Telesat Corporation

Good morning, ladies and gentlemen. Welcome to the conference call to report the second quarter 2022 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 Bolaido, Director of Treasury and Risk Management. Please go ahead, Mr. Bolaido.

Thank you, and good morning. This morning we filed our quarterly report on Form 6K with the SEC and on CDAR. 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 and uncertainties. For a discussion of known risks, see Telesat's annual and quarterly reports filed with the SEC and CDAR. 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.

Okay, thanks, Michael. This morning I'll share some thoughts on our results and give an update on the business. I'll then hand over to Andrew, who will speak to the numbers in detail, and then we'll open the call up to questions. As noted in the earnings release, we're off to a good start for the year. And as a result, we're able to raise our full year guidance for both the revenue and adjusted EBITDA. Our confidence around this comes from securing the partial dish renewal, reselling the portion of capacity that dish didn't renew, the rebound we've seen in traffic for mobility services over the course of the year, and a number of other contributors on both the revenue and expense side of the business. Pricing environment remains largely stable. and we continue to maintain relatively high utilization across the fleet. On our last earnings call, we noted that we purchased in the open market Telesat unsecured notes with an aggregate base value of US $60 million, and that our board had authorized us to purchase up to an incremental $100 million US base value of Telesat debt, which we did in Q2 last quarter. And at our board meeting yesterday, we received authority to purchase up to an additional U.S. $100 million face value in TALSAT debt. Suffice to say, we think our debt's trading below fair value and that this is an accretive way for us to use our cash. I want to flag this morning an issue with our ANACF2 satellite that we called out in the 6K we filed. In previous filings, we've noted that ANACF2 suffered anomalies on two of its thrusters, and that as a result, we had to implement a workaround mode to maintain its orbital position and provide service to customers. We expected this approach would allow us to provide station kept service until 2025, but it now appears that we can only maintain station kept service until the end of this year, at which point the satellite will be put in inclined orbit. When that happens, services currently supported on the satellite will be adversely impacted. some as early as next February, while other services will degrade over time depending on the size of the antennas receiving signals from the satellite. As a result, beginning next year, we expect ANAC F2 revenues will decline if we can't find alternative ways to support those services. But in an effort to provide continuity of service and preserve revenue, we're developing a range of potential mitigation strategies for ANAC F2. including adding tracking antennas at certain of our sites, which would extend the service life for many of our customers, and exploring repointing customer antennas to alternate telesat satellites or to third-party capacity. We're working closely with our ANACF2 customers and with government officials here in Canada on this effort, as most of the services on the satellite are provided in Canada. To give you a sense of the potential financial impact, ANAC F2 and related ground services represent around 8% of our revenues, so a little bit more than 50 million Canadian. We don't anticipate any adverse revenue impact for this year, 2022. For next year, and assuming a given service ends when it can no longer be supported on the satellite, we estimate we'd lose around a third, one third of ANAC F2's revenue next year in 2023, which likely would be somewhat offset by resale of the freed up capacity for mobility services, which ANAC F2 can support when it's in inclined operations. But to be clear, we'll be seeking to use our own and third party capacity to find solutions for our ANAC F2 customers in order to provide continuity of service and preserve the revenue on ANAC F2 to the maximum extent possible. We will, however, incur incremental expense for any third-party capacity or other investments we make to extend the impacted service. So turning to TALIS at light speed, we received a few weeks ago a final proposal from TALIS, which we shared with the ECA lenders earlier this week. It took us longer than anticipated to get the TALIS proposal. On our last earnings call, I indicated we hope to have a good sense of where we stood with the ECAs by the end of June, but given the delay in getting TELUS's final proposal, that's now slipped out a few months. We also believe that we're going to need to secure some additional financing above and beyond the ECA borrowings as inflation and the delay in the schedule for TELUS at light speed has led to an increase in the cost of the program. To that end, we're in discussions with potential financing sources at this time. The contemplated financing, this incremental financing, would be at the Lightspeed unrestricted subsidiary level and would be subordinate to the ECA lenders and the governments of Canada and government of Quebec investments. Lightspeed represents a compelling investment opportunity that there's no assurance that these discussions will come to a successful conclusion. Although we've been disappointed with the supply chain challenges and inflationary pressures that we've encountered, we remain extremely bullish about the opportunity Telesat Lightspeed gives us to grow our business. We have a highly disruptive and robust constellation design, over $750 million in contractual backlog, and over $4 billion in financing arrangements and the strong support of government partners at the federal and provincial levels here in Canada. Our overwhelming focus is on completing the financing and commencing the full-scale construction of the program. So with that, I'll hand over to Andrew and then look forward to addressing any questions.