Telesat(US:TSAT)2023-11-06 18:34Financial Data and Key Metrics Changes - In Q3 2023, Telesat reported revenues of $175 million, a decrease of $5 million compared to the same period in 2022. Adjusted EBITDA was $133 million, down by $4 million, resulting in an adjusted EBITDA margin of 75.9% compared to 76% in 2022 [89][90] - For the nine months ended September 30, 2023, net income was $545 million, primarily due to U.S. C-band clearing proceeds and gains from debt repurchase [8] - The net loss for Q3 2023 was $3.3 million, a significant improvement from a net loss of $228.7 million in the prior year, attributed to favorable currency conversion and debt repurchase gains [72] Business Line Data and Key Metrics Changes - Operating expenses decreased by $6 million to $50 million in Q3 2023, while cash inflow from operating activities was $156 million [89][8] - The revenue decrease was mainly due to lower revenue from certain South American customers, with a noted loss from foreign exchange of $77 million [71][90] Market Data and Key Metrics Changes - The company experienced competitive pressure in the enterprise segment, particularly from Starlink, which has gained traction in maritime and aeronautical services [120] - In Latin America, a specific contract in Peru was lost to a competitor, contributing to revenue softness in the region [32] Company Strategy and Development Direction - Telesat is focused on executing the Telesat Lightspeed program, an advanced broadband LEO network, and is optimistic about concluding funding arrangements with Canadian federal and provincial partners [5][4] - The company has secured a significant contract with SpaceX for the launch of 14 Falcon 9 rockets, which is expected to support the timely deployment of the Lightspeed network [69] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the execution of the Lightspeed program and the expected customer commitments leading up to the first satellite launch in mid-2026 [12] - There are anticipated revenue headwinds due to a renewal with Bell Canada at a lower rate, which may impact operating margins [19][106] Other Important Information - Telesat has repurchased a total of $587 million in debt at an aggregate cost of $332.7 million, resulting in annual interest savings of approximately $40 million [9] - The company maintains a cash balance of approximately $1.8 billion, with $1.3 billion held in unrestricted subsidiaries, providing a strong liquidity position [73] Q&A Session Summary Question: Can you provide insights on OpEx and CapEx ramp-up? - Management indicated that OpEx will begin to ramp up in Q4 as the Lightspeed program commences, with detailed guidance expected in future calls [94][96] Question: Any updates on the constellation planning and capacity commitments? - Management confirmed ongoing engagement with customers and expects to announce additional capacity commitments throughout the next year [12][99] Question: What are the expectations regarding gross margins? - Management noted that while they have historically maintained high operating margins, there may be downward pressure due to revenue headwinds from contract renewals [19][106] Question: Can you clarify the funding arrangements with Canadian partners? - Management stated that they are making good progress with federal and provincial partners and expect to reach financial close either late this year or early next year [109] Question: How is the competitive landscape evolving with Starlink's entry? - Management acknowledged increased competitive intensity in the enterprise segment, particularly in maritime services, but remains confident in the value proposition of the Lightspeed constellation [120]