Telesat Corporation

Good morning, ladies and gentlemen. Welcome to the conference call to report the fourth quarter 2023 financial results for Telestat. Our speakers today will be Mr. Dan Goldberg, President and Chief Executive Officer of Telestat, and Andrew Brown, Chief Financial Officer of Telestat. I would now like to turn the meeting over to Mr. Michael Bolaito, Senior Director of Treasury and Risk Management. Please go ahead, Mr. Bolaito.

Thank you and good morning. This morning, we filed our annual report for the year ending December 31, 2023 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 in uncertainties. For a discussion of known risks, please see Telesat's annual report filed with the SEC. Telesign assumes no responsibility to update or revise these forward-looking statements. I will now turn the call over to Dan Goldberg, Telesign's president and chief executive officer.

Okay, thanks, Michael. I'll say a few words this morning about our performance last year, share some thoughts about our expectations for this year, and then give an update as to progress to date on the Lightspeed program. I'll then hand over to Andrew to speak to the numbers in more detail. and then we'll open the call up to questions. I'm very pleased with our performance and the things we achieved in 2023. We did a really effective job in staying focused, in beating our adjusted EBITDA guidance, maintaining our operating discipline and industry-leading operating margins, securing the CBAN clearing proceeds, and executing what I believe were some value-enhancing debt repurchases. But far and away, the most important thing we did last year was find an innovative and highly accretive path forward for TerraSat Lightspeed, including landmark agreements with MDA and SpaceX, as well as important financing arrangements with our government partners in Canada. The satellite user community, fully consistent with our longstanding expectations, is transitioning to LEO networks, and this transition will accelerate over time. For that reason, moving forward with our transformational Telesat Lightspeed program is our highest priority. 2024 marks the first full year where Telesat starts to make that transition to LEO in earnest. And to help all of you track what we're doing, starting this year, we're breaking down our financials between GEO and LEO and showing consolidated numbers as well. As you can see in our top line guidance that we released this morning, we're expecting some significant revenue declines around 150 million Canadian dollars in GEO this year, split pretty evenly between our video and non-video businesses. We're not giving guidance beyond 2024 today, though I would note we're not expecting to see this magnitude of annual top line decline in the coming years. On video, the expected decline comes primarily from the full run rate impact of the lower rate on NMIC 4 from the renewal we secured last October with Bell, as well as a renewal we have with EchoStar on NMIC 5 coming up in early Q4 this year. Over the past few years, we've talked about the headwinds we're facing in our DTH business, really driven by cord cutting, and the rise in over-the-top video platforms, and the reductions we're expecting this year are very much a continuation of that trend. The other half of our expected revenue decline is coming from the enterprise side of our business, with the biggest contributor being erosion of maritime services revenues. Other meaningful expected reductions are from an aero customer, number of customers in Latin America, a universal service program we support in Indonesia, And here in Canada, some point-of-sale retail networks and a number of government services. The biggest driver on the lost revenue in the enterprise segment is the migration of customer requirements from Jio to Leo, namely to Starlink, as they're the first in the market with a disruptive Leo network. The reality is that enterprise customers want affordable, low-latency broadband connectivity, which we've been talking about for quite some time. If anything, the transition to LEO is happening a little faster than even we expected. And although we don't love seeing Starlink cannibalize some of our geo-customer requirements, it's a strong validation of the market embrace of LEO and the compelling path that we're on with TuttleSat Lightspeed. We fully anticipated the transition to LEO, and it's precisely why we're building Lightspeed and why we're so bullish on it. Turning to OpEx, we expect to see an increase of roughly $40 million Canadian dollars year over year, which is all driven by the investments we're making in Lightspeed. For half the increase comes from headcount expansion. I'm happy to say, though not surprised, we're getting world-class professionals joining and wanting to join Telesat, individuals who see where the industry is going, and want to be part of building out and bringing to market a really advanced and revolutionary low Earth orbit global satellite broadband network. The project is a huge magnet for absolutely top-notch talent throughout our industry. To give you a sense, we had a little less than 500 people across the company at the end of last year, and around 35% of them were working on Lightspeed. By the end of this year, We expect to have roughly 740 employees, a roughly 50% increase, with nearly two-thirds of the team working on Lightspeed. Dedicated geo heads are actually coming down over 10% as we shift folks to Lightspeed and more broadly take steps to right-size geo OpEx for a declining geo business. The rest of the OpEx increase is coming from higher Lightspeed revenue-related costs, as well as costs associated with professional services, IT, travel, marketing, and regulatory activities, all tied to the development, implementation, and commercialization of Lightspeed. It's full on, and we're making great progress working with MDA and our other suppliers. We've completed the major system requirements review milestone with MDA, and are progressing toward preliminary design review in the third quarter of this year. They're ramping up staff just as we are. We're also making great progress with our software partners, developing the tools we need to dynamically manage the traffic on the network and the APIs and other interfaces our customers will use to purchase and manage Lightspeed services for their users' requirements. We're also making really good strides with various antenna suppliers for LEO user terminals for each of the verticals we're focused on, as well as with suppliers for our landing stations. In short, we're moving up fast on all the key work streams necessary to bring Lightspeed into service. The customer community is enthusiastic with the approach we're taking and the services we'll be offering, and there's great interest also with potential strategic partners and governments around the world to leverage Lightspeed for their needs. Telcos, mobile network operators, satellite operators, service providers and users in every vertical around the world, for enterprise, for aero, maritime and government services, they all recognize the transition to LEO that's underway in our industry, and everyone is actively looking for the best path or paths to ensure that they don't get left behind. Our CapEx guidance for this year has us investing roughly a billion dollars Canadian into Lightspeed this year. We remain focused on launching our first satellites in June 2026, slightly more than two years from now, offering beta services shortly thereafter and providing full global coverage and service by the end of 2027. Let me now give a quick update on Lightspeed funding. Over the past months, we've had extensive engagement with the government of Canada over funding for Lightspeed. We believe we've reached an understanding on detailed funding terms and expect to release a summary of those terms shortly, likely after markets close today. Suffice to say that we're very pleased we've reached this point. As we've noted in our earnings release, we estimate that our total cost of borrowings is roughly $750 million US dollars lower than our prior funding plan. And that's on top of the US $2 billion in CAPEX savings. We're very grateful for the strong support we've had from the Government of Canada on the Lightspeed program. And I'd note also that the Government of Canada isn't just some inanimate object. There are a ton of people throughout the Government of Canada who have worked really hard with Telesat and engaged closely with us over the past few years. And I just want to note that my colleagues and I appreciate all their hard work and commitment to the program. And I'd note also, not a huge surprise given all the benefits that Telesat Lightspeed delivers to Canada, I'd say the world, whether that's bridging The digital divide, whether it's job creation, technology development, job creation, all of that, there are huge benefits that come from the Lightspeed program, and the Government of Canada and the people that work there recognize that, and we really appreciate that. So in sum, we accomplished a great deal last year and have a very full 2024 as we accelerate our efforts and investment in bringing Lightspeed to market. Our industry is undergoing a significant transition as Leo Networks gain ascendancy and market share. To that end, our highest priority is on focused execution of the Lightspeed program, both technically and commercially. We're hugely bullish on our prospects in the market, as well as our ability to deliver an extraordinary value proposition for our customers and significant value creation for shareholders. With that, I'll hand over to Andrew and then look forward If you're addressing any questions you may have.