Telesat Corporation

Good morning, ladies and gentlemen. Welcome to the conference call to report the fourth quarter 2021 financial results for Telesat. Our speakers today will be Dan Goldberg, President and Chief Executive Officer of Telesat, and Andrew Brown, Chief Financial Officer of Telesat. I would now like to turn the meeting over to Mr. Michael Bolaito, Director of Treasury and Risk Management. Please go ahead, Mr. Bolaito.

Thank you, and good morning. This morning we filed an annual report on Form 20F with the SEC. Our remarks today may contain forward-looking statements. There are risks that Telesat's actual results may differ materially from the results contemplated by the forward-looking statements as a result of known and unknown risks, risk factors, and uncertainties, which are discussed in Telesat's annual report filed with the SEC on Form 20F. Telesat assumes no responsibility to update or revise these forward-looking statements. I will now turn the call over to Dan Goldberg, Telesat's president and chief executive officer.

Good. Thanks, Michael. Good morning, everyone. This morning I'll discuss our fourth quarter and full-year financial results and give an update on the business. I'll then hand over to Andrew. We'll speak to the numbers in more detail, and then we'll open the call up to questions. Looking first at the full-year numbers and adjusting for foreign exchange rate changes, Revenue and adjusted EBITDA were both down 4% relative to the prior year, and our adjusted EBITDA margin remained stable at 79.6%. The revenue and adjusted EBITDA decrease was primarily due to a reduction of service for one of our North American direct-to-home customers, the reduction or non-renewal of some services in the enterprise segment, including as a result of the full-year impact of contractor restructurings in 2020 for a mobility customer as a result of COVID-19 and lower consulting revenue as well. The revenue decline was partially offset by an increase in revenue from short-term services provided to another satellite operator in 2021, which didn't occur in 2020, as well as increased services provided to customers in the mobility market as it began to recover from the impact of COVID-19. Looking at our fourth quarter numbers and adjusting for FX, revenue was down 5% relative to Q4 2020, adjusted EBITDA was down 7%, and our adjusted EBITDA margin was 77.5% versus the 79.5% in Q4 2020. The revenue and adjusted revenue, I'm sorry, the revenue and adjusted EBITDA reductions were primarily due to lower equipment sales to certain government customers, the reduction or non-renewal of certain services in the enterprise segment, and a reduction of services for one of Telesat's North American direct-to-home customers. Turning to some key metrics, backlog at the end of 2021, excluding backlog associated with Telesat Lightspeed, was $2.1 billion and fleet utilization was 80%. And looking at how our revenues broke down on an application basis in 2021, broadcast was 51% of total revenue, enterprise services 47%, and consulting another 2%. And on a geographic basis for the year, North America accounted for 83% of revenue, Latin America 7%, EMEA 5%, and Asia 5% as well. Beyond the numbers, 2021 was an eventful year for Telesat, including becoming publicly traded, clearing the C-band spectrum we've used in the U.S., and receiving payment for the first portion of the $344 million allocated to Telesat in the FCC's CBAM clearing proceeding and making substantial progress on Telesat Lightspeed. With respect to Telesat Lightspeed, last year we announced a $1.44 billion and a separate $400 million investment in the program by the government of Canada and the government of Quebec, respectively. which brings to over $4 billion the amount of financing we've lined up for Lightspeed to date. We also concluded an agreement with the government of Ontario to use Telesat Lightspeed to help bridge the digital divide, which along with our government of Canada agreement previously announced, contributes to the over $750 million in contractual backlog we had in place for Telesat Lightspeed at the end of last year. And again, that backlog is incremental to the backlog that I mentioned earlier, where we ended last year. Lastly, we did a huge amount of work with the supply chain for Lightspeed, advancing the key technologies underpinning the high-performing satellites and systems that are key to its operation. As we noted last quarter, Thales Alenia Space, who we've been working with on Telesat Lightspeed, informed us late last year that the global supply chain issues out there will delay the construction and in-service date of the Lightspeed Constellation. These issues are also putting upward cost pressures on the program. We're working through these issues with TALIS now, and we expect to share an updated business plan in the near term with the export credit agencies with whom we've been in discussions to provide financing for the program that will allow us to get those discussions moving again. Although these supply chain issues have been unwelcome, we remain enthusiastic about the prospects for Telesat Lightspeed and are focused on completing the financing and commencing the full-scale construction of the program in the near term. Before summing up and handing over to Andrew, I wanted to note that I've spoken to a number of our debt investors over the past few months, including addressing a range of questions about Telesat Lightspeed. Reflecting on those discussions, we thought it was important to reiterate a few points on our call here this morning, sort of in the affirmative, just so we're all aligned on how we're thinking about the world. First, it's our plan in the main to operate our geo business and our leo business, tell us at light speed, as an integrated business, which is to say the same management team, same sales team, technical and operations teams, and the same corporate support functions like finance, legal, human resources, IT, and the like. The fact that LEO is being financed in a separate credit silo has been solely a function of the borrowing covenants that exist in our current credit facilities, not the fact that we think about it as a separate business. Second, Telesat Canada, our restricted entity, owns 100% of the equity of our LEO subsidiary and we have no plans at this time to move that subsidiary out from under Telesat Canada. And third, we expect our geo-activities will continue to generate significant cash, and we intend to use that cash in a way that strengthens the business, which could include paying down current debt and otherwise managing our leverage profile. These are all points that we've made in the past, but we thought it would be useful to reiterate those points given some of the questions we've been hearing from folks. We're going to be presenting at quite a few investor conferences over the course of this year and engaging with the market more broadly on what's happening at Telesat, including our expectations on Telesat Lightspeed. So those will all be good opportunities to continue to drive these points home and share our enthusiasm more broadly about our future prospects. So with that, I'll hand over to Andrew, and then I look forward to addressing questions.