Telesat(US:TSAT)2023-08-11 18:45Financial Data and Key Metrics Changes - Telesat reported revenues of $180 million in Q2 2023, a decrease of $7 million compared to the same period in 2022 [63] - Adjusted EBITDA for Q2 2023 was $139 million, down from $147 million in Q2 2022, resulting in an adjusted EBITDA margin of 77.1%, compared to 78.4% in 2022 [42][43] - The company recognized approximately $260 million in C-band clearing proceeds during the quarter, contributing to a net income of $520 million, compared to a loss of $4 million in the prior year [36][44] Business Line Data and Key Metrics Changes - The revenue decrease was primarily due to a service termination by a South American customer and reduced revenues from a North American DTH customer, partially offset by increased revenue from NASA-related work [64] - Operating expenses decreased by $7 million to $52 million, attributed to lower noncash share-based compensation, despite higher costs for third-party satellite capacity [63] Market Data and Key Metrics Changes - The company maintains its guidance for 2023 revenues between $690 million and $710 million, assuming a Canadian dollar to U.S. dollar exchange rate of CAD1.35 [45] - Telesat's total program cost for the Lightspeed project is approximately $3.5 billion, with a capital expenditure of about $2.7 billion for the initial 156 satellites [53][60] Company Strategy and Development Direction - Telesat has selected MDA as the prime contractor for the Lightspeed satellites, leveraging advanced technology to reduce capital expenditures by roughly $2 billion while maintaining network capabilities [57][60] - The company is focused on the global enterprise broadband market and aims to grow revenue and adjusted EBITDA significantly, targeting an internal rate of return (IRR) of approximately 30% on the Lightspeed project [60][61] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in closing funding with government partners and emphasized the importance of timely execution moving forward [92][93] - The company is optimistic about the support from Canadian government partners, especially with MDA's increased role in the project [114][130] Other Important Information - Telesat has approximately $1 billion in cash held in unrestricted subsidiaries and continues to generate significant cash from operations [46] - The company has repurchased a total of $456 million in debt at an aggregate cost of $233.9 million, resulting in annual interest savings of approximately $27 million [78] Q&A Session All Questions and Answers Question: Can you confirm the capacity of the new network compared to the previous one? - Management confirmed that the new constellation will have the same or roughly the same amount of capacity as the prior network, despite spending $2 billion less [68][69] Question: What is the status of the government financing? - Management indicated that all government funding will be over on the unrestricted side, and they are confident in closing the funding with government partners [92][113] Question: What keeps management up at night regarding the project? - Management highlighted the need to close funding with government partners and the extensive work required to ramp up operations as key concerns [92][93] Question: Can you provide details on the funding structure for the remaining $900 million? - Management expects that all government funding will be allocated to the Lightspeed subsidiary, and they are focused on finalizing agreements with government partners [92][93] Question: What are the alternative uses of cash flow besides debt buybacks? - Management stated that while debt buybacks have been a priority, they remain open to other investment opportunities that could strengthen the business [134]