Telesat(TSAT) - 2025 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Telesat reported consolidated revenues of CAD 106 million for Q2 2025, a decrease of CAD 46 million compared to 2024 [7] - Adjusted EBITDA for the quarter was CAD 59 million, down CAD 45 million year-over-year, with an adjusted EBITDA margin of 55% [8] - Net income for Q2 2025 was CAD 76 million, compared to CAD 129 million in the same period last year [10] - Cash from operations year-to-date was CAD 108 million, ending the quarter with CAD 547 million in cash [7][10] Business Line Data and Key Metrics Changes - The GEO segment experienced a significant revenue decline primarily due to a lower renewal rate with a North American direct-to-home customer [8] - The LEO segment is progressing well, with a committed backlog for Telesat Lightspeed exceeding CAD 1 billion, slightly up from the previous report [5][19] - Operating expenses decreased by CAD 6 million to CAD 51 million, attributed to higher capitalized engineering costs and lower consulting costs [8] Market Data and Key Metrics Changes - The company noted a gain on foreign exchange of CAD 115 million compared to a loss of CAD 34 million in 2024 [10] - Interest expense decreased by CAD 8 million during the second quarter compared to the same period in 2024, primarily due to debt repurchases [9] Company Strategy and Development Direction - Telesat is focused on refinancing restricted group debt due in December 2026 and is actively searching for a new CFO [6] - The company remains optimistic about the demand for Telesat Lightspeed, particularly in the aero and government sectors, and is working to convert a robust pipeline of opportunities into completed deals [5][29] - Telesat is committed to maintaining a strong position in the LEO market, emphasizing the importance of its capabilities in meeting government requirements and defense spending [31][45] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the future performance of Telesat Lightspeed, highlighting strong interest from customers and a robust pipeline [5][29] - The company anticipates that the headwinds from the GEO segment will ease as contracts renew, particularly after the DISH renewal in Q4 2025 [28][62] - Management remains focused on executing the Lightspeed plan and believes it presents significant value creation opportunities [78] Other Important Information - Telesat reiterated its guidance for 2025, expecting full-year revenues between CAD 400 million and CAD 425 million [11][13] - The company has approximately CAD 550 million in cash and short-term investments, along with CAD 2.2 billion available under funding agreements with the governments of Canada and Quebec [13] Q&A Session Summary Question: Clarification on LEO backlog - Management explained that the LEO backlog reported in CAD was affected by currency fluctuations, with a slight increase in backlog due to a new contract [17][19] Question: Update on debt restructuring - Management indicated that they have not yet engaged with debt holders but expect to do so soon, with a possibility of concluding negotiations by the end of 2025 [22][24] Question: GEO business decline and future outlook - Management acknowledged that the decline in GEO revenue is primarily due to contract renewals and expects some headwinds to ease in the coming years [25][28] Question: Demand for Lightspeed - Management remains optimistic about demand for Lightspeed, particularly in the aero and government sectors, and noted a robust pipeline of opportunities [29][31] Question: Operating expenses for Lightspeed - Management indicated that operating expenses for Lightspeed are expected to ramp up as headcount increases, particularly in technical and commercial teams [34][36] Question: User terminals availability - Management confirmed that user terminals, including flat panel antennas, will be available before Lightspeed enters commercial service [40][41] Question: Competitive landscape with Kuiper - Management acknowledged the competitive landscape with Kuiper and emphasized Telesat's differentiated capabilities in the market [68][72] Question: Interest in additional spectrum - Management stated that Telesat is focused on its core mission and does not plan to pursue direct-to-device capabilities, despite observing competitors' actions [78][80]