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.

Thank you, Dan. Good morning, everyone. I would now like to focus on highlights from this morning's press release and filings. Helisat ended the year 2022 with reported revenues of $759 million, adjusted EBITDA of $568 million. and generated hash.

Give us a second. Go ahead, Andrew, I think we're back.

Sorry about that. Obviously somebody was very excited to join. Anyway, I'll just go back a little bit to the beginning. Telesat ended the year 2022 with reported revenues of $759 million, adjusted EBITDA of $568 million, and generated cash from operations of $229 million, with $1.7 billion of cash on the balance sheet at year end. As Dan has mentioned, we outperformed our 2022 financial guidance, which we increased and actually updated when we issued our second quarter results in August of last year. In the fourth quarter of 2022, Telesat reported revenues of $207 million, adjusted EBITDA of $139 million, and generated cash from operations of $69 million. For the fourth quarter of 2022, compared to the same period in 2021, revenues increased by $19 million to $207 million, operating expenses increased by $8 million to $80 million, and adjusted EBITDA decreased by $6 million to $139 million. The adjusted EBITDA margin was 67.2% compared to 77.1% in the same period last year. Between 2021 and 2022, changes in the U.S. dollar exchange rate had a positive impact of $8 million in revenues, a negative impact of $1 million in operating expenses, and a positive impact of $7 million on adjusted EBITDA. When adjusted for changes in foreign exchange rates, revenues increased by $11 million, operating expenses increased by $7 million, and the non-cash expense relating to share-based compensation decreased by $16 million. Overall results was a decrease in adjusted EBITDA of $12 million. Looking at revenues, the revenue increase was primarily due to the completion of an equipment sale to DARPA, as Dan has mentioned, as well as higher revenues from aero and maritime customers. This was partially offset by a reduction in revenues upon renewal of a long-term agreement with a North American DTH customer. OPEX, the increase in operating expenses were primarily due to higher equipment sales related to the DARPA program, as previously mentioned, partly offset by lower non-cash share-based compensation and lower bonus expenses relating to 2021. Interest expenses increased by $80 million in the fourth quarter when compared to the same period in 2021. The increase was due to an increase in interest rates in the U.S. term loan B facility combined with the foreign exchange impact on the conversion of U.S. dollar denominated debt. This was partially offset by the impact of the repurchase retirement of senior unsecured notes in 2022. As a reminder, and as discussed previously, we repurchased notes with a principal amount of US $160 million in 2022. These repurchases resulted in a gain of Canadian $107 million. This also represents an annual interest savings of approximately $10.4 million. Forex. In the fourth quarter, we recorded a gain in foreign exchange of $72 million as compared to a gain of $20 million in the fourth quarter of 2021. The gain for the three months ended 31st of December, 22, was mainly the result of a stronger U.S. dollar to Canadian dollar compared to the spot rate as of September the 30th, 22, with the resulting unfavorable impact on the translation of a U.S. dollar denominated debt. Our net income for the fourth quarter of 2022 was $92 million compared to net income of $113 million in the prior year. The variation of $21 million was principally due to the recognition of U.S. CBAN clearing payments in the fourth quarter of last year, partly offset by higher non-cash foreign exchange gains compared to the same period last year, along with a lower tax expense. Cash flows. For the year end of 2022, the cash inflows from operating activities were $229 million, including over $65 million by way of receipt of the remaining Phase 1 U.S. C-band clearing proceeds. In terms of overall C-band proceeds, we have received approximately $85 million to date and expect further proceeds of approximately $260 million. In terms of capital expenditures during 2022, virtually all are related to our lower orbit constellation, Telesat Lightspeed. Guidance, as Dan has mentioned, and you've noticed in our airings release, we have provided preliminary 2023 guidance. The guidance assumes a Canadian dollar to US dollar exchange rate of 1.35. Revenues for 2023, Telesat expects its full year revenues to be between $690 million and $710 million. Adjusted EBITDA, in terms of adjusted EBITDA, Telesat expects to be between $500 million to $515 million. CapEx, we expect our 2023 cash flows used in investing activities to be in the range of $40 million to $70 million. 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. To meet our expected cash requirements for the next 12 months, including interest payments and capital expenditures, we have approximately $1.7 billion of cash in short-term investments at the end of December, as well as approximately $200 million of borrowings available under our revolver. 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. As Dan has indicated also this morning, the Board has authorised up to US$200 million in cash or repurchases of our debt if management determines repurchases to be in the best interest of the company. At the end of the fourth quarter, leverage as calculated under the terms of our amended senior secured credit facilities was 6.17 times to 1. Teleset has complied with all the covenants in our credit agreement and insurance. A reconciliation between our financial statements and financial covenant calculations is provided in the report we filed this morning. A 20F provides the unaudited interim condensed consolidating financial information in the NDA. The non-guarantor subsidiaries shown are essentially the unrestricted subsidiaries with minor differences. So I think that concludes our prepared remarks for the call and I will be more than happy to answer any questions you may have and with that we'll 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 Walter Pysik from LightShed. Please go ahead. Mr. Pysik, your line is open. If you have muted your line, please unmute your line.

What about now? Can you hear me now?

Yes.

Perfect. Sorry about that. What a day. So SG&A is something that obviously would start to escalate if you kind of proceeded with Lightspeed. Same thing with CapEx. So given these kind of ongoing delays in terms of getting the financing, should we just basically freeze expectations, you know, for valuation purposes? on SG&A until we get the go-ahead that you can actually get the financing? Or do you guys have some confidence level that you start to engage in increased OPEX and CAPEX because you're optimistic that you're going to get this financing queued up for Lightspeed?

Hey, Walter. It's Dan. Maybe I'll take a shot and then Andrew can chime in as well. So in putting our budget together for the year and in giving the guidance. So we're spending right now on the OpEx side moving forward with Lightspeed. So we've been doing a lot of work on it. We've got a lot of people in the company that are dedicated to it. And our guidance, so part CapEx for a second, but just our guidance on the EBITDA side takes into account that, yeah, we're making investments, we're spending on the development of the Lightspeed program. We're confident that it's going to go forward and we're doing real work on it. On the CAPEX side, I think Andrew was careful to say that, you know, we've guided to 40 to 70 million a year, but said that more or less we'll update our guidance once we've got Lightspeed fully underway, because once it's fully underway, Certainly our CapEx spending will look a lot different than the $40 to $70 million. The $40 to $70 million is just kind of spending outside of the full program moving forward. So, Andrew, I don't know if you wanted to add anything to that.

Yeah, look, I think as you said, Dan, in terms of CapEx, we're very prudent. And as Dan had said, as soon as we've got the go-ahead for Lightspeed, we will come back indeed and talk about guidance for there. And on the SG&A perspective, we're very prudent. And indeed, as Dan had said, we are adding resources. But if you look at our implied guidance, in fact, you see the increase in OPEX is pretty small year on year. So we continue to be very, very prudent until we have the go-ahead on light speed.

So from a sum-of-the-parts valuation standpoint, what would you say the percent mix of SG&A is today? to light speed. And the reason, you know, I asked that, like, you know, my, my follow-on question is going to be, you know, at what point do you give up? Meaning like either financing has changed your view of the revenue opportunity of the market has changed because of delays so that you can say, okay, we can at least rely back on a base valuation, which is based on a core EBITDA number, which is currently getting diluted by some of these investments on the OPEC side. of X. So I guess there's two, two or really three parts of that question. Percentage of OpEx that is that, you know, if I know you're going to say this is not going to happen, but if for whatever reason you just said, you know, screw it on Leo, your OpEx can drop by X percent. Secondly has the market revenue opportunity, which you outlined, I think very well in a document that's I think now almost a year old or more. And then third, you know, Why do you remain confident that this can happen, that Lightspeed can get to a point where we can move forward here?

Yeah, in terms of the effects as we go through our program, that what we're spending, we will capitalize and continue to do that up until if a determination was ever made about Lightspeed that it wouldn't go ahead. But we're totally confident, as Diana said, that we will go ahead. And therefore, we see within it the confines of our total operating box. And even last year, we're up about $22 million in OPEX, and just to give you a sense of that, the big driver of that was indeed the cost of the DARPA program itself. So year on year, the incremental costs in relation to LEO is not that significant. And we've got full plans, full business plans, that indeed, in terms of attacking the markets customers, you know, rolling out the ground infrastructure, that once we have the green light to go ahead, then indeed we will come back and we'll communicate that guidance to you to make it very, very clear.

Yeah, and maybe I'll offer some thoughts on kind of where we are with LEO and, you know, the optionality that we have around it. Look, we're not required to move forward with light speed, right? There's no, you know, There's no legal compulsion where Dallas had asked to move forward with Lightspeed. We're focused on Lightspeed because we think it's a great commercial opportunity. We think it's a great way to grow the business and to create a lot of equity value for our shareholders. And yeah, it's taken us longer for sure than we had originally anticipated. But I continue to believe that The original investment thesis is totally intact, which is to say there's a huge market for a well-engineered, well-executed, enterprise-grade, enterprise-focused Leo constellation. If anything, I'm just more and more convinced of that with the passage of time, the importance of having low latency, a highly distributed network, achieving... lower cost per bits, driving down to small user terminals. Just everything that we've seen over the last while has, I don't know, confirmed for us that we're on the right path here. And certainly all the conversations we're having with commercial customers, with government users, all of that. Certainly, I'd say, you know, the experience that we see in the Ukraine in terms of how the Starling constellation, how crucial that's been to that conflict, all go to reinforce the logic around having a Leo constellation in the strategic importance. And so that's that, which is to say we're not seeing anything different in terms of commercial developments, technology developments, anything that persuades us that this isn't a good path. Why we have confidence that we'll ultimately get there, I think that was another question. We've got a ton of momentum on this. We've lined up already over, you know, $4 billion of financing commitments. We've already got something like $750 million worth of backlog. So, you know, we've got strong support from our government. We've got strong support from our customers. We've got strong support from our board. So yeah, it's taken longer than we wanted, but all of those things, I think, make us feel confident that we're going to get there. And then the last thing I'd say is, if we don't for some reason, and I think that we will, but if we don't, look, we're still generating a significant amount of cash. We've got over a billion and a half of cash on our balance sheet right now. It's not like we will have left ourselves in a horrible place. Lightspeed is what we're focused on. Lightspeed, I think, is still the right move for Telesat. And I think that we're still, you know, from a timing perspective, in a good place. But if for some reason that... we can't anticipate right now something different happens, then we'll revisit it. Anyway, it was a long-winded answer, but they were good questions.

Okay. Thank you.

Thank you. The next question is from Marcello from Ares. Please state your full name and proceed with your question.

Hey, guys. It's Marcello Termeski from Ares. I had a couple of questions. One was there's A new comment in the Form 20F that you're now actively seeking to raise equity funding for Lightspeed. What kind of equity partner are you looking for? Is it just an investment fund to provide capital, or are you looking to partner with a satellite manufacturer or even another geo or LEO network operator?

Hey, Marcel, it's Dan. I don't think there's any new news there, and we said, I think, on our Q2 call that that because of cost increases on light speed that we were in discussions with some potential equity investors, and we reiterated that on our last call. And so, yeah, no, so I don't think there's anything new there. What we said was that, you know, those investments, should they materialize, would be a support. They'd be at kind of the LEO level. and they'd be subordinate to the other financing sources that we've been engaged with, including BPI, the French Export Credit Agency, the government of Canada, and the government of Quebec, all of which we've been in discussions for financing. So I don't think there's anything new there.

And as it relates to the LEO development milestones, in order to maintain the U.S. spectrum authorizations? What are the key dates that we should keep in mind? I was under the impression the first date is next week in April. So if you don't hit that date and cannot negotiate an extension, what potentially happens?

So there, I know the F, what is it, an F-20, F-20F, talks a little bit about regulatory considerations and whatnot. The regulatory stuff, I mean, we've got a number of applications in the first processing round and the second processing round. And then, so there are regulatory activities at the FCC level. There are regulatory levels at the ITU level as well. And we've got lots of different filings there as well. I won't get into kind of the weeds on you know, round one versus round two, but all to say that I'm pretty confident that when we're ready to move forward with Lightspeed, we're going to have the regulatory rights we need around the world to, you know, provide the services that we need to provide. I direct you to the 20F. I know that we do have some disclosure around there, but that's how I'm thinking about it.

And as it relates to the geosatellites, at what point do you have to make a decision whether you want to invest in new ones to replace aging satellites? I know you have the CapEx guide into $40 to $70 million, but also in the 20F you increased the cost to launch a geosatellite to $200 to $500 million, which implies that you'd have to step up CapEx if that's the path you want to take. Or is there another path you would potentially think about?

Yeah, you know, we'll – take it kind of satellite by satellite. We're only going to replace a geosatellite or launch an expansion geosatellite or, frankly, spend any capex if we are convinced we've got a strong business case for it. And so whenever a satellite kind of comes up, you know, towards the end of its life, we have a hard look at what's the best way forward here. And there are some other things we can do. I mean, there are some newer technologies out there that can extend the life of the satellite, and we've been evaluating some of those as well. So right now, as you can tell, we don't have any plans right now to spend money this year, at least, on replacement geo-satellites. We're open to doing just that, though, when those satellites come up for renewal. And I've got to say, we're open to building new geo-satellites, and we've looked at opportunities from time to time to do that. But, yeah, we'll just evaluate every business case kind of on a standalone basis and make sure that there is a strong kind of risk-adjusted rate of return on that. But right now, as you can see, we don't have any CapEx spending for replacement or expansion geo-satellites right now in our plan for this year.

To kind of segue back to where Walter's question was earlier, if you did not end up pursuing Lightspeed, you have the $1.5 billion of cash, is that potentially cash you would, I guess, bring back from that subsidiary to invest in GEO, or how would you think about that?

Yeah, I'd probably rather not speculate too much right now on what alternative paths we could take. As I've said, our Our focus is on moving forward with Lightspeed, and we're very bullish on that. But, yeah, to your point, could we bring cash back? Yeah, we could. There's nothing. I'm staring at our general counsel. There's certainly nothing that prevents us from doing that. We'll cross that bridge if and when we get there. I think we've been running this business for a pretty long time. We've been pretty – hardheaded and pragmatic about how we use our cash and pretty disciplined around that. So anyway, again, the focus right now is moving forward with Lightspeed. If for some reason that didn't happen, we'll chat with you guys then about what we might do with the cash that we've been building up.

Great. Thanks so much.

Thank you.

Thank you. The next question is from Branded Cars from Kennedy Lewis. Please go ahead.

Hi, thanks for taking the questions. Just want to turn back to 23 guidance here. You mentioned that half of it was from DISH and the Bell Canada renewal. Could you bucket the other half a little bit? How much of that is Antec F2 changes, any kind of degradation to core business, FX, or any other variances?

Yeah, it's a good question. So the The other pieces are that DARPA contract that we recognized in Q4. That was kind of a one-time arrangement with DARPA. We said that was about $20 million, so that's another big piece of the revenue decline. And then beyond that, that right there accounts for, gosh, I don't know, three-quarters of of the downturn roughly. Beyond that, it's odds and ends. Here and there are some renewals maybe at a lower rate, some lost renewals. It's just a whole bunch of other stuff that builds up to the balance of the decline.

Okay, I thought the DARPA contract was about EBITDA neutral. So I was wondering if there was any other major data.

You're 100% right. The DARPA contract was EBITDA neutral. I was talking more at the revenue line. So we do have, you know, some increased expense coming from some of the third-party capacity we need to support customers on ANACAP2. That's probably... the biggest driver of some of the OPEX, you know, some of the ups on the OPEX side. There's some downs on the OPEX side, but countervailing that, you know, there's some increases. And one of the large increases is third-party capacity. We need to accommodate customers on ANAC F2 that we're continuing to support. So, yeah, but look, most of it's revenue-driven. as you can see, and the big drivers there are DISH, the anticipated bell renewal, and then more of these other kind of, more other stuff that relates to the regular customer business.

Okay. Would it be possible to quantify what the NIC F2 expense was and also maybe discuss some of your assumptions around the Bell renewal and what makes you so confident that you're, one, going to renew that, and, two, you're going to get the prices that you're building into the budget here?

Yeah, I'll talk to Bell. I mean, candidly, I don't think we're going to give any more granularity on F2. I think we've given a lot of granularity on that already. On Bell – Yeah, I mean, our confidence stems from the fact that we know them well. They're a big customer. We've been having a lot of conversations with them, and this feels like the deal, what we baked into our guidance very much reflects the nature of the pretty detailed conversations that we've had with them about what this renewal would look like. So that's what gives us the confidence there.

Okay, and then on the bond buybacks, it's good to see that you reauthorized more buybacks, but it's been a few quarters since you've done any. Is there any reason that you've been holding off, and has your appetite for that changed at all?

It's, you know, like figuring out when you, in a, you know, Public companies are so heavily regulated in terms of issuing securities, buying securities back. So there were, I don't know, a lot of considerations out there at the time. And we've always tried to be pretty clear with the market about what authority we've been getting from our board and kind of what our intentions are, just so everyone has a pretty good sense for how we're thinking about it. I don't know. I mean, all I would say is there are kind of a kaleidoscope of factors out there that we need to take into account. We've taken those into account. The board has increased our authorization in terms of what we can do in terms of debt repurchases. I think we've always said, you know, that we believe our debt trading at these levels, you know, we think that current debt prices don't represent really fair value of the debt. And we think that it could be a good use of cash that we have that builds up in the restricted group in particular. And so, yeah, in any event, we just wanted to make everyone aware that we've got this increased authorization from the board. And if we think that it's the right thing to do, that we'll go back out in the market and and repurchase the debt, not saying that we're going to, but just letting everyone know that we've got the authority to do it. And yeah, just wanted the market to be aware of that.

Okay. And if I could just sneak one more in here, just on the light speed side, I appreciate that you say that you've had some momentum building, but it sounds like the commentary has been pretty similar to what we've heard the last couple of quarters. So maybe if there's anything else you could share, maybe at least you think at this point, this incremental subordinated capital, do you think that's going to come from private investors or are you talking to government entities for that?

You know, I don't want to get into who the potential financing sources could be. I will say that we are in discussions with financing sources for the funding that we need. I feel pretty good about where those conversations are, although it ain't over till it's over, so no guarantees. Yeah, I don't think I can offer that much more incremental insight, but only to say that Yeah, personally, I remain optimistic that we're going to get the funding that we need to move Lightspeed forward. And, yeah, we're excited to do that.

All right, that's all for me. Thank you.

Thank you.

Thank you. The next question is from Arun Seshadri from BNP Paribas. Please go ahead.

Yes, hi. Thanks for taking my questions. Most have been asked. Just on the Lightspeed topic, could I ask the question a little bit different way? I mean, have there been some new parties, either investors or partners, that have emerged in the last three or six months that would make you more confident today than you would have been a few months ago? Hi, Arun.

What I would say is I think there's a lot of interest in Leo right now. And there are a lot of parties that kind of share our vision that there's a big opportunity there. There aren't that many LEO operators out there that, you know, if you are bullish on the opportunity, that you can put money to work with. And so I'd say that. Yeah, and I'd say again, I'd maybe just reiterate, we've already got a lot of our financing lined up, which gives us confidence that, you know, already a significant, you know, a significant amount of the financing that we need, we already have a line on. So, yeah, that's what I would say that, you know, we're in discussions with folks. I do think there are investors out there that are interested in supporting a project like ours. Um, and we'll, we'll, we'll see if we get there with them.

Got it. Thank you for that, Dan. And then as far as timing goes, um, how would you handicap the timing of an announcement on light speed? I mean, would you say this is like a month or a couple of months away, or do you think theoretically it could be significantly longer?

I look, I'm having, you know, uh, gotten this sort of wrong before. I'm just so loathe to, you know, no, I am. And it's not because I lack conviction that it's going to happen, but bringing this all to a close is definitely taking longer than I had anticipated. You know, I don't want to say anything more. I just don't want to, it's tempting, but yeah, let us just keep working on it. I think we're making progress. I think we'll be able to offer some clarity. You know, I hate using terms like this, but in the near term. And all I would say is, you know, I think we're doing all the right things. We still have a great opportunity here. And we want to get it right. That's the other thing I'd say would be easy in some ways just to say, oh, screw it, we've got all this cash on our balance sheet. We've already lined up all this money. Let's just start blowing our brains out and spending money. We haven't wanted to do it like that. And anyway, so stay tuned. I think we're making progress, and hopefully we'll be able to say something more definitive again in the near term.

One last thing on the Lightspeed topic. Are there any additional changes in the scope of the overall project? possible or probable as a result of potentially some new investors, et cetera, and finalizing the terms?

That's a good question. You know, potentially there are opportunities to tweak some things. Maybe just to step back. Fundamentally, I think we have a really good design team. for a light speed. It is a massively capable constellation that we've designed. It's capital efficient, right? It's much fewer satellites than the thousands of satellites that some of the other folks are deploying. We just don't think that we need to do that to effectively serve the enterprise and government market that we're focused on. So I'd say fundamentally, the core building blocks of the project, a couple hundred satellites, process payloads, digital antennas, optical intersatellite links, all of those things, I think, remain intact. You know, is there a little tweaking that can be done here and there to maybe improve things a little bit further? Yeah, I think so, and we've been exploring some of that. Do some of the investors have particular focuses in terms of markets that they're focused on? Yeah, they do, and there's potential tweaking that we can do to address, you know, their focus areas. But, yeah, beyond that, you know, I'd say, again, fundamentally, the design that we've been talking to the market about, our customers about, remains intact.

Got it. Thank you very much. Thank you.

Thank you. The next question is from David Nguyen from Jefferies. Please go ahead.

Hey, guys. Thank you very much for the time. I appreciate it. Most of mine have been answered, but just one or two others from me. Could you maybe talk a little bit about the utilization increase? Was that more a function of the anomaly, or is there other stuff going on there?

No, that's a great question, and I think we've promised in the past if utilization is meaningfully affected by a satellite coming out of service or something. No. I'm looking at one of my colleagues who's totally close to this. No, it's just been hitting a lot of singles and doubles, frankly, quarter after quarter, just steadily filling up maybe some beams that in the past have had a little bit less utilization. I think we've got a very good team that is just constantly looking for ways to re-groom the capacity. It's always the case in a business like ours that you sell out of capacity in some areas that are very hot, and you have available capacity in other areas where there's just less demand, but the satellites have certain flexibility to swap capacity around And you're always looking for opportunities to continue to do that. So that's what the utilization increases have come from, just in the trenches, making good, careful capacity planning decisions. Demand, as we've said, has been pretty good. And just, yeah, chipping away at filling it up. And look, our utilization is pretty high right now, 89%. I think if you look across the industry, that's got to be up there in terms of utilization. I do think we do a good job of making full use of the capacity that we're investing in. And as you can see from all the cash we've been building up, it would be easy for us to go out and buy two new geo-satellites and throw them up there and But, yeah, it's just kind of not the way we approach the business. Perfect.

That's great. And then, you know, I appreciate all the color around the Bell renewal later this year. Are there any other contracts that you can maybe point us to for maybe, you know, the early parts of 24 or any other bigger ones that you can maybe give us some color on?

Yeah, I think the other – kind of more meaningful stuff that comes up. So we renewed DISH for two years, and they've got an option to renew for an additional year. So that would come up if memory serves kind of early Q2 next year. I think that's right. And then beyond that, probably Later, more like Q4, just looking at something, like Q4 next year, NMIC 5 with DISH would be coming up for renewal. So those are, I'd say, the more meaningful ones that come up next.

Perfect. Thank you. And then, you know, just one last one from me, but, um, how should we be thinking about, you know, potential spectrum constraints on the cave and, you know, with other guys launching satellites pretty quickly, like, is that something that, you know, could be an issue in five years time or something like that? How should we be thinking about that?

Yeah, good, good question. Um, we, um, We've got a whole team that's dedicated to, you know, the regulatory rights and coordinating with other operators out there and whatnot. From everything that we see right now and all the analysis that we've been doing, we feel comfortable that we're going to have access to the spectrum that we need to operate Lightspeed in a way that allows us to achieve our business plan objectives. So... So, yeah. And look, again, you know, we've got a few hundreds of satellites that we're going to be using. They're very advanced. They have, you know, beams that are hopping and a lot of flexibility in terms of how we use the satellites. But it's something that we pay a lot of attention to. And we believe that we're good in terms of our ability to to operate the constellation and to access the spectrum that we need.

So that's something you think maybe becomes an industry-wide problem maybe 10 years out or something, but just not with any current projections?

Yeah, hard to say. Spectrum is certainly a finite resource. you know, at some point that could become an issue for the foreseeable future, I think. Yeah, I think that we're in a good spot. Yeah.

I really appreciate the time. Thank you, guys.

Okay. Thank you.

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

Hi. Hi, thank you for taking the question. You know, SES has confirmed talks with Intelsat. I just wanted to get your thoughts on M&A in general with, you know, why is that soon to be merging with Inmarsat and Utilsat? One way, do you feel like, do you need to do something or, you know, just be patient?

Yeah, it's a great question. And we saw the reports this morning about, you know, rumors around SES and Intelsat and Can't say that those rumors are new and can't say that we were surprised by it, nor would I say that we're surprised by the M&A activity that's taking place in the sector. Our industry has gone through sort of cycles, and it feels to me, and I think I've said on a prior call, feels to me that we're entering into another one of those cycles. We clearly are with the MRSAT, BIASAT, merger pending, you'll set one web. We'll see if these rumors around SES and Intelsat are correct. On balance, I think it's a good thing for the industry. It's something that we've been anticipating for a while, and I think it'll help rationalize certainly the supply side of the equation. For us, I'd say we'll be open-minded about it. I think that the most important thing that any operator needs to do to compete is to have the best value proposition for your customers. I mean, it sounds like a truism, but I don't know. It's true. And it's why we've been so focused on bringing Lightspeed forward because we We've been monitoring very closely the changes that we've been seeing in the customer community and the user applications, whether that's cloud, whether that's e-commerce, whether how the government wants to make use of space-based infrastructure in the future. For us, that all points to a network that looks like Lightspeed, I think, That's still the most important thing to get right as a satellite operator, having the offerings that the customers want today and that you think they're going to want in the future. So I'd say that's our biggest focus right now. And look, I mean, you know, we've been pretty transparent with folks. There are headwinds in the... satellite, you know, world right now. And we've been seeing that on the DTH business. There's a massive opportunity on global broadband connectivity. And if you look at where our industry is growing, it's, and where I look where we're growing with Intel set, it's those markets. So, yeah, I think if we get that right, bringing you know, an advanced state-of-the-art infrastructure to meet the customer's requirements, I think we should be good. Does that mean that we would be closed-minded about, you know, inorganic opportunities? No. So anyway, that's how we think about it.

Thank you. Last question on your capital structure. You commented, obviously, where your debt trades, you can do these buybacks, but just a bigger picture question on how you plan to address Your capital structure, you have a few years here, but obviously the market's telling you you cannot refinance your debt today. So just how do you plan to deal with the maturities given it's unlikely that Leo will be a meaningful contributor, if any, by the time your capital structure comes due? Thanks.

Well, maybe I'll say a few words about it, and then Andrew can say a few words about it as well. First off, as you know, it's some years out. It's about four years out right now, so we certainly have a fair amount of runway there. Two, we're generating still a meaningful amount of cash, and we've been disciplined about what we've been doing with that cash, and we've got a lot of cash on our balance sheet right now. Three, you're right, you know, Assuming we move forward with Lightspeed, it's probably not the case that there's an enormous amount of EBITDA that's coming off of Lightspeed at the time that we're going to be needing to refinance. But I do expect that Lightspeed will be far along and that we will have secured a meaningful amount of Look, as I mentioned, we already have about three quarters of a billion Canadian dollars in backlog on Lightspeed now, and we haven't even fully pulled the trigger on it. And my expectation is that, you know, when it's time to raise money for Telesat in the future, either by issuing equity or debt, a lot of that's going to be tied to how investors think about the, the, the, yeah, I mean, it's obvious the future prospects of the company. And I think the future prospects of the company out in that, you know, timeframe out when that debt comes up for when it, when it matures, I think our prospects are going to be glowing because I think we'll have executed well on light speed and that our prospects will be quite bright and, And that as a result, our access to capital, be that on the equity side or the debt side, I think we're going to be in a great place. And to the point, the conversation we were just having, there are a lot of, you know, changes taking place in the industry more broadly. So who the hell knows, you know, kind of, you know, where we're going to be, you know, four years or so from now. So anyway, you know, that's I'd say that's how we're thinking about it. And then, of course, you know, can we opportunistically be out there, you know, in the market or do something more fundamental in terms of our debt? Yeah, potentially. So I think we've got a lot of tools to address that in the future.

That's how we think about it. Yeah, from my perspective, there's not much more I can add to that. That's pretty comprehensive indeed. That's the way we see it. $1.7 billion in cash generated over $200 million this year alone. And maturities are out 2026, 2027. I think that covered the way we see it. So I'm all right with that.

Great. Thanks.

Okay. And we have time for one more question here, please.

Thank you. And the last question will be from Mr. Weiss from Invescor. Please state your full name and proceed with your question.

Thanks for the time. Just in terms of the delays in raising money for LEO, how is that impacting your supply agreements with the satellite manufacturers, and do those agreements have a drop-dead date, or do they need an expiration date at which point they would need to be renegotiated, or are they being renegotiated on an ongoing basis at this point?

That's a great question. you know, the prime contractor that we've been engaged with is TALIS. And we received, and it's one of the things that, you know, for those of you who followed the Lightspeed story, when COVID hit and, you know, inflation hit, we needed to spend quite some time with TALIS kind of re-scoping the program and They had to go back out to their supply chain and get updated bids and all that. And it took a whole lot longer than we wanted, but we finally got all that. And it was on that basis that we went back out to financing sources with an updated business plan. And I would say that from that time and based on our recent conversations with Talas, all the pricing changes, that was put together as a result of that effort remains intact. Now, they'll need to reconfirm their price to us, but in a recent discussion with them, we're getting comfort that the pricing for the consolation that we've been talking about is going to be consistent with the last pricing that we've heard from them. But it's a great question. And then I'd say the pricing for the other elements of the program, the big one would be the launch vehicles and then some other elements around landing stations and user terminals. We feel confident also that those prices are consistent with the business case that we've been working with. Great, thank you. Thank you. Okay. Operator, well, thank you very much. Thank you all for participating in our full year results conference call. And we look forward to speaking with you again in the not too distant future when we release our Q1 numbers. So thank you very much. Thank you very much.

Thank you. The conference has now ended. Please disconnect your lines at this time, and we thank you for your participation. Mr. Belizo? This conference is no longer being recorded.