Telesat Corporation

and now are fully re-engaged with them to secure their commitments for the program. The plan is for 188 satellites plus 10 in-orbit spares, which keeps us within the same CapEx envelope we were working with previously, notwithstanding the cost increases we've seen from supply chain shortages and other inflationary pressures. On our last call, I said we expected to have a much better sense of where things sit with the ECAs by the end of June, and we're still focused on that timeframe. We remain enthusiastic about the prospects for Telesat Lightspeed and remain heavily focused on completing the financing and commencing the full-scale construction of the program. So with that, I'll hand it over to Andrew, and then look forward to addressing any questions.

Thank you, Dan, and good morning, everyone. I would now like to focus on highlights from this morning's press release and filings. In the first quarter of 2022, Telesat reported revenues of $186 million, adjusted EBITDA of $146 million, and generated cash from operations of $43 million, with over $1.5 billion of cash on the balance sheet at quarter end. For the quarter of 2022, compared to the same period in 2021, revenues decreased by $5 million to $186 million, operating expenses increased by $24 million to $64 million, and adjusted EBITDA decreased by $6 million to $146 million. the adjusted EBITDA margin was 78.4% compared to 79.8% in 2021. Between 2021 and 2022, changes in the U.S. dollar exchange rate had a minimal impact on revenue, operating expenses, and adjusted EBITDA. The revenue decrease was primarily due to reduction of service for one of Calisthenics North America's direct-to-home customers, some reductions terminations on contract renewal of certain services, and a decrease in equipment sales to Canadian government customers. This was partially offset by increased services provided to customers in the mobility market as it continues to recover from the impact of COVID-19. The increase in operating expenses was principally due to higher non-cash share-based compensation expense and to a lesser extent the reversal of the bad debt provision in the fourth quarter of 2021, which had the impact of lowering operating expenses in the prior period and also including some higher expenses in respect of being a public company These are partially offset by higher capitalized engineering costs associated with the increased activity in the Light Speed program. Interest expense increased by $7 million in the fourth quarter compared to the same period in 2021. The increase in interest expense was primarily due to interest on the 2026 senior secured notes, which were issued in April 2021, partially offset by the impact of the maturity of one of our interest rate swaps in September 2021. As Dan had mentioned, in March and April, we repurchased our senior secured notes with a face amount of $16 million by way of open market purchases. These repurchases resulted in a gain in the fourth quarter of Canadian $21 million. We will also show a further gain in the second quarter of approximately $17.5 million. All of the notes repurchased will be cancelled. As Dan has also mentioned, we have authorization to purchase up to a further $100 million face value of debt. The gain on changes in fair value of financial instruments for the fourth quarter of 2022 reflects primarily changes in the fair values over interest rate swaps and prepayment options on our notes. The loss on changes in fair value of financial instruments for the fourth quarter of 2021 primarily reflected changes in the fair values over interest rate swaps and prepayment options. For the fourth quarter of 2022, the cash inflows from operating activities were $43 million. and the cash flows generated from investing activities were $47 million, including about $65 million by way of receipt of the remaining Phase 1 U.S. EVAN clearing process, and with virtually all of the capital expenditures relating to our lower orbit constellation. Guidance. As you will also have noted in our earnings release this morning, we are reiterating our previously stated 2022 guidance. Our guidance reflects the Canadian dollar-to-U.S. dollar exchange rate of 1.3%, For 2022, Telesat expects its full-year revenues to be between $720 million and $740 million. Telesat expects its adjusted EBITDA to be between $520 million to $545 million in 2022. With respect to expected capital expenditures, and as Dan has also noted, we are continuing to work at this time to finalize our financing and contracts with our key suppliers. For now, we expect our 2022 cash flows used in investing activities. to be in the range of $100 million to $120 million, including capital expenditures, to further advance our Lightspeed program. Once we have greater visibility around the construction and financing of our Telesat Lightspeed program, we will provide a further update on our anticipated capital expenditures for the year, which could increase substantially. To meet our expected cash requirements for the next 12 months, including interest payments and capital expenditures, We have approximately $1.5 billion of cash and short-term investments at the end of December, as well as approximately $200 million of borrowings available under revolving credit facilities. Approximately $1 billion in cash was held in our unrestricted subsidiaries. In addition, we continue to generate a significant amount of cash from our ongoing operating activities. At the end of the first quarter, leverage as calculated under the terms of our amended senior secured facilities was 5.67 times to 1. Telesat has complied with all the covenants in our credit agreements and indentures. A reconciliation between our financial statements and financial covenant calculations is also provided in the report we filed this morning. Our 6K provides the unaudited interim condensed consolidated dating financial information in the MD&A. The non-parent or subsidiaries shown are essentially the unrestricted subsidiaries with some minor differences. So that concludes our overall prepared remarks for the call. Now we'll be very happy to answer any questions we may have and we will turn back to the operator.

Thank you. We will now take questions from the telephone lines. If you have a question and you're using a speakerphone, please lift your handset before making your selection. If you have a question, please press star 1 on your device's keypad. To cancel the question, please press star 2. Please press star 1 at this time if you have a question There will be a brief pause while participants register. Thank you for your patience. And the first question is from Jason Kim from Goldman Sachs. Please go ahead. Hi, this is Julie.

I'm for Jason. On light-speed funding, what are the additional steps that need to happen in order to complete the financing? And we continue to hear about the supply chain and inflation issues across all markets. How are you thinking about your early investment needs now versus your initial plan?

Hey, Julia, it's Dan Goldberg. So let's see, a couple of things. So light-speed financing, you know, fundamentally, we've been saying this for a while, the missing piece right now that we need to close on are the discussions that we're having with the export credit agencies. So I think we've said that, you know, we've already sort of, you know, lined up I know these are Canadian dollars. There's like $4.2 billion of financing between the cash that we have, the contributions that we've made already, the commitments we have from the government of Canada, the government of Quebec, and things like that. And we've talked about a CapEx envelope for the program of about $5 billion U.S. dollars. So in any event, you know, the The heavy focus is concluding those discussions with the export credit agencies. The history here is we were, I think, making good progress with the ECAs in Q4. And then early in Q4, we got bitten by these supply chain issues, which caused delays and some inflationary pressures on the program. if you've followed the history here, we spent a lot of Q4 and a good chunk of the early months of this year working with TALIS to update the schedule, reformulate the program, and our other suppliers too. But having now kind of updated the program and worked through those issues, we're now back re-engaged with the export credit agencies and so what I think I said on our last call and what I said earlier this morning is that we're hoping that by the end of June we're going to have a pretty good sense of where we're sitting with the ECAs. That's kind of the timeline that we're trying to drive towards right now. And then you know on the inflationary pressures We've been dealing with those. And I think that what we've done is we're moving forward with a constellation of, and this is the plan that we're speaking to the export credit agencies about, it's 188 satellites in orbit plus 10 other in-orbit spares to provide some redundancy and resiliency and obviously all the ground facilities that are integrated with the network and all the launch vehicles and the software platforms that we need. All of that is kind of covered in that kind of $5 billion U.S. dollar number. So that's how we're addressing it. It's a hugely capable kind of, you know, enterprise-grade focus constellation. So we feel good about it. So that's where we are right now.

Awesome. Thank you. Two more questions. On ANIC F3... It's good to see the partial renewal of DISH and also leasing out the rest of the capacity. I think in the past you said that DTH contracts generally generate around $70 million Canadian dollars of annualized revenue in EBITDA. In the current construct, how much is ANIC F3 satellite generating in revenue in EBITDA now, and how should we be thinking about that run rate for the next few years?

Yeah, no, so you're right. We have said that. you know, our, I don't know, just kind of typical DTH contract, you know, sort of generates that sort of revenue profile, about 70 million Canadian. And, yeah, we're very pleased with the renewal that we got with DISH and probably even more pleased still how quickly we were able to, you know, get the rest of that capacity and under contract and generating revenue. We're not going to, though, provide kind of a new run rate on ANAC F3. You know, we've given guidance for the year. Certainly closing the dish renewal and entering into that other big contract for all those cruise services makes us feel, you know, quite comfortable about the guidance that we've given. Andrew reiterated it just a few moments ago. But beyond that, we're not going to give kind of more granular information about what F3 is going to be throwing off going forward.

Got it. Makes sense. Thank you. And then on NIMIC 5, that's coming up for renewal in 2024. I know that's a few years out, but in your view, are there any differences between NIMIC 5 and ANAC F3 in terms of the importance to your customers? Sure.

Yeah, we think there are real qualitative differences, and we talked about some of those when we were talking to the market about the ANAC F3 renewal. You know, ANAC F3 was used to support services for DISH that, and we talked about this a lot before, that really weren't kind of core to their central multi-channel offering. It was used for kind of a more niche market. It was used for ethnic broadcast services, so mostly not English, and really served kind of a niche market. That's not true really for any of our other DTH satellites, NMIC-5 with DISH, which is very much kind of supporting their more core direct TV services that are kind of made widely available for their subscribers, and that would also be true for the other DTH contracts that we have with Bell, that we have with Shaw. So F3 was, yeah, it was kind of different in that regard. It was providing important services, but services that really weren't core to the main DTH offering of DASH.

Thank you. And then my last question is regarding the bond buyback program, is there any reason for the size of $100 million USD face value program that was authorized? And then your initial bond buyback focused on the unsecured bonds, and are they going to be your focus going forward, I guess, given where they're trading now?

As far as the amount... I'm sorry, my general counsel is... As far as the amount... Yeah, I don't know, we just sort of felt that was appropriate. I mean, you know, we look at the amount of cash that we have available for all the different things that we want to do. And so, I don't know, there wasn't really any exact science to it. It just, you know, felt like the right amount. I mean, obviously in the future, if we change our minds and want to do something different, then we can do something different. And then as far as kind of, I don't know, the tranches, I'd say we're sort of being open-minded about that. And look, we're also, I should say, we're not committing to buy back any debt. We've been authorized to buy back debt. We made the purchases that we made in March and April. I think it's good for the company to have the flexibility to do it. We're just being pretty transparent with everyone that we have that authorization. But the fact that we have the authorization doesn't necessarily commit us to doing anything.

Great, thank you so much.

Thank you.

Thank you. The next question is from Arun Seshadri from Credit Suisse. Please go ahead.

Hello everyone, thanks for taking my questions. First, I wanted to ask, in terms of the, I guess, reduction in scope of light speed, can you talk about whether there are any you know, do you expect to use the full $5 billion U.S. for a one-third reduction in scope? Obviously, you're dealing with increased costs of the overall program, but is there any scope for a reduction in the required funding?

I doubt it. I mean, I think we've... Look, we're well advanced in the development of this program, so... It doesn't feel like it, Arun. I mean, we're not people that like to spend more than we need to. But I don't think so. I think, frankly, I think what we're doing is very capital efficient when you just look at the amount of capacity that we're going to deploy and the amount of capital that's required to deploy that much capacity. I mean, this constellation will have something like 10 terabits of capacity. It's more capacity than exists if you aggregate all the in-orbit geo-satellites. So, I mean, it's completely disruptive in terms of the capability that we're bringing. And I'd note, just in terms of capital efficiency, I think unlike some of the other low-Earth orbit satellite programs that are moving forward, these satellites are real, you know, large, complex, capable satellites that have a you know, a service life of 10 years plus another year just, you know, for launching, getting them into their final orbit and for in-orbit testing and the like. And so we actually feel, I mean, we didn't love, obviously, the inflationary pressures that we're seeing out there, but even with them, we think that, you know, what we're bringing to market is going to be disruptive in terms of the the quality of service that it will deliver and the price at which we can deliver it, still achieving the kinds of returns that we need to achieve. So that's a long-winded answer, but the short answer is I don't think there's really a lot of scope to bring that number in.

Got it. Thank you for that, Dan. And then it's just a broader question. Obviously, with the moving to the right of light speed timing and You're obviously also seeing Kuiper come in at a similar time now. I think you had probably a one- to two-year lead over them, which is sort of gone by the wayside somewhat. So just first, your thoughts on that. And second, given that Lightspeed has moved to the right, what are your current thoughts on the geo-satellite fleet and sort of a longer-term CapEx envelope that requires that you would need to sort of deploy in order to keep that, you know, keep that business in good shape?

So I'll start with your first question about Kuiper. Look, we always believed that Amazon was serious about building out Kuiper and, you know, frankly, you know, a one-year head start or, you know, whatever. I don't think that's, you know, really that material in terms of our our competitive positioning. We're building a constellation that's very much focused on and built for this kind of enterprise and government market that Telesat's been serving for the last 50 years. For sure, Kuiper's gonna be providing services to some of those verticals as well, but I think their constellation's really more optimized for the primary market, but they're focused on serving, which is more the consumer broadband market. And, you know, it looks like right now they're not going to be having polar coverage. There are some limitations there. So, you know, our business case is intact, you know, fundamentally. It's a big, big market. We know this market well. We know the customers well. You know, we've engineered our constellation to give us and I think our customers certain competitive advantages in the verticals that we're focused on, backhaul, you know, for ISPs and mobile network operators, the aero market, the maritime market, the government market, and we're really happy. I didn't talk about it in my comments, but we landed that, you know, really interesting contract with NASA. That took place in Q2, but, you know, we announced it in connection. We mentioned it in this earnings release as well. So, you know, with With the delay that we've had, and I would note, everyone's getting delayed. I mean, I haven't heard from a single satellite operator in the last, I don't know, 12 months, whether they're a new entrant, whether they're a long-standing operator, just everyone's kind of getting moved to the right a little bit, mostly for the same reasons that we've been moved to the right, these supply chain issues and whatnot. So that's how we think about Kuiper. And then on geo and replacement, CapEx and whatnot, we're just kind of taking them one at a time. We're never going to replace a satellite unless we feel like we've got a sound business case to do it. When we invest money, it's always with a view towards achieving the kinds of returns that our shareholders have come to expect and that we've been able to generate over our fairly long history in this market. And so that's what we're going to do going forward. We'd never say it's going to be all Leo going forward or we're going to replace every single one of our geo-satellites. We're really going to take them One at a time, as these satellites come up for renewal, we look at the existing book of business, we're engaged with the customers, and we make a judgment about whether or not it makes sense to do it. On the DTH side, that's going to be mostly about where we end up in conversations with Dish, Shaw, and Bell with respect to each of the satellites that we're using to support their services. And as we said before, there's some new technologies out there that might mean that we can extend the life of some of these satellites without having to do a full-scale replacement. Intelsat was a bit of a pioneer extending the life of one of their geo-satellites. We've looked at that technology, too. We've also said in the past that, particularly for some of these DTH satellites, the current contract term for our customer comes up long before the end of life of the satellite comes up, and I'm thinking of satellites like MIMIC-6 and NMT-1, so in any event. But that's how we're thinking about it. And we've also said in the past, look, we're still going to pursue, if there are attractive opportunities, to build new geo-satellites, never mind replacement, That's something that we're going to continue to think about, too, provided that there's a good, compelling business case that underpins it.

Got it. Got it. Thank you. That's all I have.

Thank you. The next question is from Raghav Garg from DoubleLine. Please go ahead.

Thank you for taking the question. Can you just talk about the utilization? I saw it picked up from 80 to 84%, but can you tell us whether it's some reduction in supply, or can you just walk us through that pickup and utilization?

The last bit of what you said chilled out for me, but I think Chris got it.

I think he was talking about the increase in utilization as a factor of increase usage and reduction in capacity?

Yeah, no, it's a great question. So, and we probably should have called this out. We took our ANAC F1R satellite at the beginning of this year and put it in what we call inclined operations. So you're kind of backing off on your station keeping a little bit to preserve fuel. It's something that satellite operators routinely do to extend the life of their satellites that are nearing the end of their lives. We have another satellite like that, ANAC-F1, that's been in inclined operations for quite some time. But when we report utilization, we're reporting utilization on station capacity. And it's a great question. I'm glad you asked it. So what happened was we ended last year with an 80% utilization rate. We put ANAC-F1 into an F1R station. into inclined operations in January, probably, of this year. And when we did that, we then removed that satellite from our utilization calculation for station cap capacity. And a Kaplan-R, on average, had lower utilization than, on average, the rest of the fleet. And it had the effect, when we removed it from the utilization calculation, it brought up the fleet-wide utilization to 84%. But if we corrected it and did an apples for apples comparison, it would have been flat. Utilization would have been 80% for Q1. So thanks for asking it. And in the future, if something like that happens, we'll do a better job of calling it out so that people don't have to wonder.

Got it. Thank you. A follow-up, just trying to triangulate on DISH. I know you probably can't talk about the specifics, but just looking at the 2023 backlog, it seems like it's only picked up an incremental $10 million between year end and today. Am I missing anything just to get a sense of how big that contract and the maritime contract is? Is that the right way to think about it? If you can help me there, thanks.

Yeah, another good question. But we signed this contract in Q2 in April, and so it didn't get picked up in the Q1 backlog number. So you can ask me again in Q2 when we report our Q2 numbers. But it's just not there right now because that backlog calculation gets done for contracts that are in place at the end, before the end of March 31st. And so, yeah, and that contract got signed in April.

Very helpful. And just last question, the $750 million on the LEO backlog, How quickly do you expect that to ramp? Is getting the ECA deal a big piece of selling that capacity in the future, or what kind of timing can we think about the ramp of the LEO capacity? Thank you.

So maybe just on the question, in terms of increasing the backlog, you mean, or as opposed Yeah, increasing the backlog. Yeah, for sure. I think our customers, we've already got a material amount of backlog on Leo with the $750 million that we've reported to date, but it's certainly the case that once our financing is in place, we've started the full-scale production of the Constellation, we'll be signing more with customers pre-launch, you know, we're going to be very focused before, you know, any satellite is launched to have that backlog number meaningfully higher than the 750 where it sits today. And we'll be reporting that along the way.

Great. Thank you very much.

Thank you.

Thank you. The next question is from Amer Tawani. Tawana from Imperial Capital. Please go ahead.

Hi, guys. I have two questions. The first one is regarding guidance. I just wanted to unscramble it a little bit. You obviously got the partial renewal from Dish done, and you were able to put some of the excess capacity or all of it from that satellite into a newer contract as well. You know, does it mean that we could be looking towards the higher end of guidance as you move through the year? You know, are you confident that you can hit that given that you've had these two positive things? Because I believe you said on the last call that if you didn't get the DISH contract, you'd be at towards the low end of guidance. So just some comments around that would be helpful.

I'll take it. Andrew will probably kill me. But yeah, your recollection is right. What we had said was that the guidance range that we gave kind of embraced the full range of outcomes with DISH. And having gotten that renewal and having entered into that other contract, yeah, we feel quite comfortable. that we're within the range and here's the part where Andrew will kill me. Yeah, probably more gives us a better feeling that we're trending more towards the upper end of the range. So still only the end of May 6th, so still have a whole lot of ways to go through the year. But when we said in our earnings release we feel like we're off to a good start and can reaffirm the guidance, yeah, we feel good about where we sit and it probably gives us a little bit more confidence that on balance, you know, we're, yeah, we're kind of more on the upper side than the lower side.

Sounds good, Don. Okay. Maybe if you can talk about Broadly, there's obviously delays all over the place on the LEO constellation. Is it right to assume that this is actually good for the geo business? And in that sense, is it possible that we could potentially see some more business come to the geo side? over the next coming years, you know, just trying to understand the trajectory of the business. Obviously, it was declining at, you know, higher single-digit rates. Now you're, you know, starting to see some stabilization on the revenue and EBITDA front. So just maybe talk about the opportunity that's out there for the geo business in the near term.

Okay. I'd say, you know, I'll do the macro thing first maybe. For the legacy satellite operators as a whole, yeah, I think, you know, the longer these new disruptive constellations are kind of pushed to the right, it creates more opportunity for the geoassets to remain full and hopefully we'll start to see some better pricing dynamics as asset utilization rates across the industry get tighter. With respect to TELUSAT, we'll have to see. I said in my opening comments that we're actually seeing an uptick in activity, but we can't always capture it given that our utilization rate is is pretty high, I think certainly the fact that we resold all of that ANAC F3 capacity that came back to us so quickly is certainly a sign that there are, particularly in certain markets, getting to be some capacity shortages. You would think that, you know, if you believe in the laws of supply and demand, that those shortages should translate over time to some improved pricing dynamics. We haven't really seen it yet. We've seen it, I'd say, a little bit on the margins in a good way in some markets. And again, all these markets are not uniform. So you can have, for instance, it feels right now like there's some capacity shortages building up on some of the key cruise markets, the Caribbean, maybe the Med. We don't have a ton of capacity there, whereas there are other markets still that, you know, like Africa, for instance, there still seems to be, you know, more supply than we as providers would want right now. So, I don't know. I mean, on balance, it can't be a bad thing for the geo operators, including Telesat, but we're not prepared to sit here right now and say, yeah, we're materially changing our outlook. But yeah, on balance, I think it's supportive. We'll put it that way.

I think that's all I have. So thank you very much for your time.

Thank you.

Thank you. The next question is from Brandon Karsh from Kennedy Lewis. Please go ahead.

Hi. Thanks for taking the questions. You mentioned a couple times that you're seeing a lot of demand, but you're actually having a hard time supplying it based on your utilization. But you're only at 84% utilization. So can you help me understand what the delta is there and what's preventing you from selling that other 16%? Is it just the location of your satellite, or is it needing some redundancy in orbit?

Yeah, no, it's exactly what I was just referring to. You know, we provide... We have capacity that serves all sorts of different markets. Some of those markets, there's greater demand right now. So I think where we probably have more excess capacity is in some of those areas that have been a little bit more challenging. I mentioned Africa a moment ago. We've got some outstanding capacity over Africa. There are opportunities there, but if that capacity were available over some other markets, we'd be able to sell it a whole lot more quickly. So that's what it is. And I think, candidly, if you look at our utilization rate, it's pretty favorable, I think, relative to probably the industry as a whole right now. If you look at probably just kind of utilization rates across the industry, You know, I've got to believe it's lower than 80% right now. So that's what our challenge is. And it's not like, you know, you throw in the towel. We're always trying to get to 110%, but that's the reality of the situation. I think if you go back and look at our utilization rates that we've been reporting, and we report them every quarter and a half for decades, I think we've done a good job. I think it's trended up a little bit. even through the pandemic and all of that. So anyway, that's what explains it. And also, I don't want to overstate, it's not like we're besieged with demand right now that we can't satisfy. I was just noting a trend, which is we are seeing an improvement in certain verticals and in certain geographies, which is good. But we can't always satisfy it. Case in point, with Ukraine right now, there's been heightened demand for some government services. There have been some users that have had to come off of Russian satellites that need to be accommodated on other satellites. Some of those requirements folks have reached out to us on. And we just simply don't have the available capacity to meet those requirements. So that's an example of what I'm talking about.

Okay, that's helpful. And then I know you don't want to give specific numbers on new contracts on F3, but could you give me a sense generally of if you're trading from broadcast to enterprise on a given satellite for the same amount of capacity, how does pricing typically compare between those two use cases?

You know, it's so kind of sui generis, you know, the thing that we did with DISH, right? I mean, it's not – you can't extrapolate really from one to the other. And so, yeah, it's – I'm not trying to avoid the question. It's just they're – Yeah, I mean, the dish renewal, you know, that's got its own dynamic around that, and then these other, anyway, I'm looking at a colleague of mine for some help here, but I'm sorry, it's hard to say. If there were just some other, you know, we had eight transponder come up, it was for kind of more generic you know, broadcast services or pick a market, Latin America or something like that. I don't think it's terribly dissimilar to what we would see if we were selling in the broadcast or video market kind of writ large. But we put, you know, the dynamics around the dish renewal in a different category.

Okay, understood. And then just the last one from me. It seems like you're seeing some benefit from Arrow and Maritime coming back as the world continues to reopen. If we just look at where we are now for that vertical compared to where we were pre-COVID, how far back do you think we are at this point?

You know what? That's a great question, and I wish our chief commercial officer was here because, and I'm hoping that someone else in the room can help me here, but I saw a stat that said something like while only

with like 70% of the crews?

Well, only 70% of the crews are kind of back in the water, you know, going out with passengers and whatnot, that the bandwidth requirement that they have was like... More than 100%. Oh, it was well over 100% of where they were pre-pandemic. I mean, it doesn't take a rocket scientist to figure out why. Everyone just wants a whole lot more bandwidth. It was mean that the bandwidth requirement was meaningfully higher, like, you know, at the end of Q1 than it was pre-pandemic, even though there are only about 70% of the cruise ships out there. So here again, not a surprise. Everyone wants more bandwidth. That's kind of the inexorable trend. And, yeah, the pandemic certainly accelerated that. If you're out on a ship, you need to, you know, have access to Zoom, just all of that. You're using cloud services. So that's kind of what it looks like, and we believe that's kind of the future of broadband connectivity demand. It's why we're building TELUS at light speed, and that's why we're so bullish about it.

Okay, great. So it sounds like some room to run there still on the cruise side, though. Then what about the aero side?

I'd say I haven't seen kind of direct numbers like that, but certainly it's way back up. I mean, it's way back up. You know, both obviously, you know, passengers and planes and demand. I don't know if bandwidth demand has eclipsed where we were pre-pandemic. My gut is we probably have, but I'm not sure. We're probably kind of back, but we'll have a look at that and we'll be We'll try to be prepared to talk about that on our next call. But clearly, the dynamics are improving, which is why I called it out in my opening remarks. And we've definitely been a beneficiary for some of that so far this year.

Great. That's all for me. Thank you. Thank you.

Thank you. The next question is from Walt Piecik from LightShed. Please go ahead.

Thanks. Dan, you mentioned things being back on track with the ECAs. Can you just provide a little bit more color on what that means and whether that we should infer anything in terms of timing?

Well, what it means is that, you know, as we said before, Back in October when we were informed by TALIS that they couldn't support the schedule that they had previously shared with us and when they also sort of warned us that there were also these pricing pressures, we had already been in very advanced discussions with the export credit agencies and we had to pause those discussions because the business case that they were being asked to underwrite needed to get updated as a result of the news that we heard from TALIS, and so when I say that we're re-engaged with them, what I mean by that is we have a new schedule, we have a new, you know, I should say a current plan, and we shared that with them probably right before Easter, which allowed us to unpause, and so You know, we're back at it with them. We've had, you know, multi-hour sessions with them on technical updates, commercial updates, you know, financing updates, regulatory, I mean, everything. So that's what I mean when, you know, I said that we're fully reengaged with them. And then I said from a timing perspective, you know, they've got work to do. They've got technical advisors, commercial advisors, and they've got, you know, processes that we need to respect. And so they're, you know, absorbing, you know, all the information that we've shared with them. And what, you know, we've said from a timing perspective is that we hope to have, you know, a good sense for where we're standing with them, you know, kind of, you So, you know, our Q2 is, you know, June 30th kind of thing. So that's where we are. We've shared a lot of information, you know, and they're doing their work, and we've told them that, you know, we want to get moving quickly. We think there's an awesome market here, and we want to get at it. So that's, you know, that's where things are.

Got it. You also announced, I think recently, something with NASA on the, I believe it's related to the LEO project. But just in general, like as things develop going forward with ECA, tell us as things kind of progress, where do you expect to have pre-launch success in terms of signing up contracts? And how would that pace look over the next, whatever, six to 12 months?

Well, you know, I think verticals where, you know, where we think that there's some good opportunities for prelaunch opportunities, it'll be, you know, on the terrestrial side. So, you know, broadband connectivity, that can be big. World broadband programs that tell us that light speed's going to be really well positioned to serve. It'll be... working with mobile network operators, some of that. And again, it's all rural, rural, rural. It'll be network extension for ISPs and mobile network operators, we think, in both developed and developing countries. We think that the maritime market is gonna be another promising market for pre-launch deals. Aero, it's probably a longer sales cycle just given all the regulatory complexity around serving the aero market with all the certifications you need and how long it takes to deploy terminals on planes and all the requirements around that. I still think there are opportunities there to do pre-launch stuff and I think that Lightspeed's gonna be revolutionary for the aero market just given the flexibility of the network, the optical inter-satellite links that we have, our ability, like I think no other system, to concentrate gigabits and gigabits of capacity around airports and high-density flight corridors. And then on the government side, it'll be interesting. I mean, governments have their own very Byzantine kind of procurement rules and cycles. But I'm still cautiously optimistic there. Obviously, you know, with allied nations, certainly, you know, the activities in Ukraine right now have underscored the importance of resilient, ubiquitous, I think low latency, resilient satellite connectivity. And I think that allied governments showing a renewed interest in spending and in understanding how integral space is to, I hate to say it, but kind of modern warfare and whatnot. And so it'll be interesting. I think that Lightspeed can be transformative for government users. How much of that we can do pre-launch, I think some. I mean, obviously, we're doing some really interesting work with DARPA right now. We're supposed to be launching two satellites sort of like toward the end of this year to demonstrate the efficacy of these optical intersatellite links. We announced that deal with NASA. That's more kind of, you know, intersatellite communications, this time not with optical links but with RF. So... Yeah, you know, and then as far as the pace and whatnot, I don't want to say right now. We're not going to throw out any backlog targets right now for Lightspeed. But, you know, look, I think it's amazing that we already have seven and three-quarters of a billion of backlog, and we haven't really started in earnest the full build out of the Constellation.

I mean, that's a very detailed... just to a certain extent targeted view of the market. When, when you came up with your, in the presentation from several months ago, I suppose that, you know, you think that the constellation can address 1% of a $430 billion market. Is that when you were, when you were contemplating that, was that kind of a thoughtful exercise built up from these, um, you know, again, this list of, of different opportunities that you had, or was it just like, look, if we launch this much capacity up there, we're going to capture 1%. Can you give us a little bit more insight into that?

We don't roll like that. We have built up, I've got to think, the most granular business case and demand model. We have divided the world into like 100,000 little micro-quadrants, and in every single one of those quadrants, We look at all the different verticals that we plan to serve and make a judgment about whether in that little micro quadrant, in that little micro quadrant, we make a judgment. Is fiber the best solution? transmission medium the requirement? Is it microwave? Is it some other satellite, you know, connectivity? So, I mean, that's how we built our model up and, you know, soon we'll be engaging with all of you guys to help you understand what we've done. But, no, this is not a, yeah, we'll, you know, invest $5 billion in light speed. We'll have you know, I don't know, 10 terabits globally, yeah, we'll build it.

Maybe you should have said 1.1%, and people might have taken it a little bit more to heart. Well, I mean, you know, whatever.

But no, I mean, I cannot believe that there's anyone who's been more anal and forensic and rigorous in building up a demand model for every vertical And again, that's backhaul connectivity. Again, every little micro quadrant around the Earth, that's aero, that's maritime, that's government. And then within aero, it's commercial, it's private jets, it's sizing every different jet. In maritime, it's cruise, it's maritime transport, it's high-end yachts, it's smaller yachts. That's how we've done it.

So it's just amazing that there's focus on like small dish renewals when there's a $4 billion target.

We, we, we, we, we, you know, I think there, look, we look at kind of where the stock's trading right now in our market cap and just shake our heads. But, but, you know, shame on us. We need to go out there and I understand why people care about the dish renewal and we care about it too. And I think we got a, a really good outcome there, but we've got to get out there and share a whole lot more information on Lightspeed. We're presenting at two investor conferences this month, and so you'll be hearing a whole lot more from us, and it's why, again, we're so bullish on this opportunity. We need to work with these export credit agencies that we've been working with For some time, I can tell you the support that we've had from the government of Canada and the government of Quebec has been phenomenal, and they've been great partners for us, and they're four square behind what we're doing. So now we've got to finish this work with the export credit agencies, get going, and then go out and kind of proselytize, not just with the customer community who we've mostly been focusing our our time and energy on, but obviously with the investor community, too.

Okay, thank you.

Okay, thank you, everyone. We've run out of our allotted time. Operator?

Yes, thank you.

So, Dan, you want to... Yeah, no, we've run out of our time. I think my answers were, you know, I'm a long-winded slash wholesome side, but in any event... Yeah, we appreciate everyone's time this morning. We will be presenting at an Oldman Leverage Finance Conference later this month, a J.P. Morgan Equity Conference in Boston later this month, so we're looking forward to speaking with everyone about what's been happening in the business and our plans. We feel like we're off to a great start for the year. We had a really, I think, positive Q1 and laid some good for the rest of the year. And so with that, we appreciate everyone's time, and we'll talk to you when we put out our second quarter numbers. So thank you. Thank you.

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