Q4 2024 Telesat Corp Earnings Call
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Speaker Change: This conference is being recorded so it goes to the hospital or as you see.
All participants please standby your meeting.
Speaker Change: He is ready to begin good morning, ladies and gentlemen, welcome to the conference call to report the fourth quarter of 2020 full financial results I'll kill yourself.
Speaker Change: Our speakers today would be Dan Goldberg, President and Chief Executive Officer.
Andrew Ross: And Andrew Ross Chief Financial Officer.
Speaker Change: I like to tell anything all that.
Ratliff: Ratliff Vice President.
Speaker Change: Please go ahead Mr <unk>.
Speaker Change: Yes.
Speaker Change: Thank you Sal and good morning, everyone.
Speaker Change: This morning, we filed our annual report for the period ending December 31, 2020 for 'twenty.
Speaker Change: 20-F, with the SEC and on SEDAR.
Speaker Change: Our remarks today may contain forward looking statements.
Speaker Change: Actual results may differ materially from the results contemplated by forward looking statements.
Speaker Change: No as unknown risks and uncertainties.
Speaker Change: For a discussion of known risks please see <unk> annual report filed with the SEC.
Speaker Change: That assumes no responsibility to update or revise these forward looking statements.
Speaker Change: I'll now turn the call over to Dan Goldberg.
Dan Goldberg: President and Chief Executive Officer.
Speaker Change: Okay. Thanks, James and thank you all for joining us this morning.
Speaker Change: A few words about our performance in 'twenty 'twenty four and then talk about our key objectives and expectations for 2025, and then hand over to Andrew to speak to the numbers in more detail and then we'll open the call up to questions.
Speaker Change: 2024 was a pivotal and productive year for Telesat and I'm very pleased with what we accomplished we delivered focused disciplined execution in our junior business, resulting in revenue and adjusted EBITDA that were above our guidance and we deployed a portion of the healthy cash flows the geo business generates it makes some.
Speaker Change: No debt repurchases, which we believe strengthen our financial position and are accretive for stakeholders.
Speaker Change: In addition, we made major strides forward with Telesat Lightspeed.
Speaker Change: In September we closed our financing arrangements with the governments of Canada, and Quebec, securing the funding we need for full global service. We also made strong progress on the development and deployment of lightspeed investing more than $1 billion over the course of last year is completing some important development.
Speaker Change: We continued to build up the league team on both the engineering and commercial fronts, and importantly drove strong traction with prospective customers turning to this year 2025, we expect the difficult operating environment and our gyro business to continue which is reflected in our guidance for the year.
Speaker Change: We anticipate revenue to be down approximately 155 million Canadian dollars at the midpoint of our guidance with pressure on both the video and enterprise portions of our business have been anticipated decline comes from our Dth business, primarily from the full run rate impact of.
Speaker Change: The lower rates associated with the renewal last year of the Nimitz five agreement with dish. We also mark the end of service was shot last year on our Annick asked to satellite and early this year will reach the exploration of our Anika three contract with dish anecdote three years come to the <unk>.
Speaker Change: <unk> station kept life and so it was being put into inclined orbit and will be used for customer requirements that can be supported on an inclined orbit satellite.
Speaker Change: The other half of our forecasted revenue declined as expected to come from our enterprise and consulting activities roughly 20% of that is coming from customers shortening the maritime and to a lesser extent the aero markets principally O into competition from Starlink.
Speaker Change: Other meaningful contributors are reduced revenues from an Indonesian government funded broadband program, where a new Indonesian one satellite is replacing some of the services. We provided lower revenues from Lear related consulting and demonstration projects with U S government agencies, Nossa and <unk>.
Speaker Change: DARPA as well as reduced consulting revenues and our G O business too and lower revenues owing to the sale of our wholly owned subsidiary info set that we announced last year on.
Speaker Change: On the Opex front, we're expecting lightspeed opex to increase by approximately 40 million Canadian at the midpoint of guidance with increased investments in engineering operations and commercial resources, mostly head count driven as we continue to ramp up and execute the program.
Speaker Change: We'll run our Geo business and a very focused disciplined way well continue to do that in an effort to mitigate as much as possible. The pressures we're seeing in the market on a consolidated basis with the forecast topline declines and the incremental opex for Lightspeed, we're expecting consolidated adjusted EBITDA.
Speaker Change: To be down approximately 200 million Canadian dollars at the midpoint of guidance.
Speaker Change: For my colleagues and I 2025 will be all about focused execution on both Geo and Leo mitigating as best we can the headwinds we're facing in Geo and building out and commercializing Lightspeed unbelievable front, we're making strong progress across all aspects of develop into lightspeed.
Speaker Change: Installation the satellites the landing stations user terminals software development and expect to launch our first batch of satellites late next year.
Speaker Change: On the commercial front for Lightspeed, I'd say, we're more bullish than ever given what we're hearing from customers and seen in the market, we've announced a handful of customer contracts over the past few weeks and are optimistic that we'll have more material contract announcements over the course of this year announcements that will translate.
Speaker Change: And the more significant lightspeed contractual backlog, which in turn will provide greater revenue and cash flow visibility for the project.
Speaker Change: We've spoken for some time about the huge opportunity we see in the market for commercial services, something that's becoming much more concrete as we get closer to launch and as the markets embrace of the Leo value proposition accelerates across all verticals.
Speaker Change: We'd also note that the recent fairly tectonic shifts in the geopolitical environment are making us even more bullish on sovereign national security requirements.
Speaker Change: <unk>, we always believe were significant but now expect we will provide an even stronger tailwind as countries increase their defense spending and look to diversify the allied governments and service providers, they work with to protect and advance their national security interests.
Speaker Change: I'd note that refinancing in our restricted group that remains an important priority for the company this year.
Speaker Change: We made an enormous amount of progress in 2024, and we have a clear plan and huge opportunity as we go forward.
Speaker Change: Given the progress we've made and the opportunities we see in the market at this time, we're more bullish than ever on our ability to deliver the services and solutions to the market is demanding while delivering a highly attractive returns to our shareholders.
Speaker Change: As I hand over to Andrew you may have seen in our release. This morning that after more than five years at telesat and well over 40 years in the computer chip in satellite Communications industries, Andrew has decided to retire.
Speaker Change: We'll be instituting the search for his successor, shortly and Andrew will ensure a smooth transition and handover.
Speaker Change: I've known and worked with Andrew for over a quarter century, and while we'll still be working together for the next little while I can't thank him enough for his exemplary work and contributions and for his warm collegiality and friendship over the years.
Speaker Change: Wish him a heartfelt congratulations and all the very best as he gets ready to take this very well deserved next step so with that over to you Andrew.
Andrew Ross: Morning, everyone. Firstly, thank you Dan So that's really kind of generous words and so very much appreciate it it's been a great prevention of knowing what to do for many years and especially here at telesat.
Andrew Ross: As you move ahead with Tele satellite state I'm really very excited about the future created for telesat entity in Canada and the world.
Andrew Ross: As we all know there are times in life with certain decisions have to be made in the last. Please. This is the right time to use that word retirement.
Andrew Ross: Especially given where we are now <unk> side and also I think for the my good life with family.
Speaker Change: I would actually do all I can to ensure a smooth and seamless hand over to my successor and sincere. Thank you again that allows until my colleagues are very good friends around the table with me. This morning, I'm here at telesat onto our board.
Speaker Change: So with that said I would now like to focus on the highlights from this morning's press release and filings Telesat ended the year 2024, which reported revenues of $571 million adjusted EBITDA of 384 million in cash from operations of $62 million with $552 million of cash on the balance sheet.
Speaker Change: In.
Speaker Change: As Pat has mentioned, we outperformed our revenue and EBITDA guidance for 2024.
Speaker Change: In the fourth quarter of 2020 for Telesat reported revenues of 128 million and adjusted EBITDA of 73 million down 38 million and $50 million, respectively from the same periods in 2023.
Speaker Change: When adjusted for changes in foreign exchange rates total revenues decreased by $40 million and adjusted EBITDA decreased by 53 million.
Speaker Change: Adjusted EBITDA margin was 67, 4% as compared to 74, 3% in the fourth quarter of 2014 did.
Speaker Change: The G O.
Speaker Change: Segment, adjusted EBITDA margin, which exclude ongoing investors tallies at light speed was 78% versus 82.2% in the fourth quarter of 2023. The revenue decrease for the quarter was primarily due to a rate reduction on the renewal of a long term agreement with a north American D T H customer lower enterprise.
Speaker Change: Revenues and decided that the company's emphasis on business as Bob mentioned the decline in our consolidated EBITDA.
Speaker Change: EBITDA was affected the revenue decline along with higher costs associated with the telesat like fee deployment.
Speaker Change: Interest expense decreased by $7 billion during the full quarter of <unk> compared to the same period in 2023. The decrease in interest expense was primarily due to the repurchase of term loan B. In 2024. This was partially offset by an increase in interest rates in the U S term loan facility in the fourth quarter, we recorded a foreign exchange loss of 177.
Speaker Change: 1 million as compared to a gain of 78 million in the fourth quarter of 2003. The loss of the train months ended December 31, 24 was mainly the result of the stronger U S dollar to Canadian dollar spot rate as of December 31st compared to the spot rate as of September the 30th.
Speaker Change: The impact of the translation of our U S dollar denominated debt.
Speaker Change: We recorded a 447 million net loss in the fourth quarter of 2020 for comparison that equaled 39 billion for the same period the prior year, but a full 'twenty 'twenty four we recorded a net loss of $302 million compared to a gain of $5 83 billion for the prior year.
Speaker Change: It's primarily due to previously mentioned foreign exchange impact the recognition of C band proceeds in 2023 higher impairment charges on our orbital slots and satellite zones the reduction in revenues for.
Speaker Change: For the year ended December 31st cash inflows from operating activities were $62 million with total cash capital expenditures of $1 1 billion, a 1.21 billion on an accrual basis of about one point to one period in virtually all of this related to our investments in telesales licensee in.
Speaker Change: In terms of debt repurchases, we repurchased 262 in the U S. Dollar during 2024 at the cost of 119 million U S dollars, including accrued interest.
Speaker Change: Combined the debt repurchases completed the 'twenty, two and 'twenty three we have now repurchased accumulative principal amount of 849 to U S dollars at a cost of 459 million U S dollars at an average price of just over 53. This also results in interest savings of approximately 54 million U S dollars annually combine.
Speaker Change: But our 20 penny repayments of $365 of our term loan with a card 36% of our total debt outstanding and lowering overall annualized interest expense by 78 million U S dollars at current rates.
Dan Goldberg: The guidance as Dan discussed and as you will also have noted in our earnings release. This morning, we provided guidance for 2025 guidance assumes the Canadian to U S. Dollar exchange rate of Canadian 142, and.
Dan Goldberg: 2025, <unk> expects its full year revenues to be between $5 million performed and $25 million in terms of adjusted EBITDA Telesat expects to be between 170 million $190 million on a consolidated basis.
Dan Goldberg: Segment perspective, we expect lease operating expenses to be in the range of 410 to 120 billion or $38 million to $48 million increase in 2020 for the drivers of the increased operating expenditures include higher compensation expense as we continued to build out that he says he likes V T ICT services and consulting costs.
Dan Goldberg: We expect capital expenditures expenditures in 2025 to be in the range is 900 million from $1 1 billion virtually all of which related to 30 satellites. They.
Dan Goldberg: Turning to our cash and liquidity position is the restricted group, we had approximately 211 billion cash on hand at the end of 'twenty 'twenty four and the business continues to generate healthy cash flows.
Dan Goldberg: Leo Group, we ended the year with 317 million cash on hand, and also with the full Canadian 254 billion and lending capacity from the government of Canada, and Quebec available to draw as we noted in our release, we received the first tranche of loans from the loan facilities in January of this year at the four quarters of total leverage.
Dan Goldberg: <unk> ratio as calculated under the terms of the amended senior secured facilities with 668 times Telesat is in compliance with all covenants in our credit agreement and the dangers.
Dan Goldberg: A reconciliation between our financial statements and financial Covenant calculations is provided in the reports we filed this morning. Our 20-F provides even after the interim condensed consolidated financial information in the MD&A. The non guarantor subsidiaries shown are essentially the unrestricted subsidiaries with minor differences.
Dan Goldberg: So this concludes our prepared remarks for the call and I'm very happy to throw it back to the operator and address any questions. You may have thank you very much.
Dan Goldberg: Thank you we will now take questions from the telephone lines.
Speaker Change: Please press star one at Mckinsey I would your question at any time by Christian Stark two please press star one at this time with your other question there would be a brief pause while participants with just thoughtful back questions. Thank you for your patience.
Speaker Change: Well I'll take the first question from Edson you that's.
Speaker Change: Please go ahead.
Edson: Hey, good morning, everyone. Thank you for taking our questions. So first off I know you mentioned.
Edson: Tectonic shifts happening in part due to the geopolitics can you give us a sense on how those discussions have changed was it one of those things were.
Edson: A couple of months ago.
Edson: Literally you saw and just kind of blew up or how do you think of that going on in the background that Nick has accelerated some color there would be great.
Edson: Okay. Thanks, Hudson, It's Dan.
Speaker Change: Yeah, I think that.
Speaker Change: That's probably a fair characterization.
Speaker Change: Where are they going on in the background and then did they accelerate I think that's kind of probably best captures it and maybe less accelerate but maybe it's the same thing but.
Speaker Change: It just seems to be more concrete now there's just a much greater focus it feels like with.
Speaker Change: Yeah kind of a sovereign.
Speaker Change: Our customers are in.
Speaker Change: Thinking about their need to have access to an advanced Leo network.
Speaker Change: Their focus on making sure that they.
Speaker Change: They've got options in terms of who they work with.
Speaker Change: Certainly for the government of Canada.
Speaker Change: We've been here and I should say, we're in an election up here right now so we're hearing a lot from our political leaders from all parties right now and whether you know.
Speaker Change: It's the Conservative party of Canada, whether its the Liberal party of Canada, they've been articulating in connection with this election their views around the need to have greater defense spending.
Speaker Change: Number one to accelerate that spending so to achieve.
Speaker Change: Achieved NATO spending targets much sooner than what was earlier envisioned.
Speaker Change: Doing it in a way that that sort of supports Canadian industry I'd say most countries do this when they increase their defense spending they usually in the first instance look to do that with their domestic suppliers.
Speaker Change: And certainly doing all of that with a greater focus on here in Canada at least.
Speaker Change: Arctic sovereignty is an area of great focus.
And working with all.
Speaker Change: All of their allies to.
To make sure that the defense spending is done in a way that doesn't just lift the ER or meet.
Speaker Change: Kind of.
Speaker Change: Parochial.
Speaker Change: <unk> domestic objectives, but that that is kind of a win win in terms of what the alloys youre thinking about as well so anyway. So that's what we're seeing and I've talked.
Speaker Change: A little bit about what's happening here in Canada.
Speaker Change: We're seeing it all over when I read.
Speaker Change: Read the press about what the Europeans are doing and I see how that's impacting some of our European.
Speaker Change: Peers out there I.
Speaker Change: I think they are probably experiencing the same thing when we have conversations around the world with other governments here again, whether it's sovereign requirements are just making sure that they've got good.
Speaker Change: Our broadband infrastructure to bridge the digital divide in their countries. There just seems to be a greater focus on ensuring that there are a diversity of suppliers that can bring these kind of architectures to market. So I'll stop there, but that's what it's like.
Speaker Change: And maybe just one more thing as I said in my remarks.
Speaker Change: We were always optimistic about how tell us at Lightspeed Ken.
Speaker Change: And.
Speaker Change: And deliver on all of those sorts of objectives, but it just seems so much more concrete now so much more tangible and the nature of the discussions we're having just there's just a greater immediacy I would say and I think a lot of that has to do.
Speaker Change: Just with the fact that our program is getting closer to launch number one but number two some of these geopolitical shifts that I talked about it just really focus the minds of government users.
Speaker Change: And that just gives us greater confidence that are the things that we believe were going to happen or going to happen and maybe sooner rather than later.
Speaker Change: Understood I appreciate the color.
Speaker Change: On the comment you made about the backlog for lightspeed.
Speaker Change: Can you give us a sense of.
Speaker Change: Magnitude I think that the last disclosure, we made was 600 million or something could we see that.
Speaker Change: Double triple in the next year or two.
Speaker Change: Any kind of color around around that maybe the pipeline to be getting that number makes a larger.
Speaker Change: Yeah, I'll say something about that and I'll say a couple of things one we have promised to start disclosing Leo backlog and to break that out in our financial statements and we are going to do that it's not in our 20-F, but we'll start doing that looking around the table my colleagues.
Speaker Change: We'll start doing that in Q1, which isn't that far off at this point, so you'll see that we've disclosed G O.
Speaker Change: Backlog at year end, this time around which was $1 1 billion Canadian.
Speaker Change: But here's what I would say, we've talked about Leo backlog before and we'll do that more formally in our public filings, but your recollection is correct. We have talked about Leo backlog be an order of magnitude about 600 million Canadian I would note that that includes.
Speaker Change: That 600 million dollar.
Speaker Change: <unk> that we have with the government of Canada. So we include that.
Speaker Change: And obviously, that's a big part now we have been announcing some smaller.
Speaker Change: Lightspeed customer contracts I mentioned in the last few weeks there was something with Orange that we mentioned a lot of that was we're they're gonna be hosting a landing station for us they've made a smallish commitment for lightspeed, what's more fundamental about that is orange is obviously big.
Speaker Change: A player in.
Speaker Change: In the mobile and broadband connectivity space in Europe throughout Africa and elsewhere.
Speaker Change: And and having them as a partner and getting them set up to integrate lightspeed into their network, which isn't that hard given the way we've architected light speed I think theres more strategic significance in that then there is actual kind of meaningful contributions to backlog at this.
Speaker Change: This time, we announced.
Speaker Change: Just yesterday I think maybe the day before Bangladesh She satellite services integrator.
Speaker Change: Made a commitment to lightspeed more meaningful than orange, but still not what I would consider out of a big.
Speaker Change: Ariel level.
Speaker Change: Level, but there are things in the pipeline that we have that.
Speaker Change: Are giving us confidence that we will see some more meaningful contributions to backlog even by the end of this year I know, we're not going to get into the habit of giving guidance for backlog.
Speaker Change: They don't give us maybe just some you know.
Speaker Change: High level thoughts given what.
Speaker Change: We're seeing what I'm seeing in our pipeline right now.
Speaker Change: Nature and the quality of the discussions that we're having with different folks out there my own expectation is that you know by the end of.
Speaker Change: This year that a lightspeed backlog.
Speaker Change: It could very likely eclipse, what our geo backlog.
Speaker Change: It was at the end of last year that $1 1 billion Canadian and look it ain't over till its over.
Speaker Change: Some advanced discussions with customers about lightspeed commitments, which I think is great right. I mean, we're still about a year and a half out from our first launch.
Speaker Change: But the market just feels like its moving in our direction and and so that's kind of some.
Speaker Change: Some.
Speaker Change: Feeling for how we think backlog is going to shape up but we got to close these deals and.
Speaker Change: And as we do you know hopefully we'll be making some announcements about that throughout the course of this year.
Speaker Change: Thank you.
Speaker Change: Thank you the next.
Speaker Change: Question is from David My son game called <unk> Securities. Please go ahead.
Speaker Change: Okay, Hi, Yeah, a couple of questions.
Speaker Change: Well first of all as far as he answered well.
Speaker Change: Yes.
Speaker Change: Hum.
Speaker Change: Uh huh.
Speaker Change: You talked about the debt restructuring and you said, it's a priority.
Speaker Change: So let's.
Speaker Change: What's the update on that and do you think you did get that resolved.
Speaker Change: On the tongue time.
Speaker Change: That that's going to be our focus.
David: Focus David.
Speaker Change: It is a priority for us and look I've got to say I mean, you know the maturities.
Don't come up until the end of next year.
David:
David: So it's not like these are things that are coming up at the end of next quarter.
David: But we want to tackle.
David: Tackle this sooner than later and so yes, that's going to be our focus we obviously have a lot going on at Telesat right now I'm happy to say it's.
David: Good stuff, but we got a lot going on but no.
David: Engaging with the restricted group lenders and seeking to refinance that restricted group debt is a priority for us this year and I believe it's realistic that we.
David: We will be able to get that done, but we'll see.
David: So it is a priority.
David: Okay and.
David: And then just on the Geo business.
David: Yeah, obviously as you know.
David: Some decline in 'twenty or in our guidance and 25 in another.
David: <unk> decline do you think that decline in the Geo revenue might ease up in 2026, because it factored in a couple of big contract renewals.
David: Gosh I haven't quite looked out that far I mean, we've got a long term plan, obviously, but just getting ready for this call.
David: Focused on last year and this year then.
David: 2026.
David: Fortunately I've got colleagues showed that.
David: But in any event.
David: What would I say I mean.
David: The good thing about our GI business is fairly predictable alphabet. The dth business that we provide I think a huge amount of visibility on in terms of when these big contracts come up for renewal and so you know I certainly think folks out there that that's a pretty easy part of our business model, we set a lot about the limit.
David: Five renewal, we had with dish, we said a lot about the.
David:
David: End of life on our Anika to Anika three satellites and whatnot. So so that's been I think reasonably easy to model the enterprise a little bit more challenging.
David: Looking from the outside in but.
David: Yeah, you know what can I say that we expected these shifts to be taking place in our industry. It's why we're working as hard and as fast as we can on lightspeed.
David: And that business still generates a lot of cash we are.
David: We are fighting in the trenches on every new opportunity on every renewal to support that business as best as possible. We continue to manage the cost structure in a very disciplined way and we can't it is a largely fixed cost business, but we will be reducing some costs over the course of this year.
David: In the Geo business. So anyway, so I don't want to project all the way out to 2026, maybe as we get a little bit deeper into this year. We will try to start you know to foreshadow how do we think that's going to shape up.
David: Okay.
David: And then you only need to.
David: 211 million in cash and restricted side and social Sunday lie.
David: Why you haven't purchased any debt these impacts in Q4 and I. Thank you for standing in Q3 as well I'm just wondering what your thoughts.
David: Right now.
David: Look we are.
Speaker Change: That's another area. We've just tried to be pretty transparent about we think those debt repurchases that we've made to date.
Speaker Change: Totally sensible, we think it strengthens our financial position, we think it's accretive to shareholders, but candidly to all stakeholders, we do have.
Speaker Change: Some available cash.
Speaker Change: If we want.
Want to do more of those and I'd say you know there are a lot of variables that we have to take into account when we go into the market, whether that's liquidity or are you just where things are trading.
Speaker Change: So anyway, I'll say, if we make additional.
Speaker Change: Repurchases.
David: Always we will disclose them and so that's probably leave it there David.
David: Okay, just one last one if I may.
Speaker Change: So when you look at their Capex spend medallion on saying 1924 in the guidance. This year is another billion dollars. So it seems to me that given the total capex of this program plenty six capex is going to be probably something like Italian is alright.
David: So the.
David: Next company is at 26, 27, and it would be in that sort of range absolutely.
David: Yeah Okay.
David: Okay, great. Thanks, guys. Thank you.
Speaker Change: The next question is from Chris Quilty from Quilty space.
David: Sure.
Chris Quilty: Thanks, Dan I'd go.
David: Go back to the enterprise business.
Speaker Change: Declined 24 million in two years ago. It was down $93 million. This year just in terms of revenue contribution.
Speaker Change: Does it slow from there or does it accelerate and I guess, what I'm asking is what is the nature of the enterprise customers that remain on the network.
Speaker Change: And how much of them.
Speaker Change: Customers who were.
Speaker Change: Subject to loss have already left.
Speaker Change: Okay.
Speaker Change:
Dan Goldberg: Thanks for the question, Chris So what would I say about that I mean, our our enterprise business.
Speaker Change: Mix of different things, it's rural broadband connectivity.
Speaker Change: Broadband connectivity in the maritime and the Aero segment. We include a government services in there.
Speaker Change: There are kind.
Speaker Change: Kind of some.
Speaker Change: Services in the energy market.
Speaker Change: Kind of point of sale networks or whatnot, so it's a bunch of different things.
Speaker Change: And and.
Speaker Change: We've talked before where we've where we've already seen big impacts in the enterprise business from Starlink and Sterling.
Speaker Change: <unk>.
Speaker Change: Has been ramping up and there have been some it certainly impacts to the Geo operators tell us that included where we've seen the most of it to date has been in the maritime segment.
Speaker Change: I'd say that maritime and Aero combined are no order of magnitude 10%.
Mike: Of our total revenue roughly and it's right. It was split pretty evenly between the two Mike My.
Speaker Change: Stinker.
Speaker Change: Given that we see more hits the arrow I'm, sorry to maritime over the past 12 to 24 months, but it wouldn't surprise me if if arrow is now.
And our mix a little bit bigger the maritime at this point.
Speaker Change: Is that leveling out.
Speaker Change: I don't know.
Speaker Change: Look for we're actually doing okay in Aero right now.
Speaker Change: Notwithstanding the inroads that Sterling has been making theres been some pressure there, but it feels.
Speaker Change: Feels like we're seeing.
Speaker Change: Sheen.
Speaker Change: Good number of renewals and some new business opportunities there that market continues to grow quickly.
Speaker Change: Question is who's going to capture it, but we're kind of holding our own there I think one of the issues that we're gonna have to watch is just beyond kind of the macro dynamics out there just our own fleet right. So we've got anika three going into and find operations here at Anika to go into new unclaimed operations.
Speaker Change: It said before we Havent ordered a new Geo satellite and.
Speaker Change: Nine years.
Speaker Change: And that means that some of our satellites are starting to come to their end of life. So even away from kind of the Leo Geo.
Speaker Change: G O dynamics out there in the market and what that means there are some issues.
Speaker Change: Issues that are more telesat specific because we havent been.
Speaker Change: April to close a compelling business case for a new Geo satellite in quite some time.
Speaker Change: We sure where this market was going so you all know we've been taking that cash flow and and and.
Speaker Change:
Speaker Change: Thinking about our Leo investments repurchasing debt and the like I'm sorry.
Speaker Change: Not totally I still think there might be another opportunity or two four.
Speaker Change: Our new Geo satellite in the future, we'll see so we're not totally it by any measure abandoning that anyway, Chris that's a it's a long answer.
Speaker Change: Net net there will continue to be headwinds in the enterprise space. This particular year 25 relative to 'twenty four.
Speaker Change: The restructuring and with exploring that we've talked about that has provided some headwinds we we sold our info shop business.
Speaker Change: Which you know has some headwinds we were providing.
Speaker Change: Some consulting services to the U S government around Leo some of those projects are still ongoing but we expect less revenue this year versus 2024, but but overall I think.
Speaker Change: That there is going to be a shift from geo to Leo that will continue to act as a headwind to our enterprise G O revenues as will some of the.
Speaker Change: Reaching the end of life of some of our satellites and then I think you know we're going to see massive acceleration once lightspeed gets into service.
Speaker Change: As those enterprise applications are just really well served by lightspeed.
Dan Goldberg: Thanks, Dan real.
Speaker Change: Real quickly I mean, I I will Miss your distinguished way.
Speaker Change: Going through the earnings report, but I do have one final question for you and for the equity Guy here can you remind us of how the government.
Speaker Change: And that goes down.
Speaker Change: Over time.
Speaker Change: And it will be drawn down pretty well in line I think with our Capex that we just refer to it it's clearly matched up with that Chris So that would be the expectation you know our capex for this year it'll be around around the same as the capex itself that would be pretty kind of linear.
Speaker Change: Yet your comments on my I might dulcet tones about them I appreciate that.
Speaker Change: One of my favorites over the years thank.
Speaker Change: Thank you.
Speaker Change: Thank you. The next question is from Walter Piecyk <unk>.
Speaker Change: Please go ahead.
Dan Goldberg: Thanks, Dan Thanks for the.
Speaker Change: I know, it's not an official target, but at least kind of sizing what do you think the backlog.
Speaker Change: But now you have basically enabled us all to keep asking questions and kind of how your trucking tracking to hit that so I would suggest maybe providing that every quarter kind of where you are.
Speaker Change: Anything on the backlog for Leo.
Speaker Change: So leases have also been helpful. Even if they don't include.
Speaker Change: Include that data so you know.
Speaker Change: To the extent you sign up additional customers for Leo capacity.
Speaker Change: I would just encourage you guys to continue to do.
Speaker Change: The issue there is released it so we can get some sense some sense of the pace.
Speaker Change: One of the potentials.
Speaker Change: They should be out there.
Speaker Change: In terms of a customer for Leo capacity.
Speaker Change: Would be biased that I'm, just curious kind of what the state of the relationship you have with the company and what might be taking so long and.
Speaker Change: Presumably if you do come to some agreement with them it would be you know.
Speaker Change: It would be an announced ball than wood.
Speaker Change: Would you anticipate something more strategic like that.
Speaker Change: Being like kind of a take or pay cash type of deal or maybe equity in lightspeed like how would you imagine a relationship like that taking place.
Walter: Okay. Walter Thanks for the question.
Walter: So I'll say a few words about viasat.
Walter: I'll say at the start.
Look as a rule, we tend not to talk about.
Walter: Deal discussions with prospective customers will make an exception for viasat largely because <unk> been talking about the discussions that they've been having him with us and and I should note. We gave them a green light to do that.
Speaker Change: And I know they had their earnings call a couple of weeks ago, and Mark Denk Bird.
Walter: <unk> made some comments about.
Walter: His discussions with lightspeed and in all of our firm.
Walter: You know what Mark said I believe Mark said that.
Walter: They are by yourself.
Walter: In advanced negotiations with tell us that we are converging.
Walter: In terms of the nature of those discussions that.
They're thinking about their use of the lightspeed network kind of to support them across a couple of verticals, but probably with a heavy emphasis on the commercial aero market.
Walter: Flight connectivity and so so yeah.
Walter: I think Mark's characterization of where we are is a yeah very fair.
Walter: No bias out well.
Walter: We've worked with them for a long time, they're a customer of Telus such today, we've been a customer of theirs over the years for their VSAT product and whatnot.
And we have a high regard for our bias out there definitely are leading pretty well vertically integrated service provider.
Walter: It's just to say a little of it. It's it's less about kind of an equity kind of deal and more about them being a.
Walter: Customer and show and whether it's taking long or not I don't know if these these.
Walter: They're they're they're pretty complex.
Walter: Since to negotiate but.
Walter: As Mark said.
Walter: Yeah. The discussions are advanced the parties are converging.
Walter: You know if we ultimately get there with them for sure we'll announce that.
Walter: Yeah.
Walter: You said I think that'd be a great customer of lightspeed, given the verticals that they're focused on.
Walter: Given kind of the way the market's developing we'd welcome the opportunity to work with them. We would welcome the opportunity as we've always done in the past to work with a lot of the other service providers out there across all the different verticals that that's our business model.
Walter: <unk> business model, we need good channels, whether it's into the aeronautical market. The maritime market government you know the deal with Orange in ADN, that's much more about rural broadband connectivity and.
Walter: Extension of terrestrial and wireless networks on the ground space, Norway that we announced we signed a term sheet with space, Norway. We've worked with them for years, they're owned by the government now they used to be owned by telephone or but.
Walter: Space, Norway is now owned by the government of Norway, They've got a mix of different requirements commercial requirements government requirements like bias that they kind of have a multi orbit strategy.
Walter: Lightspeed is dynamite advanced Leo networks, so anyway.
Walter: Yeah, So I'll stop there.
Speaker Change: When a contract with them substantially get you to that end of your target and I guess similarly any of these announcements ever merit, you, putting sizing them in there or is it always going to be something you kind of hold back and only.
Speaker Change: Aggregate up in terms of overall backlog for Leo Yes, you tend not to disclose exact.
Speaker Change: Uh huh.
Speaker Change: Contract sizes.
Speaker Change: Tends to be pretty commercial and proprietary so when we talk about it we'll probably talk about it more in the aggregate.
Speaker Change: Maybe try to put some markers down distinguishing.
Speaker Change: Large contract from a contract that you know might be strategic but it might be smaller in terms of our guaranteed dollar contribution so anyway, no, but I mean, you know when we think about the pipeline of opportunities Bioscience, obviously in that pipeline there are others.
Speaker Change: And yeah, when we kind of think about them in the aggregate that gets us into the ZIP code of sort of what I was suggesting you know where we could land in terms of Leo backlog by the end of this year.
Speaker Change: Yeah, let me I prefer it.
Speaker Change: Your prayer cash as you've indicated as opposed to equity so that that's obviously good to hear.
Speaker Change: Yes.
Speaker Change: But you'll be happy to know that we're pretty aligned there, we like take or pay contracts too.
Speaker Change: We like the backlog creation, we liked the revenue and the cash flow visibility that it offers.
Speaker Change: To invest.
Speaker Change: Investors.
Speaker Change: Yeah, that's our focus we're pretty simple guys. We're building a great network.
Speaker Change: And were.
Speaker Change: Focused on.
Speaker Change: Being out there selling it.
Speaker Change: And a pretty clear straightforward way.
Speaker Change: Did you can you give us a sense of when we look at 2025, I know theres a lot of interim mingled expensive, but if we wanted to get a sense of kind of what the world looks like versus Leo just what the Opex is.
Speaker Change: The associated.
Speaker Change: With the with the Leo because obviously you're ramping up this year, we feed in Capex.
Assume there's opex that you can't capitalize maybe I'm wrong, but well north of that.
Speaker Change: Right.
Speaker Change: Looking at our guidance, we literally broken out what are what are what our Leo Opex, We gave a range of Leo.
Speaker Change: Opex of between 110 and $120 million.
Speaker Change: Median.
Speaker Change: That's all.
Speaker Change: Theres other expenditures for Leo that we expect will get capitalized.
Speaker Change: And most of that 110, 120, I mean, a huge part of that is head count and compensation related expenses, we continue to ramp up the team a lot of that is technical people, but there's some commercial people and then we just kind of have to scale. The rest of the organization to keep up with that and then there are other.
Speaker Change: Expenses, obviously that are.
Speaker Change: Above and beyond Com, but yeah, no it will be real transparent about.
Speaker Change: Trying to help folks understand.
Speaker Change: Leo versus G. O. So that you can see how those different activities are shaping up and what do you consider your 20-F, we breakout the segmentation, we make that very clear so going forward.
Speaker Change: That will continue for sure.
Speaker Change: Okay. Thank you for that and just one last one just I think in an earlier answer you said something to the extent of <unk>.
Speaker Change: Enterprises more challenging from the outside looking in and I'm just wondering.
Speaker Change: I wanted to get a little bit more color I think you were relating to the Geo business, but I mean, I guess in general in terms of satellite connectivity has the enterprise market.
Speaker Change: <unk> at all and then similarly like you know you know it looks like hyper is finally, starting to move forward on my own getting satellites up.
Speaker Change: There are entrants or vinyl finalizing some of their launch stuff change kind of your perception of that I know you said you were super bullish in the prepared comments, but then I just caught that more challenging from the outside looking in maybe I was misunderstanding. What you were saying there, but just kind of go back on the enterprise there and say what exactly is going on and what do you.
Speaker Change: Think maybe kiper.
Speaker Change: Does to that market in 'twenty, six and seven and when you launch.
Speaker Change: So I'll clarify the remark I made but what I was trying to say is if you look at our Geo business, it's easier to model. The video side of that it's three customers. It's a handful of satellites, it's easier to model the video side of our Geo business.
Speaker Change: From the outside looking in than it is to model. The G O enterprise side of our business from the outside looking in there just more moving parts there.
Speaker Change: So that's all that's all.
Speaker Change: We were saying and then as far as kiper.
Speaker Change: We've known paper's been coming for quite some time.
Speaker Change: They are a little bit later than they had originally planned on coming to market, but we still fully believe that they will be coming to market.
And that they'll have a very capable constellation and so our confidence around our ability to be successful with lightspeed.
Speaker Change: <unk> has always taken into account not just starling being there and continuing to improve their constellation, but the entry of hyper as well and they are out there in the market right now.
Speaker Change: Engaging with <unk>.
Speaker Change: Commercial and government users so we're already seeing them out there.
Speaker Change: Great. Thank you.
Speaker Change: Thank you once again, please press star one if you have a question.
Chris Quilty: The next question is from Kenneth Emily Hamm Quilty space. Please go ahead.
Chris Quilty: Hey, Thanks, guys. Most of my questions have been answered I just wanted to do one follow up on the sovereignty discussion.
Speaker Change: Yeah I was looking for there is a couple of Canadian programs like enhanced satellite Communications project listed as a $5 billion Canadian program in that space.
Chris Quilty: You said northern operational support hub.
Chris Quilty: Canadian forces program, that's supposed to have around $2 7 billion across 20 years. I guess my question is are there programs that we should watch that could be needle moving for light speed either.
Chris Quilty: What what Canadians live bands on the government.
Chris Quilty: Side should we be paying attention to that but might have an impact in terms of scope.
Chris Quilty: Some more structure around the sounds like you discussion.
David: Yeah, David Thanks for.
Speaker Change: Further question. So certainly escape has been kind of a long standing program of record.
Speaker Change: For the department of National Defense here, it's all about yeah kind of Arctic sovereignty Arctic communications, it's envisioned to be Ah Ah.
Speaker Change: That would provide in the upper latitudes.
Speaker Change: Broadband connectivity more narrow band tactical communications so.
Speaker Change: That is a program and a set of requirements, we understand very well. So that's one to watch and then but I would also say that as a long standing program of record.
Speaker Change: And I do think that with these geopolitical shifts that we spoke about.
Speaker Change: That that.
Speaker Change: There will be greater focus still on kind of that underlying mission that escape was all about maybe other things.
Speaker Change: Point folks to is just sort of some of these recent.
Speaker Change: The announcements that we've heard from I'd say, the two leading political parties here in Canada, the Conservatives announced their Arctic strategy, probably a month or so ago and if and if you have a look at that and then kind of think about the things.
Speaker Change: That lightspeed can do in terms of connecting forward operating bases connecting.
Speaker Change: Ships icebreaker ships in other ships in terms of.
Speaker Change: Just having greater presence and connectivity and do you think about fighter Jets, and you think about Uavs and drones. So and then here again, you think about light speed capabilities. So that's one thing on the one in the Liberals earlier.
Speaker Change: Earlier this week.
Speaker Change: <unk> announced kind of a refresh.
Speaker Change: Defense policy, and there's you know kind of lots of points in there, but one of the points that they make and there is about the.
Speaker Change: <unk> that Canada has to accelerate its defense spending with Canadian suppliers and one of those ways is too.
Speaker Change: Roll forward with dual use investments or investments that can support not only sovereign defense national security requirements, but also other requirements that can be you know I'll make it up bridging the digital divide providing.
Speaker Change: Infrastructure for first responders.
Speaker Change: And territorial and provincial and municipal governments, and then that refresh liberal policy. They explicitly mention satellite communicate it sounded like technologies.
Speaker Change: So those are other things maybe I.
Speaker Change: I'd point folks to to think about and the track.
Speaker Change: And those are the sorts of things that give us even greater confidence that the capabilities that we're investing in are really well suited to help the government of Canada and their allies out.
Speaker Change: As they yeah kind of engaged in this new environment.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: No more further questions.
Speaker Change: I would now like to turn anything all that go with that.
Speaker Change: Good okay, well. Thank you operator, thank you all for joining us this morning.
Speaker Change: And we will be speaking in the not too distant future because.
Speaker Change: In the not too distant future, we'll be releasing our Q1 numbers. So we look forward to speaking with you again then thank you. Thank.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: Please disconnect your lines at this time and we thank you for your participation.
Speaker Change: This conference is no longer being recorded so it does always this thing.
Speaker Change: [music].
Speaker Change: Thank you for your patience.
Speaker Change: Yeah, Yeah, we watched a silty duckenfield they'd be tough Super Duper pre owned at the end, we will have someone like any cause that stuff and you wouldn't assume that that's healthy.
Speaker Change: [music].
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: Yeah.
Speaker Change: [noise].
Speaker Change: [laughter].