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Telesat(TSAT) - 2024 Q4 - Earnings Call Transcript
TSATTelesat(TSAT)2025-03-27 21:13
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Financial Data and Key Metrics Changes - Telesat reported revenues of 571millionforthefullyear2024,withadjustedEBITDAof571 million for the full year 2024, with adjusted EBITDA of 384 million and cash from operations of 62million,outperformingguidance[21]−InQ42024,revenueswere62 million, outperforming guidance [21] - In Q4 2024, revenues were 128 million and adjusted EBITDA was 73million,down73 million, down 38 million and 50millionrespectivelyfromQ42023[22]−TheadjustedEBITDAmargindecreasedto57.450 million respectively from Q4 2023 [22] - The adjusted EBITDA margin decreased to 57.4% in Q4 2024 from 74.3% in Q4 2023, with the GEO segment adjusted EBITDA margin at 78% compared to 82.2% in the same period [22][23] - A net loss of 447 million was recorded in Q4 2024, compared to a net income of 39millioninQ42023,primarilyduetoforeignexchangeimpacts[25]BusinessLineDataandKeyMetricsChanges−TheGEObusinessisexpectedtofacecontinuedrevenuepressurein2025,withaforecasteddeclineofapproximately39 million in Q4 2023, primarily due to foreign exchange impacts [25] Business Line Data and Key Metrics Changes - The GEO business is expected to face continued revenue pressure in 2025, with a forecasted decline of approximately 155 million, largely due to lower rates from the DTH business and the end of service contracts [9][10] - The enterprise and consulting activities are also expected to contribute to revenue decline, particularly from maritime and aero markets due to competition from Starlink [10][11] - Operating expenses for Lightspeed are anticipated to increase by approximately 40millionin2025,drivenbyinvestmentsinengineeringandoperations[11]MarketDataandKeyMetricsChanges−Theenterprisebusinesshasseensignificantrevenuedeclines,withadropof40 million in 2025, driven by investments in engineering and operations [11] Market Data and Key Metrics Changes - The enterprise business has seen significant revenue declines, with a drop of 93 million in 2024, attributed to competition from Starlink and the sale of the Infosat business [72][80] - The company expects continued headwinds in the enterprise space in 2025, with a shift from GEO to LEO impacting revenues [80] Company Strategy and Development Direction - Telesat is focused on disciplined execution in both GEO and LEO markets, with a strong emphasis on building out and commercializing the Lightspeed constellation [12][15] - The company has secured funding from the governments of Canada and Quebec for Lightspeed, investing over 1billionindevelopmentanddeploymentin2024[7][21]−Telesatisoptimisticaboutthemarketforcommercialservices,particularlyinlightofgeopoliticalshiftsincreasingdemandforsovereignnationalsecurityrequirements[14][15]Management′sCommentsonOperatingEnvironmentandFutureOutlook−ManagementanticipatesachallengingoperatingenvironmentfortheGEObusinesstopersistin2025,withafocusonmitigatingmarketpressures[8][12]−ThecompanyisoptimisticaboutthepotentialforLightspeed,expectingtolaunchthefirstbatchofsatellitesinlate2025andseeingstrongtractionwithprospectivecustomers[13][14]−Managementhighlightedtheimportanceofrefinancingrestrictedgroupdebtasapriorityfortheyear[15][58]OtherImportantInformation−Telesatended2024with1 billion in development and deployment in 2024 [7][21] - Telesat is optimistic about the market for commercial services, particularly in light of geopolitical shifts increasing demand for sovereign national security requirements [14][15] Management's Comments on Operating Environment and Future Outlook - Management anticipates a challenging operating environment for the GEO business to persist in 2025, with a focus on mitigating market pressures [8][12] - The company is optimistic about the potential for Lightspeed, expecting to launch the first batch of satellites in late 2025 and seeing strong traction with prospective customers [13][14] - Management highlighted the importance of refinancing restricted group debt as a priority for the year [15][58] Other Important Information - Telesat ended 2024 with 552 million in cash on the balance sheet and a total leverage ratio of 6.68 times [21][31] - The company repurchased 262millionindebtduring2024,resultinginannualinterestsavingsofapproximately262 million in debt during 2024, resulting in annual interest savings of approximately 54 million [27] Q&A Session Summary Question: Can you provide insight on the geopolitical shifts affecting discussions? - Management noted that discussions have accelerated due to a greater focus on sovereign customers needing access to advanced LEO networks, particularly in Canada [36][42] Question: What is the current backlog for Lightspeed? - Management indicated that the LEO backlog is around $600 million, including a significant agreement with the government of Canada, and expects it to grow significantly by the end of the year [44][50] Question: What is the update on debt restructuring? - Management confirmed that refinancing restricted group debt is a priority and is expected to be tackled sooner rather than later [56][58] Question: How does the GEO revenue decline look for 2026? - Management has not projected far into 2026 but noted that the GEO business is predictable, with visibility on major contract renewals [60][62] Question: What is the state of the enterprise business? - Management acknowledged challenges in the enterprise segment due to competition and the aging satellite fleet, but remains optimistic about future opportunities with Lightspeed [80][112]