Telesat(US:TSAT)2023-05-11 20:58Financial Data and Key Metrics Changes - Telesat reported revenues of $183 million for Q1 2023, a decrease of $2 million compared to the same period in 2022 [6] - Adjusted EBITDA for Q1 2023 was $139 million, down $7 million from the previous year, resulting in an adjusted EBITDA margin of 75.7%, compared to 78.4% in 2022 [7] - Net income for Q1 2023 was $29 million, a decrease of $32 million from $61 million in the prior year [9] - Cash flow from operating activities was $63 million, with $7 billion in cash on the balance sheet [6][10] Business Line Data and Key Metrics Changes - Revenue decline was primarily attributed to reduced revenues from North American DTH customers, partially offset by higher equipment sales to Canadian government customers and increased services to air and maritime customers [7] - Utilization at the end of Q1 was 88%, slightly down from 89% at the end of Q4 [4] Market Data and Key Metrics Changes - Interest expense increased by $20 million compared to the same period in 2022, driven by rising interest rates and foreign exchange impacts [8] - A gain on foreign exchange of $10 million was recorded, down from $36 million in the same quarter of 2022 [8] Company Strategy and Development Direction - The company is optimistic about the Lightspeed constellation project, continuing to engage with various parties despite not having significant updates [5] - Telesat has repurchased approximately $103 million in face value of debt, which is expected to strengthen its financial position [5][11] Management's Comments on Operating Environment and Future Outlook - Management reaffirmed the full-year guidance provided in late March, indicating that the revenue and adjusted EBITDA declines are primarily due to the renewals with Bell and DISH [3][4] - The company expects to maintain its 2023 revenue guidance between $990 million and $710 million, with adjusted EBITDA expected to be between $500 million and $550 million [10] Other Important Information - Telesat has approximately $1.7 billion in cash and short-term investments, along with $200 million available under its revolving credit facility [10] - The leverage ratio at the end of Q1 was 6.24 times, with compliance to all covenants in the credit agreement [11] Q&A Session Summary Question: Update on LEO discussions - Management confirmed ongoing discussions with existing parties and noted progress, but no significant updates were available [12] Question: Participation in the IRIS 2 European project - Management stated that Telesat is not a bidder for the project but is monitoring developments and evaluating potential participation [13] Question: Cost to build Lightspeed and launch timeline - Management indicated no significant inflationary pressures affecting the estimated cost of $5.5 billion and projected the first launches could begin in 2026 [18] Question: Supplier conversations and cost reduction opportunities - Management confirmed ongoing collaboration with Thales as the prime contractor while evaluating alternative suppliers to reduce costs [19] Question: Impact of Erwin Hudson's retirement on Lightspeed - Management expressed confidence in the technical team's capabilities and indicated that Hudson would continue to consult on the project [20] Question: Royalty payments between GEO and LEO businesses - Management clarified that payments are for shared resources rather than royalties, with revenues primarily coming from U.S. government services [21] Question: Impact of Shaw Rogers transaction on relationships - Management stated that the relationship with Shaw is not expected to be adversely impacted by the Rogers acquisition [23] Question: Renewal timelines for Shaw contracts - Management indicated that renewals are tied to the end-of-life of satellites, with timelines extending into 2024 and beyond [24]