change: Financing.
Speaker Change: But we've already kind of started down that road and are highly confident that we're going to get there. So so that's what I'd say the final you know.
So that needs to be tied.
Daniel S. Goldberg: But we're moving forward, as we said in our remarks. I mean, we've got meaningful cash on our balance sheet at this point in time. And we're going to start spending that money so that we can move this program forward as quickly as we can because we are hugely bullish on the opportunities that are out there in the market. And we want to come to market and get in service as quickly as we can.
Speaker Change: But we're moving forward as we said in our remarks I mean.
Speaker Change: We've got meaningful cash on our balance sheet.
Speaker Change: At this point in time.
Speaker Change: And we're gonna start spending that money. So that we can move this program forward as quickly as we can because we are hugely bullish on the opportunities that are out there in the market.
Speaker Change: And we want to come to.
Speaker Change: To market and getting service as quickly as we can.
Speaker Change: Okay.
Speaker Change: Thanks very much.
Speaker Change: Thank you.
Christopher David Quilty: Thank you. The next question is from Chris Quilty from Quilty Space. Please go ahead. Your line is open.
Speaker Change: Thank you.
Speaker Change: The next question is from Chris Quilty from Quilty space. Please go ahead. Your line is open.
Christopher David Quilty: Thank you.
Christopher David Quilty: Thank you. So, Dan, just to follow up and, you know, I'm not going to... But on the government of Canada, Quebec. Is that something that, you know, in the next... Yeah, yeah, yeah. Yes, Chris. Yeah, no, you know, we believe that should get done before the end of the summer. And hopefully, you know, yeah, we're we're, we've got a lot of momentum with the Government of Canada, as you can imagine, and the Government of Quebec, which are the big contributors here. So yeah, we're talking about, you know, in the coming months. I was going to say the summary.
Christopher David Quilty: So Dan just to follow up and you know I'm not going to hold you to it but on the government of Canada, Quebec and the vendor is that something that you know in the next three to six months sort of yeah, Yeah, Yeah, Yeah, Yeah, Yes, Chris Yes no.
Christopher David Quilty: We believe that should get done before the end of the summer.
Christopher David Quilty: And hopefully you know yeah, where we're we've got a lot of momentum with the government of Canada as you can imagine and the government of Quebec, which are the big contributors here. So yeah. We're talking about you know in the coming months.
Speaker Change: Gotcha, So I was going to say the summer ends in October in Florida.
Speaker Change: [laughter] well.
Daniel S. Goldberg: Well, I'm working on an Ottawa summer, which ends a little bit earlier. It hasn't, yeah, anyway, spring hasn't really even shown up yet, so. Anyway, yeah.
Speaker Change: I'm working on.
Speaker Change: I'm working on in Ottawa summer, which and so a little bit earlier.
Speaker Change: Anyway spring hasn't really even shown up yet.
Speaker Change: Anyway, Yeah yeah.
Christopher David Quilty: And also the CapEx and Q1, I mean obviously you just closed the financing deal, but CapEx and Q1 were a little bit lower than I was expecting. Is it fair to assume you're probably more towards the 1 and the 1.4 billion? And Andrew, typically, in these large-scale long-term programs, is it fair to assume year one 30%, year two 40%, year three 30% type of how it falls out in timing? Or should we look at this as sort of a longer, slower climb? Just a general framework of how you expect it to pan out.
Speaker Change: So and also the Capex in Q1, I mean, obviously you just closed the financing deal, but capex in Q1.
Speaker Change: A little bit lower than I was expecting.
Speaker Change: Fair to assume you'll probably more towards the one and the $1 4 billion and you know.
Andrew.
Speaker Change: And these large scale long term programs is it fair to assume.
Speaker Change: Year, 130% year, 240%.
Speaker Change: 330% type of you know.
Speaker Change: Of how it falls out in timing or should we look at this as sort of a longer slower climb.
Speaker Change: General framework about how you expect that okay.
Andrew Martin Browne: Yeah, I think, Chris, that, you know, given the nature of the program, you know, on supply chains and getting everything sort of moving forward, so I think in this year that we, you know, our guidance 1 to 1.4, we think that's a solid number, and so by implication it means we'll see kind of more payments up front as we get all of the suppliers in place, so that's probably the best way I would characterize it, and then thereafter as we go through the different milestones over the next two to three years, it'll be more of a kind of a slow type of a contract and, you know, the operational milestones.
Speaker Change: Yes.
Speaker Change: Yes, I'd say Chris.
Speaker Change: Given the nature of the program.
Speaker Change: Supply chain and getting everything sort of moving forward. So I think in this year.
Speaker Change: Our guidance multiple times four we think that's it.
Speaker Change: Solid numbers.
Speaker Change: And so if I use occasions means we'll see kind of more payment upfront as we get all of the suppliers in place. So that's probably the best way I would characterize it.
Speaker Change: And thereafter as we go through the different milestones over the next two to three years it will be more of a kind of a flow tied to their contract.
Speaker Change: The operational milestones Christian.
Christopher David Quilty: Great. I have one other question for you, Andrew.
Speaker Change: Great.
Christian: One other question for you Andrew the.
Andrew Martin Browne: You had given the expected OPEX for the Lightspeed program. I'm assuming that is OPEX that's running through the P&L and strips out whatever is getting capitalized. Can you give a sense of what is getting capitalized in, you know, as part of the program? And is that, you know, again, as the construction goes on and more gets capitalized, do we see that Telesat off X staying flat because everything gets rolled into capitalization? Or do you expect it to grow? I mean, it's going to grow in the coming years, but yeah. So, in terms of
Christian: You had given the expected opex for the Lightspeed program.
Speaker Change: Assuming that is the opex, that's running through the P&L and strips out whatever is getting capitalized and can.
Speaker Change: Can you yeah.
Speaker Change: What is getting capitalized in <unk>.
Speaker Change: Part of the program.
Speaker Change: You know again.
Speaker Change: As the construction goes in mortgage capitalize do we see that tell us that opex staying flat because everything gets rolled into the capitalization or do you expect it to grow.
Speaker Change: I mean, it's going to grow in the out years.
Speaker Change: Yeah.
Andrew Martin Browne: So in terms of the sources and uses, we tried to make it a little bit clearer in terms of the capex spend, the third-party capex spend, so with vendors. So labor is in the operational uses, whether it's capitalized or not, just so you can see the outflow of funds and what the purpose of the outflow of funds is. So in that regard, you know, the capitalized costs are there. In terms of the overall level of effort, you know, the amount of capitalized staff, we build up, we ramp up our staffing infrastructure quite rapidly, and therefore you get to sort of a constant state relatively quickly in the program in terms of staffing.
Speaker Change: So in terms of the sources and uses we tried to make it a little bit clearer in terms of the Capex spend is third party capex spend so with vendors. So so labor is in the operational uses whether it's capitalized or not just study you can see the outflow of funds and what the purpose of the <unk>.
Speaker Change: Outside of the funds is so and so in that regard.
Speaker Change: The capitalized cost of that.
In terms of the overall level of effort the amounts of capitalized stuff, we buildup, we ramp up our staff infrastructure quite rapidly and therefore, you get sort of a constant state relatively quick into the program in terms of the level.
I understand.
Christopher David Quilty: Another question, I mean, you've predicted the data side of some of those contracts rolling off. Have you programmed in being able to resell some of that? What sort of luck have you seen on the data side? Yeah, oh, for sure, we assume that there's some capacity that has come back into the inventory that will resell, and I suspect we've already resold some of it, and the guidance that we gave for this year will have kind of captured our assumptions, at least, about all of that.
Speaker Change: Another question that I mean, you you predicted the data side of the business being down about $75 million and some of those contracts rolled off.
Have you programmed in being able to resell some of that capacity and what sort of like have you seen on the data side.
Speaker Change: Okay.
Speaker Change: Yes for sure we assume that there is some.
Speaker Change: Capacity that.
Has come back into inventory that will resell and I suspect we've already resold some of it.
Speaker Change: And the guidance that we gave for this year will have kind of captured our assumptions at least about about all of that was there another part to your question Chris.
Christopher David Quilty: Was there another part to your question, Chris? No, that was it. It was that simple. But I will ask you a difficult question. The Elephant in the Room question, Intelsat SES, and you'll probably have Lightspeed on a little bit before the regulators get done with that, but what are your general thoughts on that transaction?
Christopher David Quilty: That was it was that okay, yes.
Speaker Change: But I will ask you a difficult question, which is the elephant in the room question Intelsat S. Yes, you'll probably have a lightspeed on all that before the regulators get done with that but what are your general thoughts on that transaction and how it impacts you.
Daniel S. Goldberg: Yeah, well, first off, I mean, we all know that those were conversations that were taking place between SES and Intelsat some time ago, and they both confirmed that there had been discussions, and then they both, you know, they each announced that those discussions had come to an end, but yeah, I was never, I'd say, persuaded that, you know, that was the end of it. So it wasn't a big surprise to us, I'd say, that they made the announcement that they did recently.
Speaker Change: Yeah, well first off I mean, we all know that those were conversations that have been taking place between Ses and Intelsat, some time ago and they they both confirm that.
Speaker Change: There had been discussions and then they both you know they each announced that those discussions had come to and then but.
Speaker Change: Yes.
Speaker Change: I was never a cheap persuaded that that you know that that was the end of it so it wasn't.
A big surprise to us I would say that.
Speaker Change: That they made the announcement that they did recently and and I think it's that announcement I think fits within kind of the same framework that.
Daniel S. Goldberg: And I think that announcement fits within Kind of the same framework that we've been talking about for a little while, which is to say the industry is changing quickly. There are these new entrants in Starlink and, in the future, Kuiper that are impacting the industry. And we all believe that industry consolidation, you know, would be a response to that. And we've seen some already with Viasat and Inmarsat and Eutelsat and OneWeb.
Speaker Change: We've been talking about for a little while which is to say the industry is changing quickly.
Speaker Change: There there are these new entrants and starwood.
Speaker Change: Starlink and in the future paper that are.
Speaker Change: In the industry and we all believe that industry consolidation.
Speaker Change: B, a response to that and we've seen some already with Viasat and Inmarsat and Utah sat in one web and now this big transaction as companies kind of organize themselves to.
Daniel S. Goldberg: And now this big transaction as companies kind of organize themselves to remain competitive in this changing landscape. For us, I don't think it's going to have any real impact in terms of how we compete in the market, or what the prospects of Lightspeed and the like are. We've been competing against each of them, you know, for decades now, and they're each already each, you know, meaningfully larger than Telesat. Coming together, obviously, they'll be larger still, but I don't think there's anything that should be.
Speaker Change: Remain competitive in this changing landscape.
Speaker Change: For us I don't think.
Speaker Change: It's going to have.
Speaker Change: Any real impact in terms of how we compete in the market, but the prospects of lightspeed.
Speaker Change: And well like our we've been competing against each of them are you know for <unk>.
Speaker Change: Okay now.
Speaker Change: And they each you know they're already each meaningfully larger than telesat coming together, obviously there'll be larger still but I don't think there's anything that should be.
Daniel S. Goldberg: You know, two dramatically different in the combined competitive profile versus us competing against each of them individually. So yeah, you know. All to say, we weren't surprised. It fits with our expectation that consolidation would happen in the industry. It's probably not the last deal. Certainly, there will be fewer players as more consolidation takes place, but I suspect that, you know, there could be more consolidation still in the future.
Speaker Change: You know two dramatically different in the combined competitive profile versus us competing against each of them individually.
Speaker Change: Italy, so yeah.
Speaker Change:
Speaker Change: All of US say, we weren't surprised.
Speaker Change: It fits with our expectation that.
Speaker Change: Consolidation would happen in the industry, it's probably not the last deal certainly there'll be you know there are fewer players is more consolidation takes place, but I suspect that you know there could be more consolidation is still in the future. So anyway. That's how we think about it then and again I mean, we're.
Daniel S. Goldberg: So anyway, that's how we think about it. And again, I mean, we're, actions speak louder than words. You know, our vision is that, and I don't think it's even a vision anymore, I think we're all watching it in real time. There is a transition that's taking place in the industry right now, particularly as, you know, we think of as, you know, enterprise users, which is to say non-video. It's in the process of transitioning off of GEO and down to LEO, and for good reason, something that, you know, we saw coming, something that, you know, we think that we're well organized for with our friends at Lightspeed.
Speaker Change: You know actions speak louder than words, you know our vision.
Speaker Change: Vision is that and I don't think it's even a vision anymore I think we're all watching it real time there is a.
Speaker Change: The transition that's taking place in the industry right now as particularly you know we think of as you know enterprise users, which is to say non video.
It's in the process of transitioning off of G O and down the Leo and for good reason are something that you know we saw coming something that.
Speaker Change: We think that that were well organized for with our fence for lightspeed. So anyway, that's where our focus is right now.
Daniel S. Goldberg: So, anyway, that's where our focus is right now, just making sure that we execute well on Lightspeed and bring to the market what we're convinced our addressable market is focused on, so our enterprise customers, government customers, and the aero and maritime customers are wanting, you know, affordable, high throughput, low latency, distributed, resilient, kind of seamlessly connected connectivity, and we'll be able to deliver that.
Speaker Change: Just making sure that we execute well on lightspeed and bring to the market what we're convinced.
Speaker Change: Our addressable.
Speaker Change: The addressable market is focused on so our enterprise customers government customers and the Aero and maritime customers there.
One thing you know.
Speaker Change: Affordable high throughput low latency distributed resilient tend to seamlessly connected.
Connectivity, and we'll be able to deliver that in lightspeed.
Speaker Change: Great I appreciate it and I hope our spring comes in for Ya. Thanks, Chris.
Christopher David Quilty: Thank you, Chris.
Speaker Change: Yes.
Speaker Change: Yeah.
Speaker Change: Thank you.
Marcello Chermisqui: The next question is from Marcello Chermisqui from IRIS Management. Please go ahead. Your line is open.
Speaker Change: Next question is from Marcello Shcherbitsky from Iris management. Please go ahead. Your line is open.
Marcello Chermisqui: Hey guys, thanks for taking the question. You said earlier in response to a question that you will be making a Canadian $120 million restricted payment in the coming days. Given that you already have such a significant amount of cash at the LEO entity and are waiting to spend the money until once you finalize terms later this summer, what is the rush to make the cash transfer system?
Marcello Chermisqui: Hey, guys. Thanks for taking the question.
Marcello Chermisqui: You said earlier in response to a question that you'll be making a Canadian $120 million restricted payments in the coming days given that you already have such a significant amount of cash at the legal entity and are waiting to spend the money until once you finalize terms later this summer what is the rush to to make the cash transfer so soon.
Daniel S. Goldberg: So hey, Marcello, thanks for the question. First off, I think the arm I'm looking at is Earth...
Speaker Change: So hey, Marcelo Thanks for the question first off I think the I'm looking at our first of its 150.
Daniel S. Goldberg: It's 120 U.S. Yeah. So the payment is 120 U.S. And then, as far as urgency is concerned, look, we're moving forward with Lightspeed in advance. And by moving forward with Lightspeed, I mean we are going to be spending meaningful amounts of money this year. You've heard the CapEx guidance that we've given. In advance of completing these definitive agreements, we have a sufficiently high level of confidence on the one hand that we'll conclude those definitive agreements.
Speaker Change: Yes, yes, it shows the payment as 120 U S.
Speaker Change: And then as far as <unk>.
Marcelo: Urgent see look where we're moving forward with lightspeed in advance and by moving forward with Lightspeed I mean, we are going to be spending meaningful amounts of money. This year, you've heard the capex guidance that we've given.
Marcelo: In advance of completing these definitive agreements we have a sufficiently high level of confidence on the one hand that will conclude those definitive agreements and on the other hand.
Daniel S. Goldberg: And on the other hand, there is kind of a strategic urgency to get going with the Lightspeed program. So we're moving out. And when we talk about the CapEx spending that we've guided to this year, that like we're opening the spigots now and MDA is going to be and our other vendors, you know, contracting with the supply chain, ordering parts, hiring people, we're moving out here. So that's the plan. That's what we'll be doing.
Marcelo: Kind of a strategic urgency to get going with the lightspeed programs. So we're moving out.
Marcelo: When we talk about.
Marcelo: The capex.
Marcelo: Spending that we've guided to this year that like we're opening the spigots now and M. D. A is going to be and in our other vendors.
Marcelo: You know our contracting with the supply chain ordering parts hiring people, where we're moving out here. So that's that's that's.
Marcelo: That's the plan, that's what we'll be doing.
Speaker Change: That makes sense then.
Daniel S. Goldberg: And in terms of discussions regarding an extension on your revolving line of credit, I know it's due later this year. I know today you're in compliance with the revolver covenant, but if I roll forward your leverage ratio to your end based on the guidance, and I understand you're not tested today since there's no revolver usage, but I think the company may not be in compliance by your end. Like, do you think that could impact, like, a revolver? Okay, yeah, Marcello, it's certainly something that we look at, that we review.
Speaker Change: In terms of discussions regarding.
Speaker Change: The extension on your revolving line of credit and I know, it's due later this year.
Today, you are in compliance with the revolver Covenant fight roll forward your leverage ratio at year end based on the guidance and I understand the guidance and I understand youre not tested today since there is no revolver usage.
Speaker Change: I think the company may not be in compliance by year end like do you think that could impact that.
Speaker Change: Like a revolver or do you think.
Speaker Change: Find without having a revolver or how you're thinking about discussions.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: It's certainly something that we look at that we review.
Daniel S. Goldberg: You know, we have a business that generates our geobusinesses, which I talked about earlier a few minutes ago, is still generating cash. And you know, in terms of a revolver, in 17 years, I believe we have drawn a revolver once.
Speaker Change: You know, we have a business that generates our geo businesses.
Speaker Change: That's about it really a few minutes ago is still generating cash.
Speaker Change: And as you know in terms of a revolver.
Speaker Change: 17 years I believe we have drawn our revolver at lunch.
Speaker Change: Yeah.
Marcello Chermisqui: Yeah, totally makes sense. And just one last question on utilization that has declined so much sequentially. I know there's an interplay between utilization and then just like what your pricing per transponder is. Can you talk about just like, when you think about utilization, like, are you targeting a certain utilization? Or how do you think about where utilization is versus where you want to be? Yeah, no, I'll take it. Yeah, we do.
Yeah totally makes sense.
Speaker Change: One last question on utilization that have declined so much sequentially I know, there's an interplay between utilization and then just like what your pricing per transponder rates can you talk about just like when you think about utilization like are you targeting a certain utilization.
Speaker Change: How do you think about where utilization is working versus where you want to be.
Daniel S. Goldberg: Yeah, no, I'll take it. Yeah, we target 110% utilization, to be honest with you. I mean, that's where we'd like to be. Probably everyone does.
Speaker Change: Yeah, No I'll take it.
Speaker Change: Yeah, we talked about 110% utilization can be honest with you I mean, that's that's where we'd like to be.
Speaker Change: Probably everyone does.
Speaker Change: Barely anyone really gets fair I still think even with the decline in utilization that we've had we still probably have one of the highest utilization.
Daniel S. Goldberg: But barely anyone really gets there. I still think, even with the decline in utilization that we've had, we still probably have one of the highest asset utilization numbers in the sector right now. We concluded this quarter at 77%, but it is down meaningfully from where we ended Q4, which was up at around 85%. And what's driving that, the biggest culprit has been the business we've lost in the maritime space. We talked about that on our last call that there were some renewals that we did not secure, particularly in the maritime space, that have moved mostly, as far as we can tell, over to Starlink. And I'm not going to give you an opinion right now on what we think utilization will be in the future, but we're focused on remarketing that capacity.
Speaker Change: Numbers are in the sector right now at <unk>.
Speaker Change: We concluded this quarter at 77%, but it is down meaningfully from where we ended.
Speaker Change: Q4, which was up at around 85% and it's and what's driven that.
Speaker Change: The biggest culprit has been the business we've lost in the maritime space fundamentally we talked about that on our last call that you know there was some renewals that we did not secure particularly in the maritime space that is that a move mostly.
Speaker Change: As far as we can tell over the starlink.
Speaker Change: And so so we're.
Speaker Change: I'm not going to guide right now and you know what we think utilization will be in the future, but but we're focused on remarketing.
Speaker Change: Remarketing that capacity from a pricing perspective.
Daniel S. Goldberg: From a pricing perspective, there's been downward rate pressure in the industry for years now, and the kind of the slope of that decline has varied throughout those years. So we were seeing significant downward pricing pressure. I'm looking at one of my colleagues, probably five or six years ago; it moderated. There's still downward price pressure, but the extent of it has moderated. And again, I'm speaking as if we're living in a homogenous world. It really varies by region, though.
Theres been downward rate pressure in the industry for you know well.
Years, now and and the.
Speaker Change: The kind of the slope of that decline.
Speaker Change: As Barry throughout those years, so we were.
Speaker Change: <unk> seen significant downward pricing pressure and I'm looking at one of my colleagues, probably five or six years ago. It moderated there's still downward price pressure, but the extent of it had moderated and again I'm speaking as if you know we're living in.
Speaker Change: Modulus World It really varies by region and we have noted before that probably where we were seeing the steepest declines were in Africa and in Latin America, but again things starting to moderate a little bit right now I'd say.
Daniel S. Goldberg: And we had noted before that probably where we were seeing the steepest declines were in Africa and Latin America. But again, things started to moderate a little bit. Right now, I'd say the slope of the downward pressure is probably picking up a little bit again, but not dramatically. So anyway, so, but look, I mean, the laws of supply and demand are alive and well in our industry, just like in others. And so, Yeah, but that's what has accounted for the declining utilization. It's mostly been in the maritime space. There is some downward pricing pressure, but not what I would describe as sort of extreme at this point.
Matthew I. Lapides: Thank you. The next question is from Matt Lapides from AB Partners. Please go ahead. Your line is open.
Speaker Change: Is that the slope of the downward pressures, probably picking up a little bit again.
Speaker Change: But not dramatically so.
Speaker Change: So anyway, so but look I mean, the laws of supply and demand are alive and well in our industry like like in others and so.
Speaker Change: So yeah, but that that's what it has accounted for the decline in utilization, it's mostly been in the maritime space. There is some downward pricing pressure.
But I'm not what I would describe as sort of extreme at this at this point.
Speaker Change: Great. Thanks, so much.
Speaker Change: Okay. Thank you.
Speaker Change: Yeah.
Thank you. The next question is from Matt <unk> from <unk> Partners. Please go ahead. Your line is open.
Matthew I. Lapides: Hey guys, thanks for all the color here. Wanted to follow up on the maritime comments. Can you talk about what type of maritime customers you've been using? Are they cruise lines? Are they large global shipping companies? Are they both?
Hey, guys. Thanks for.
Matt: All the color here wanted to follow up on the Maritime comments can you talk about.
Matt: What type of maritime customers.
Matt: Cruise lines or the large global shipping companies.
Daniel S. Goldberg: Are they personal, you know, the yacht segment? Take any color you can provide on the type of maritime customers we're seeing the most. Yeah, the biggest has been in the cruise space, and in particular, probably for us in the Caribbean. We just had a meaningful amount of capacity there, so I'd say that accounts for the lion's share of the losses. Crews in the Caribbean. And then there's probably on the margins some erosion, maybe maritime transport and stuff like that, but the driver's been crewed.
Matt: <unk>.
Matt: Personal.
Matt: Segment.
Matt: Any color you can provide on the typhoon.
Matt: Customer facing the most are the most defection nicely.
Matt: Yeah Yeah.
Matt: Yes, the biggest has been in.
Matt: In the crude space.
Matt: And in particular, probably for us in the Caribbean, We decided.
Matt: Meaningful amount of capacity there so so I'd say that.
Matt: Accounts for the lion share of the losses.
Matt: Cruise and Caribbean.
Matt: And then there is.
Matt: Probably on the margin there's been some erosion.
Matt: I don't know, maybe maritime transport and stuff like that but but the drivers been crews.
Matt: Yeah.
Matt: Okay.
Matt: Okay.
Daniel S. Goldberg: [inaudible] Can you talk about how much of that business is gone now? If you look back a few years ago, how much of it is now gone? I mean, is there more of it to come? Yeah, we've been, you know, staring at that. I'll ask my colleague, Sean.
Matt: Can you talk about how much of that business.
Matt: If you look back two years ago.
Matt: How much of that is now gone I mean is it more of it because that's really what I'm trying to get at.
Daniel S. Goldberg: Yeah, we've been, you know, staring at that. I'll ask my colleague.
Matt: Yeah, we've been staring at that.
Speaker Change: I'll ask my colleague.
John Flaherty: John, we've shorted a lot of the hit. John, do you want to offer any thoughts around that? Yeah, if you go back three years, that's probably not the right time to go back because in the past two years, we've had some pretty significant increases in Maritime, but from the past two years to this year, we're expecting roughly half the revenue. [inaudible] And then just one follow-up to the earlier question.
Speaker Change: John.
John: We've absorbed a lot of.
They hit John do you want to offer any thoughts around that yes. If you go back three years, that's probably not the right time to go back to because in the past two years, we had some pretty significant increases.
John: Maritime, but but but from the past two years two to this year, we're expecting roughly half the rescue.
John: Revenue declined by roughly half from where we were from where we were over the past couple of years.
Matthew I. Lapides: And then just one follow-up to the earlier question about the government of Canada's equity position in LEO. I just want to make sure I understand the flow of funds. If, you know, five, six years from now, light speeds up, if everything you hoped it would be in terms of generating lots of cash, and in the LEO subsidiary business, if there's excess cash flow after servicing the debt, there's a dollar of excess cash flow, where does that first dollar go?
Speaker Change: That's helpful.
Speaker Change: And then just one follow up to the earlier question about <unk>.
Speaker Change: Okay.
Speaker Change: Equity position.
Speaker Change: Yes, I just wanted to make sure I understand.
Five six years from now might speed up.
With everything we hoped it would be.
Speaker Change: In terms of generating lots of cash.
Speaker Change: In EMEA.
Speaker Change: Subsidiary.
Matthew I. Lapides: Does it go to the equity holders, does it go to the equity holders of the We Are Subsidiary, or is it shared ratably amongst all of them? up to the ultimate holding company such that all stakeholders would get their pro rata share of that dollar. There's nothing in the contemplated definitive documents that we're talking about that would radically share that between the equity holders of Telesat Corporation and Telesat Leo. Thank you for clarifying. Thank you for listening.
Speaker Change: If there is excess cash flow after servicing the debt.
As the dollar has excess cash flow.
Where is that.
Speaker Change: First dollar.
Speaker Change: Does it go to.
Speaker Change: Equity holder.
Speaker Change: And we'll go to the equity holders of the year.
Speaker Change: Or is it share data.
Speaker Change: Amongst.
Speaker Change: Epic epic Ultimate holding company such that all stakeholders within their program.
Speaker Change: Sure.
Speaker Change: Okay.
Speaker Change: There is nothing in the contemplated definitive documents that were talking about they would radically sure that between the equity holders of Telecom Corporation and Telesat.
Speaker Change: No.
Speaker Change: Okay. Thank you for clarifying.
Speaker Change: That's it for me appreciate it.
Speaker Change: Thank you.
David John McFadgen: Thank you. The next question is from Evan McFadgen from Carmark Securities. Please go ahead. Your line is open.
Speaker Change: Thank you. The next question is from Evan <unk> from <unk> Securities. Please go ahead. Your line is open.
David John McFadgen: Okay, thank you. Yeah, a couple of questions. So, if I understand you right, I think you said that you expect to conclude the definitive agreements with the government and it could take as long as until the end of the summer. Is that correct?
Evan: Okay. Thank you.
Evan: Yeah, a couple of questions.
Evan: So if I understand right.
Evan: I think you said that you expect to conclude the deferment agreements I think everyone.
Evan: It could take as long as plenty of them and some is that is that correct.
Daniel S. Goldberg: Yeah, yeah again. I mean, we're dealing with the government of Canada here, so I can't be too precise about the timing on when exactly it would come to a close, but that's our expectation. Given the momentum that we have and what an extensive blueprint we have in terms of what the terms are, yeah, we think that having this done by the end of the summer is achievable.
Speaker Change: Yeah, Yeah, again, I mean, we're dealing with the government of Canada here. So.
Speaker Change: Can't be too precise about the timing on when exactly it would come to a close but that's our expectation given the momentum that we have in a wooden extensive blueprint we have in terms of what what's the terms are yeah. We think that having this done by the end of the summer is.
Speaker Change: A realistic timeline.
David John McFadgen: Okay, and so even though you may not have those agreements concluded until the end of the summer, you're still going to spend 1 to 1.4 billion, and I guess you can do that because you have all that cash sitting in non-restricted stuff. Is that what gives you the confidence to just spend the way you are?
Speaker Change: Okay.
Speaker Change: So even though you may not have enough agreements concluded until the end of the center and one to one 5 billion and I guess you can do that because you have all that cash and not unrestricted status does that is that what gives you the confidence to just spend the way you are.
Daniel S. Goldberg: Well, it gives us what, I mean, what gives us the confidence to spend that money before having the definitive agreements concluded is just a lot of conviction that we'll get those definitive agreements done, given all the good work that we've done with these funding sources and how much these funding sources want to see this project move forward. And then, as I said, on the other hand, we've got to get going. We've got pricing locked in with our suppliers, and we've got a great opportunity out there in the market.
Speaker Change: It gives us what I mean.
Speaker Change: What gives us the confidence to spend that money before having the definitive agreements concluded is just a lot of conviction that we'll get those definitive agreements done given all the good work that.
Speaker Change: We've done with these funding sources and how much. These funding sources wanted to see this project move forward.
Speaker Change: And then as I said on the other hand, we Gotta go and we've got pricing locked in with our suppliers.
Speaker Change: And we've got a great opportunity out there in the market.
Daniel S. Goldberg: Our customers want us to have this service available to them as quickly as we can. If they had their way, we'd have it available like now. So we've got to move and wait around for another three or four months knowing, as we do, and we believe that, again, a high degree of confidence that we're going to get all this funding that we need just, you know, doesn't seem, on balance, the right thing to sit on our hands and go through a process that we're pretty, you know, have a lot of conviction about where we're going to land with these Okay, and so I would imagine that the vast majority of that spend might be on satellite build and design and everything, correct?
Speaker Change: Our customers are wanting us to have this service available to them as quickly as we can if they add their way you know we'd have it available like now so we got to move and waiting around for another three or four months knowing.
Speaker Change: As we do and we believe that that again, a high degree of confidence that we're going to get all of this funding that we need just doesn't.
Speaker Change: It doesn't seem to be on balance the right thing to sit on our hands.
Speaker Change: And go through a process that were pretty you know have a lot of conviction about where we're gonna Lam with these funding sources. We so yes, so we've decided to move.
Speaker Change: Move forward and move forward with speed.
Speaker Change: Okay.
Speaker Change: So I would imagine that in the vast majority of that spend unlike b will be on satellite TV design correct.
David John McFadgen: The most significant portion of the CapEx that we'll be investing this year is, yeah, it's going to go towards the satellite. There'll be some launch payments, there'll be some other stuff for user terminals and landing stations, but the biggie will be, you know, our friends at MDA giving them the cash that they need to turn on their supply chain and move forward.
Speaker Change: The most significant portion.
Speaker Change: Of the Capex that we'll be investing this year is yes, it's going to go towards satellites there'll be some launch payments there'll be some other stuff for user terminals and landing stations, but.
Speaker Change: The biggie.
Speaker Change: B you know our friends at M D a.
Speaker Change: Giving them the cash that they need to turn on their supply chain.
And move forward.
Daniel S. Goldberg: Right, and so, because MDA is the prime contractor, all that money is going to go through MDA, right?
Speaker Change: Right and so because mdas prime contract them all that money, it's one of those.
Speaker Change: Yeah.
David John McFadgen: I wouldn't say all of it, but I'd say a very meaningful portion of it.
Speaker Change: I wouldn't say all of it but I'd say, a very meaningful portion of it.
Daniel S. Goldberg: All right, okay, okay, and then just a question on your You know, the fact that you've lost some business to maritime, I think it's kind of startling. It's my understanding that Starlink doesn't offer any SLAs, and you would, when you had Lightspeed up, you would offer SLAs, so wouldn't that give you a competitive advantage?
Speaker Change: Right, Okay, Okay, and then just.
Speaker Change: Just a question on your.
Speaker Change: You know the fact that you've lost some business to maritime because it's kind of a filing.
Speaker Change: It's my understanding that styling doesn't offer any as always and you would have liked.
Speaker Change: Iraq, Ras al and so what does that give you a competitive advantage.
David John McFadgen: Yeah, we think it will, but we need our Lightspeed Constellation to deliver the service, so that's why we're bullish about our prospects to take, you know, the market share that we need in order for that project to be successful. I think there are a number of features of the Lightspeed Constellation that will give us a good competitive advantage and allow us to present a tremendous value proposition to the customer community, the ability to provide SLAs and CIR and give our customers an enormous amount of autonomy to manage the bandwidth that they'll be contracting from us.
Speaker Change: Yeah, we think it will but we need or want to be constellation to deliver the service. So.
Speaker Change: That's why.
Speaker Change: We're bullish about our prospects too.
Speaker Change: Take you know.
Speaker Change: The market share that we need in order for that project to be successful I think there are a number of features of the lightspeed constellation that will.
Speaker Change: Give us a good competitive advantage and allow us to present.
Speaker Change: Tremendous value proposition to the customer community the ability to provide that's always and she IR and give our customers.
Speaker Change: An enormous amount of autonomy to manage the bandwidth that there'll be a contracting from us, but I think all of those things will allow us to be successful, but yeah. That's one of the features for sure we will be offering our customers S. L age.
David John McFadgen: I think all of those things will allow us to be successful, but yeah, Evan, that's one of the features for sure. We'll be offering our customers SLAs, and we think that's important to some subset of them.
Speaker Change: And do you think that's important to some some subset of them.
David John McFadgen: Okay. All right. Thank you so much. Okay. Thank you.
Speaker Change: Okay alright. Thank you so much okay. Thank you.
Alex Nolan: Thank you. The next question is from Alex Nolan from Nevesco. Please go ahead. Your line is open.
Speaker Change: Thank you. The next question is from Alex Nolan from Invesco. Please go ahead. Your line is open.
Alex Nolan: Thanks. My question wasn't answered. I wasn't able to take myself out of the queue. Thanks. Thank you.
Alex Nolan: Hi, Thanks, My question was answered it wasn't able to take myself out of the queue. Thanks.
Alex Nolan: Thank you Keith.
Operator: Thank you. Once again, please press star 1 on your device's keypad if you have a question. The next question is from Walter Piecyk from LightShed. Please go ahead. Your line is open.
Thank you once again, please press star one on your devices keypad. If you have a question.
Alex Nolan: The next question is from Walter <unk>.
Walter: Truck from Lakehead. Please go ahead your line is open.
Walter Paul Piecyk: Thanks, Dan. I apologize if this is kind of a redundant question, but I've kind of heard this before.
Walter: Thanks, Dan.
Walter: As if this is kind of a redundant question, but I've I've kind of heard this.
Walter Paul Piecyk: I want to make sure that this is put to bed. NDA will start constructing these satellites prior to you finalizing the agreements with the government of Canada, correct? Correct. Okay. Unknown Speaker.
Walter: And make sure that this is put to bed.
Walter: Okay.
Speaker Change: MDA will start constructing these satellites prior to you finalizing the agreement.
Speaker Change: <unk> with the government of Canada correct.
Speaker Change: Correct.
Speaker Change: Okay.
Daniel S. Goldberg: And then in terms of the overall market. You know, now that you've seen a little bit more of what Starlink has been doing, the different verticals they've gone into, I'm not sure many people, at least initially, expected them to go up from Maritime. I know that there were some of your peers that were claiming they couldn't do airplanes and wouldn't allow airplanes. Just curious when you look at the market opportunity for your LEO constellation. Has it changed at all as you kind of approach construction now?
Speaker Change: And then in terms of the overall market.
Speaker Change: You know now that you've seen a little bit more of what starlink had been doing different verticals that they've done.
Speaker Change: Don and Joe I'm not sure many people.
Speaker Change: At least initially expected them to go out from Maritime I know that.
Speaker Change: There was some of your peers are claiming they couldn't do airplanes and that alone airplanes just.
Speaker Change: Curious when you look at the market opportunity.
Speaker Change: For your Leo constellation.
Speaker Change: Has it changed at all or as you kind of approach construction now.
Daniel S. Goldberg: I don't believe so at all. And listen, you know, Startlink's having a big impact on the market, and they're having an impact on our business, which, you know, I don't love.
Speaker Change: I don't believe so at all.
Speaker Change: Unless you know.
Speaker Change: Starlink is having a big impact on the market are having an impact on our business.
Speaker Change:
Speaker Change: Which you know.
Daniel S. Goldberg: But what I do love is that it 100% validates the strategic direction that we took Telesat in going some years back. And you're right, there were folks that doubted whether they'd penetrate the maritime market and the, you know, backhaul market and doubts about the aero market. We were convinced that a LEO architecture was, you know, not only a good infrastructure to support those services but one that would have a significant competitive advantage. And Starlink is demonstrating that in real time. And so, but no, our market thesis, our business plan, it's intact. Yeah, we're seeing it.
Speaker Change: I don't love.
Speaker Change: But what I do love is it is I think 100% validated the strategic direction that we took telesat and go in some years back in and Youre right. There there were folks that doubted whether they penetrate the maritime market and the <unk>.
Speaker Change: Backhaul market and doubts about the Aero market, we were convinced that a Leo architecture.
Speaker Change: Was.
Speaker Change: Not only are a good <unk>.
Speaker Change: Infrastructure to support those services, but but one that would have a significant competitive advantage in and starlink is demonstrating that in real time, and so but no R. R.
Speaker Change: Market thesis our business plan it's intact.
Daniel S. Goldberg: Yeah, here again, for me, it's just reinforced everything. Our customers know now that Leo is the best way to address so many of these requirements. They are taking services from Starlink, and it provides a pretty good service, but it doesn't give everyone everything that they want. We've talked about the SLAs. We've talked about their ability to manage their own bandwidth pools and whatnot, so it doesn't give enterprise users everything they need, number one.
Speaker Change: Yeah, we're seeing it.
Speaker Change: Yeah sure again for me, it's just reinforced everything our customers know now that Leo is the best way to address so many of these requirements.
Speaker Change: <unk>.
Speaker Change: They are taking services from Starlink and it provides a pretty good service but.
Speaker Change: It doesn't give everything.
Speaker Change: It doesn't give everyone everything that they want and we've talked about.
Speaker Change: No the SLA as we've talked about their ability to manage their own bandwidth pools and whatnot. So it doesn't give enterprise users everything they need number one number two the.
Daniel S. Goldberg: Number two, customers don't want to put all of their requirements with one supplier. They don't do that with all sorts of their enterprise infrastructure, whether it's cloud or internet connectivity, kind of writ large, whether it's satellite or not, so they want multiple providers. Yeah, there's a huge opportunity here, so there's nothing that we've seen in Starlink that causes us to question the various assumptions that we made when we got ourselves on this Lightspeed path. In fact, all of our thinking around the immensity of the opportunity and why LEO will have a competitive advantage capturing those requirements has been validated by everything we've witnessed over the last 12-plus months.
Speaker Change: The customers don't want to put all of their requirements with one supplier. They don't do that with all sorts of of of their enterprise infrastructure, whether it's cloud or you know internet connectivity kind of writ large whether it's satellite or not so sure they want multiple.
Speaker Change: Providers.
Speaker Change: Yeah, there's huge opportunity here. So there's nothing that we've seen in starling that.
Speaker Change: Causes us to question.
Speaker Change: The various assumptions that we made when we got ourselves on this lightspeed path if anything.
Speaker Change: All of our thinking around the immensity of the opportunity.
And why Leo will have a competitive advantage capturing those requirements has been validated by everything we've witnessed over the last 12 plus months.
Walter Paul Piecyk: You know, on past calls, I've talked about, or we talked about the ability to sign up, you know, people to, you know, pre-reserve the capacity, right, existing enterprise customers or maybe new ones saying, Hey, we're going to take part in this. And I think the issue was, you know, getting to that point of finalization. And that once that happens, we might be able to see some of those press releases start to hit.
Speaker Change: On past calls I've talked about are we talked about.
Speaker Change: The ability to sign up.
Speaker Change: People to you know.
Speaker Change: Pre reserve the capacity right at existing enterprise customer for maybe new ones, saying, Hey, we're going to take part in this and I think the issue was getting to that point of Finalization and that once that occurred.
Speaker Change: He might be able to see some of those press releases start to hit.
Walter Paul Piecyk: You know, understanding that things aren't financed, or excuse me, finalized, if you're, if you started the construction, isn't that sending enough of a message to these customers that we can start seeing some releases from you guys or some indications of enterprises signing up for capacity on the new Constellation?
Speaker Change: Understand that things aren't financed or excuse me finalized.
Speaker Change: If you've started the construction isn't that sending a message to these customers that we can start seeing.
Speaker Change: Some releases from you guys or some indications of enterprises.
Speaker Change: Signing up for capacity on the new constellation.
Daniel S. Goldberg: Yeah, listen, you're right. I think calls like this one, and we're in a small industry, so when this supply chain all gets under contract, that'll ripple through the industry. If anyone had any doubts about whether or not Telesat was going to proceed with this program, those should be put to rest. They haven't already been put to rest. I think they will be put to rest in the coming days and weeks.
Speaker Change: Yeah.
Speaker Change: And Youre right I think you know.
Speaker Change: <unk> calls like this one in and we're in a small industry. So when this supply chain all gets under contract.
Speaker Change: That that'll that will ripple through the industry, if anyone had any doubts about whether or not tell us that it was gonna proceed with this program those those should be put to rest.
Speaker Change: If they haven't already been put to rest I think they should be put to rest in the coming days and weeks, but so I think that it will be a great sign to the customer community that you know lightspeed is common and look we're only about two.
Walter Paul Piecyk: I think that it will be a great sign to the customer community that light speed is coming. Look, we're only about two years away from launching our first satellite, so it ain't that far away. We are going to be very focused on trying to secure customers and making those announcements and reporting backlogs so that all sorts of different audiences can track the progress we're making. My own expectation is it'll still be closer to in-service when we're able to make more of those announcements, but I still have an expectation that we'll be able to announce commitments, you know, in advance of being in service.
Speaker Change: Two years away from launching our first satellite show right at it.
Speaker Change: Isn't that far away.
Speaker Change: And we are going to be very focused on trying to secure customers and making those announcements and reporting backlog so that you.
Speaker Change: You know all sorts of different audiences can track the progress, we're making my own expectation is.
Speaker Change: It'll still be closer to in service.
Speaker Change: When we're able to make more of those announcements, but but but I still have an expectation that we'll be able to announce.
Speaker Change: No commitments.
Speaker Change:
Speaker Change: In advance of being.
Speaker Change: Being in service and you can imagine that with all of my colleagues here on the commercial side. We're very focused on we're very engaged with the customer community right now and Theyre excited about lightspeed. So yeah. All I'd say there is stay tuned we're very focused on that and we'll be very transparent about the commitments that we get.
Walter Paul Piecyk: And you can imagine that with all of my colleagues here on the commercial side, we're very focused, and we're very engaged with the customer community right now, and they're excited about Lightspeed. So, yeah, all I'd say there is, stay tuned. We're very focused on that, and we'll be very transparent about the commitments that we get.
Daniel S. Goldberg: If I can just one last question on Echostar. I mean, they're facing some financial distress, particularly as they approach the end of the year, which is, I think, the time for a renewal. Have you had any preliminary discussions and any thought about how that might play out? Well, you know, we talked about what one of the
Speaker Change: If I can just one last one on Echostar I mean, they are facing some financial distress, particularly as they approach.
Speaker Change: At the end of the year, which is I think the time for renewal.
Speaker Change: Have you had any preliminary discussions.
Speaker Change: Thoughts on that maybe how that might play out.
Walter Paul Piecyk: Well, you know, we talked about one of the headwinds that we're facing this year is an expectation that, and the renewal that we have coming up, it comes up in October, is on our NIMIC 5 satellite, which they use; they're the exclusive user of that satellite. And so, you know, the guidance that we gave for this year, you know, captures all sorts of different outcomes that we might get there. Even on the last call, we said that we had started the conversation with Echostar about their thoughts about whether, you know, they're going to want to renew or not.
We talked about.
Speaker Change: Well one of the headwinds that we're facing this year is an expectation that and they use the renewal that we have coming up and when it comes up in October is on our mimic five satellite which.
Speaker Change: They use <unk>.
Speaker Change: Exclusive user of that satellite and so you know the guidance that we gave for this year you know captures all sorts of different outcomes that we might get there and on the last call. We had said that we started the conversation with echostar about their.
Speaker Change: Their thoughts about whether they're going to want to renew or not.
Speaker Change: But we haven't advanced at that much since we had our last call just six weeks ago.
Walter Paul Piecyk: But we haven't advanced it that much since we had our last call just six weeks ago, and so it's not clear to me where we'll end up. I think regardless of the scenario, we're going to see a meaningful reduction in the amount of revenue that we recognize from NIMIC 5 post, you know, the renewal date in October. But whether they renew all of it, some of it, or none of it, it's still not clear to us at this point in time.
Speaker Change: And so it's not clear to me, where we'll end up I think regardless of the scenario.
Speaker Change: We're going to see a meaningful reduction in the amount of revenue that we recognize from mimic five post renewal date in October, but whether they renew all of it some of it or none of it.
Speaker Change: It's still not clear to us at this point in time, and we've got a great relationship with Echostar, we've worked with them for.
Daniel S. Goldberg: And we've got a great relationship with Echostar. We've worked with them for years. We know that NIMIC 5 is being used to distribute content today to their subscriber base. But we know that, you know, they do have a lot of other things that they're focused on, and saving cash is pretty high on that list.
Speaker Change: Years, we know that mimic five is being used to distribute content today to their subscriber base. We know that you know they do have a lot of other things that they're focused on and shaving cashes is pretty high on that list. So anyway, all to say that.
Walter Paul Piecyk: So anyway, all to say that yeah, we'll give an update once we have one.
Speaker Change: Yeah, we'll we'll give an update once we have won but right now we don't have an update from the.
Speaker Change: The call that we have just six weeks ago.
Speaker Change: Got it thank you.
Speaker Change: Yeah.
Speaker Change: Thank you Walter.
Speaker Change: Thanks Walter.
Daniel S. Goldberg: At this time, we will turn the call back over to Mr. Goldberg. Please go ahead. Okay. Well, operator, thank you very much. And everyone, thank you for joining us this morning. And we look forward to chatting with you when we release our Q2 results.
Speaker Change: Thank you.
Speaker Change: At this time, we will turn the call back over to Mr. Goldberg. Please go ahead, okay, well operator, thank you very much and everyone. Thank you for joining us this morning.
Operator: So thank you all and have a nice weekend. Thank you. Thank you. The conference is now over. Please disconnect your lines at this time. Thank you for your participation.
Goldberg: And we look forward to chatting with you.
Goldberg: When we release our Q2 results. So thank you all and have a nice weekend.
Goldberg: Yeah.
Speaker Change: Thank you the conference has now ended.
Speaker Change: Please disconnect your lines at this time.
Speaker Change: We thank you for your participation.