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.