Telesat Corp. Q3 FY2024 earnings call

• Dan Goldberg noted that Q3 and the first nine months unfolded largely as expected, with updated guidance for revenues at the upper end of the range and adjusted EBITDA at or above the top end of the range.
• Closed funding for Lightspeed towards the end of Q3, making good progress with suppliers and hiring for the program.
• In GEO, entered a renewal agreement with EchoStar for Nimiq-5, sold Infosat, and restructured the contract with Explorer.
• Andrew Browne highlighted consolidated financial results for Q3 2024, cash from operations, capital expenditures related to Lightspeed, updated 2024 guidance including revenues, adjusted EBITDA, and CapEx ranges, debt repurchases, and compliance with credit covenants.

In the third quarter of 2024, Telesat reported consolidated revenues of CAD138 million and adjusted EBITDA of CAD96 million. For the first nine months of 2024, the company generated CAD64 million in cash from operations and ended the third quarter with CAD1.1 billion of cash. Revenues in Q3 2024 decreased by CAD37 million compared to Q3 2023, while operating expenses decreased by CAD4 million. Adjusted EBITDA decreased by CAD37 million. The revenue decrease was primarily due to reduction in services, lower rate on a long-term agreement renewal, and lower revenues from certain mobility and Latin American customers. Capital expenditures in Q3 2024 were almost all related to Telesat Lightspeed, with CAD550 million in cash payments made and CAD111 million accrued. The GEO segment had activities like renewing the agreement with EchoStar for Nimiq-5, selling Infosat, and restructuring the contract with Explorer. The LEO segment saw progress with the Lightspeed program closing funding and making good progress on execution.

• For 2024, Telesat expects full year revenues to be at the upper end of the range between CAD545 million and CAD565 million.
• Adjusted EBITDA is expected to be at or above the range of CAD340 million to CAD360 million.
• 2024 capital expenditures are expected to be in the range of CAD1 billion to CAD1.4 billion, nearly all related to Telesat Lightspeed.
• As of the end of September, Telesat had approximately CAD1.1 billion of cash and short-term investments and CAD2.54 billion available under funding agreements with the government of Canada and Quebec.

• Impact of DISH contract renewal on revenue, as revenue from DISH is expected to decrease significantly but may be offset by reallocating capacity from other satellites, but uncertainty remains on net impact.
• Explorer's financial challenges led to contract restructuring and an incremental bad debt provision.
• Competition from StarLink and other LEO providers, as user community shifts to LEO, requiring Telesat to compete on quality, price, and service.
• Regulatory and interoperability risks, such as ensuring Lightspeed is interoperable with other constellations and meeting international regulatory requirements.

Q: On the EchoStar renewal, what is the net impact expected?

A: Dan Goldberg said it's more about shifting revenue from satellites approaching end of life rather than new revenue, and no 2025 guidance yet available.

Q: On Lightspeed CapEx guidance, how does it show up in cash flow?

A: Andrew Browne explained that CapEx includes cash payments related to satellite programs and property/equipment, with CAD550 million in cash payments for Lightspeed year-to-date.

Q: Any update on discussions with ViaSat regarding Lightspeed?

A: Dan Goldberg affirmed that ViaSat is in discussions with Telesat about a Lightspeed capacity purchase.

Q: Update on the Shaw lawsuit?

A: Telesat filed a lawsuit against Shaw seeking CAD45 million in damages, including revenue payments owed and punitive damages.

Q: On Lightspeed gateways, how far does the Intellian contract get Telesat?

A: Dan Goldberg and Dave Wendling said the Intellian order covers about 27 gateways, with progress being made on mapping gateway locations globally.

Q: On interoperability of Lightspeed with military constellations and IRIS²?

A: Dan Goldberg stated Telesat is intentional about interoperability, and there's a high likelihood of interoperability with IRIS² due to shared technology and goals of maximizing resilience and flexibility.