Telesat Corporation

Please stand by. Your meeting is about to begin. Good morning, ladies and gentlemen. Welcome to the conference call to report the fourth 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 like to turn the meeting over to Mr. Michael Balaizo, Director of Treasury and Risk Management. Please go ahead, Mr. Balaizo.

Thank you, and good morning. This morning, we filed our annual report for the year ended December 31, 2022 on Form 20F 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 report filed earlier today with the SEC 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 financial 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. Looking at our financial performance for the quarter and the full year, I'm pleased with where we landed. We beat the guidance we gave at the outset of the year, as well as the updated guidance we shared when we released our Q2 numbers. We also continue to run the business in a highly disciplined and focused manner, closing the year with an adjusted EBITDA margin of roughly 75%, and with $1.7 billion of cash on the balance sheet. As you mentioned on our last call, the overall operating environment was pretty stable from a demand and pricing perspective, and I was pleased to see our capacity utilization tick up throughout the year. Our big headwind for 2022, and it will be a headwind for the first four months of this year too, was the dish renewal on our ANAC F3 satellite. As we've discussed previously, it was at a lower rate and for less capacity than the previous deal, and even though we promptly resold the balance of the capacity that DISH didn't renew, it was still the biggest contributor to the decline in revenue and adjusted EBITDA we experienced last year. Also worth noting was the revenue we recognized in Q4 from the contract we have with DARPA, the U.S. DoD's research arm. As we said before, the contract generated approximately $20 million in revenue and about an equal amount in expense. meaning it was essentially neutral at the EBIDA line and overall dilutive to margins. But because that work is all about demonstrating to the U.S. government and to the market more broadly the efficacy and capabilities of optical inter-satellite links, which are a key feature of our light-speed satellites, it made good strategic sense for us to do that contract even though it was EBIDA neutral. The last thing I'd note on our performance last year is something else we've discussed before, which was the anomaly we had on our ANAC F2 satellite that shortened its station kept life. As we covered on our last call, I think we did a really good job with our customers in upgrading ground infrastructure to extend ANAC F2 services. And where that wasn't enough, transitioning users who needed station kept capacity to other satellites including an in-orbit satellite we bought from another operator, other telesat satellites, and third-party satellites as well. As a result of all that excellent work, we expect to retain over 90% of the revenue we originally expected from ANIC-F2 this year, recognizing there's some additional CAPEX and OPEX we've incurred, with the OPEX getting captured in our guidance for this year. Press release we issued this morning sets out our 2023 guidance, and I know Andrew plans to speak to that in his remarks. We're forecasting decreases in revenue and adjusted EBITDA, and I just wanted to flag here the two biggest contributors. The first, as I mentioned a few moments ago, is the residual headwinds from the ANIC F3 dish renewal, which will show up in the first four months of this year. The second is an expected renewal with Bell for NMIC 4, which comes up for renewal in early October this year. At this time, we expect Bell to renew all the DTH capacity on NMIC 4, but at a materially lower rate than the current one. Those two renewals, DISH and Bell, account for approximately half of our anticipated revenue and adjusted EBITDA decline for this year. So now on the status of Telesat Lightspeed. On our Q3 earnings call, we reiterated we were in discussions with certain additional financing sources to cover the increased costs of the program and that we expected to have a better sense of where we stood on the financing around the end of the year. Unfortunately, we're not there yet. That said, we continue to make progress with the various parties we're engaged with, and we remain optimistic that we're going to secure the financing we need to move forward with the program, recognizing, of course, that there's no assurance that we'll ultimately get there. We know well that investors and others want clarity as to where we stand on Lightspeed financing, and we hope to be in a position to provide that clarity soon. Finally, we wanted to share that Telesat's board has authorized up to $200 million in cash for repurchases of our debt if management determines that such repurchases are in the best interest of the company. With that, I'll hand over to Andrew and then look forward to addressing any questions you have.