Telesat Corporation

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Your conference is now ready to begin. Good morning, ladies and gentlemen, and welcome to the conference call to report the first quarter 2024 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 Belytho, Director of Treasury and Risk Management. Please go ahead, Mr. Belytho.

Thank you, and good morning. This morning, we filed our quarterly report for the period ending March 31, 2024, on Form 6K, the SEC, and on CDAR Plus. 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, please see Telesat's annual report and updates filed 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. My opening remarks are quite short this morning, given we hosted an earnings call just six weeks ago when we released our Q4 and full-year numbers. I really just want to note that we're tracking to the 2024 guidance we gave earlier, and we're moving out as quickly as we can on Telesat Lightspeed now that we have understandings in place for all the financing we need for our first 156 satellites. Our CapEx guidance this year is for between $1 billion and $1.4 billion Canadian dollars, or around $750 million to $1 billion U.S. dollars, which is pretty much entirely for Lightspeed. And you'll see that unfold as we report our results throughout the year. So with that, I'll hand over to Andrew, and then we'll speak to the Q1 numbers in more detail. And then we'll open the call up to 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 2024, Telesat reported consolidated revenues of $152 million, adjusted EBITDA of $111 million, and generated cash from operations of $76 million, and ended the quarter with $1.8 billion of cash. The first quarter of 2024, compared to the same period in 2023, Revenues decreased by $31 million to $152 million. Operating expenses decreased by $6 million to $47 million, and adjusted EBITDA decreased by $28 million to $111 million. The adjusted EBITDA margin was 72.8% as compared to 75.7% in 2023. The revenue decrease for the quarter was primarily due to reduction in services and a low rate on the renewal of a long-term agreement with a North American direct-to-home customer. as well as lower revenues from certain mobility and Latin American customers and lower equipment sales to Canadian government customers. Looking at OPEX, the decrease in OPEX is primarily due to lower non-cash share-based compensation and higher capitalized engineering expenses relative to the prior period. Interest expense decreased by $4 million during the fourth quarter when compared to the same period in 2023. The decrease in interest expense was primarily due to the repurchase of notes and term loan B. This was particularly offset by an increase in interest rates in the U.S. dollar term loan B facility itself. In the fourth quarter, we recorded a loss in foreign exchange of $68 million as compared to a gain of $10 million in the fourth quarter of 2023. The loss for the three months ended March 31, 24, was mainly the result of a stronger U.S. dollar to Canadian dollar spot rate on March 31, 24, as compared to the spot rate as of December 31st, 2023, and the resulting unfavorable impact on the translation of a U.S. denominated debt. Our net loss for the fourth quarter was $52 million compared to net income of $28 million for the same period in the prior year. The change was primarily due to the loss on foreign exchanges. For the quarter ended March 31st, 2024, the cash inflows from operating activities were $76 million. and the cash flows used by investing activities were 20 million. In terms of capital expenditures incurred, they were primarily related to a lower orbit constellation, Telesat Lightspeed. Guidance, as you will also have noted in our earnings release this morning, we have reaffirmed our 2024 guidance. This guidance assumes a Canadian dollar to US dollar exchange rate of 1.35. For 2024, Telesat still expects its total full year revenues to be between 545 million and 565 million. In terms of operating expenses, excluding share-based compensation, we are still looking to spend between $80 million to $90 million attributed to the Telestat Lightspeed. In terms of total adjusted EBITDA, Telestat still expects to be between $340 million to $360 million. As highlighted on our last call, we will begin the process of showing GEO and LEO separately, and we have accordingly set out in our Note 4 of our financial statements. In respect to expected capital expenditures, as we discussed last quarter, we continue to expect our 2024 cash flows used in investing activities to be in the range of $1 billion to $1.4 billion, as Dan has highlighted, which is nearly all related to expected Telesat Lightspeed capital expenditures. To meet our expected cash requirements for the next 12 months, including interest payments and capital expenditures, we have approximately $1.8 billion of cash in short-term investments at the end of March, as well as approximately $200 million of borrowings available on the revolving credit facility. Approximately $1.25 billion of cash was held in our unrestricted subsidiaries. In addition, we continue to generate a significant amount of cash from our ongoing operating activities. Leverage at the end of the fourth quarter, total leverage ratio is calculated in terms of the amended senior secured credit facilities was 5.7 times the one. TeddySat has complied with all the covenants in our credit agreement and in ventures. In terms of our debt repurchases, we were active subsequent to quarter end and up to May the 8th, 24, where we purchased debt with a cumulative principal amount of U.S. dollars 219.5 million in exchange for an aggregate cost of 98.9 million. Combined with the debt repurchases completed in 22 and 23, TeddySat has now repurchased a cumulative principal amount U.S. dollar is $806.5 million at an aggregate cost of $438.3 million. Just to add, including the repayment in 2020 of approximately $341 million of the outstanding term loan fee combined with our repurchases, our overall debt has now been reduced by approximately 24% or $1.1 billion in U.S. dollars. In addition, this also results in interest savings of approximately $55 million annually A reconciliation between our financial statements and financial covenant calculations is provided in the report we filed this morning. Our 6K provides the unaudited interim condensed consolidated financial information in the MDA. The non-guarantor subsidiaries shown are essentially the unrestricted subsidiaries of minor differences. So with that, I think we will conclude our prepared remarks for the call. I'm very happy to answer any questions that you may have. We will now turn back to the operator. Thank you.

Thank you. We will now take questions from the telephone lines. If you have a question, please press star 1 on your device's keypad. You may cancel your question at any time by pressing star 2. So please press star 1. At this time, if you have a question, there will be a brief pause while the participants register. We thank you for your patience. The first question is from Edison Yu from Scotiabank. Please go ahead. Your line is open.

Hey, Martin. Thank you for taking our questions, mainly just some housekeeping ones. On the cash flows, it's quite strong in the quarter despite the EBITDA declining. Will there be one-time benefits here, and how do you think this kind of trends for the rest of the year?

No, I think our cash flows, I think, underscore the high margins that we've got. If you look at our geo business, our margins are approximately 80%, and I think it's one of the great things of our existing business, notwithstanding the fact that, indeed, we've identified that we will see drops this year, but that's the underlying cash flow.

Understood. I appreciate the breakdown of GEO and LEO, and you got some consulting revenue on the LEO side. Is the 1Q a good run rate to take for the rest of the year, the contribution from LEO Consulting?

I don't think so. It's not a big part of our business at this stage, obviously, not until LEO is sort of up and in service Late 2027, are we going to see meaningful revenue? Up until then, there might be some more kind of incidental stuff. We're doing some work with the U.S. government that's sort of lumpy in nature, and I think this came from a contract that we have with NASA that we've talked about before where we're demonstrating some features on LEO's ability to communicate with other in-orbit spacecraft. So, but it's kind of low to no margin stuff, too. It's a good thing for us to be doing, to be demonstrating capabilities and tightening the relationship with the important U.S. government user. But, yeah, it's not kind of going to be a big driver of our top-line results or certainly our adjusted EBITDA for the year.

Understood. Thank you.

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

Yes, hi. Just a couple from me. First, I just wanted to understand.

So the Government of Canada is planning to take senior equity, I guess, above lenders and shareholders. Is that right?

So their equity in... is going to be structurally senior equity ahead of existing lenders and shareholders?

So maybe a couple of things. I mean, what we announced six weeks ago is that the government of Canada, we reached terms with the government of Canada on a roughly $2.1 billion Canadian dollar loan, and we disclosed but the terms of that are it's 15 years, it picks during construction, it carries a rate of CORA plus 475 basis points. So it's fundamentally a loan, and the government of Canada will be the kind of, you know, alongside of the government of Quebec and the vendor financing that we're getting. It'll be the sort of senior secured lender in connection with the Lightspeed Consolation and in the unrestricted group where we're building Lightspeed. So that's kind of number one. But yes, as part of the deal, there is kind of an equity feature. The Government of Canada is getting warrants covering 10% of the equity in the Lightspeed project. And those warrants are struck at an equity value of $3 billion US for the Lightspeed project. So anyway, I'm just trying to be responsive to your question about senior equity. It is kind of a form of equity participation in the Lightspeed project itself as opposed to the common shares of Telesat Corporation.

So effectively, thank you for that, Dan. That was clear. So I think what you're saying is that it is effectively equity that's a first preference on light speed, and then the residual equity would be what flows through the equity of telecom.

Yeah, I wouldn't think about it as first preference. I think about it that right now, you know, Telesat owns 100% of light speed, and in the future, if the government of Canada exercised these warrants, they would be an equity participant alongside of TELUSAT.

Okay, so you're saying it's not structurally senior equity then? No. Alongside whatever equity there is. That's right.

Yep, that's exactly right.

And then is there any, I mean, I guess, like, is there anything specific either direction? Is it, you know, as you finish off the financing process, you know, would you, from the government of Canada's perspective, would it make sense, you know, would it make sense for them to have the entire, the TELUSAT cash flow also be as credit support or that financing or is, you know, I guess on On the flip side, would they insist that Lightspeed be separated from Telesat in order to sort of finish off the financing? And I guess if the latter is the case, then how would you manage solvency requirements to make sure that that happens?

So maybe I'll start answering this. So first off, and just so everyone understands how this works, the government of Canada is lending us money. It's going to be in the unrestricted group and the cash that Telesat Lightspeed generates is going to be used to support the borrowings in that unrestricted group. And so again, we've mentioned that our funding sources beyond our own $1.6 billion equity contribution is going to be borrowings from the government of Canada, the government of Quebec and, and, you know, some vendor financing. And so, you know, those borrowings are going to be supported and secured in, um, or secured by, uh, our light speed activities. Um, and so, yeah. So, you know, um, could we in the future, um, you know, could in the future others potentially be, you know, behind the government of Canada in terms of being supported by Lightspeed cash flows or could, with the government's consent, something different be done? Yeah. But right now, that's kind of how it's set up. I think we've always been pretty clear about how Lightspeed's getting financed and the fact that we've got a restricted group and an unrestricted group. And I mean, it's fundamentally, it's being project financed and our financing sources are Government of Canada, Government of Quebec, some vendor financing, and then again, our own meaningful equity contribution. So I hope that's helpful. And then we should probably move on.

Yes, I think that's very helpful. Dan, can I ask one last thing, and that is notice that the restricted payment hasn't fully been made yet. Just would you, I guess the expectation is that restricted payment will be made, and then once that's done, are there any other things that need to be done to put a bow on, I guess what else needs to be done from a timing standpoint to put a bow on all of the financing requirements? Thanks.

So the restricted payment, I think it's $125 million. $120, yeah.

There's a remaining restricted payment of $120 million to be made under the $150 million general basket. Yeah, and we expect that will get done in the coming days. Yes, correct. And then beyond that...

Again, at this point in time, we've got all of the financing lined up for the 156 satellites. We do need to conclude definitive funding agreements with those sources that I've described, Government of Canada, Quebec, and the vendor financing. But we've already kind of started down that road and are highly confident that we're going to get there. So that's, I'd say, the final bow that needs to be tied. But we're moving forward, as we said in our remarks. I mean, we've got meaningful cash on our balance sheet at this point in time, and we're going to start spending that money so that we can move this program forward as quickly as we can because We are hugely bullish on the opportunities that are out there in the market, and we want to come to market and get in service as quickly as we can.

Thanks very much. Thank you.

Thank you. The next question is from Chris Quilty from Quilty Space. Please go ahead. Your line is open.

Thank you. So, Dan, just to follow up, and, you know, I'm not going to hold you to it, but on the Government of Canada, Quebec and the vendor, is that something that, you know, in the next three to six months sort of time?

Yeah, yeah, yeah. Yes, Chris. Yeah, no. You know, we believe that should get done before the end of the summer, and hopefully, you know, yeah, we're – We've got a lot of momentum with the government of Canada, as you can imagine, and the government of Quebec, which are the big contributors here. So, yeah, we're talking about, you know, in the coming months.

Gotcha. So I was going to say the summer ends in October in Florida.

Well, I'm working on an Ottawa summer, which ends a little bit earlier. Yeah, anyway, spring hasn't really even shown up yet, so...

Anyway, yeah. And also, the CapEx in Q1, I mean, obviously, you just closed the financing deal, but CapEx in Q1 was a little bit lower than I was expecting. Is it fair to assume you're probably more towards the $1 and the $1.4 billion? And, you know, Andrew, typically in these large-scale long-term programs, is it fair to assume, you know, year one, 30%, year two, 40%, year three, 30% type of you know, of how it falls out in timing? Or should we look at this as sort of a longer, slower climb? Just general framework of how you expect it to pan out.

Yeah, I think, Chris, that, you know, given the nature of the program, you know, on supply chain and getting everything sort of moving forward. So I think in this year that we, you know, our guidance 1 to 1.4, we think that's a solid number. And so by implication, it means we'll see kind of more payments up front as we get all of the suppliers in place. So that's probably the best way I would characterize it. And then thereafter, as we go through the different milestones over the next two to three years, it will be more of a kind of a flow tied to the contract and the operational milestones, Chris.

Great. And one other question for you, Andrew. You had given the expected OPEX for the Lightspeed program. I'm assuming that is OPEX that's running through the P&L and strips out whatever is getting capitalized. Can you give a sense of what is getting capitalized in as part of the program? Again, as the construction goes and more gets capitalized, do we see that tell us that OpEx is staying flat because everything gets rolled into the capitalization, or do you expect it to grow in the out years? I mean, it's going to grow in the out years, but... Yeah.

So in terms of the sources and uses, we tried to make it a little bit clearer in terms of the CapEx spend is third-party CapEx spend, so with vendors. So labor is in the operational uses, whether it's capitalized or not, just so you can see the outflow fund is. So in that regard, the capitalized costs are there. In terms of the overall level of effort, the amount of capitalized staff, we build up, we ramp up our staffing infrastructure quite rapidly and therefore you get to sort of a constant state relatively quick in the program in terms of the level.

I understand. Another question, I mean, you've predicted the data side of the business, you know, being down about $75 million. As some of those contracts roll off, have you programmed in being able to resell some of that capacity? And, you know, what sort of luck have you seen on the data side in reselling?

Yeah, oh, for sure. We assume that there's some capacity that, has come back into inventory that will resell, and I suspect we've already resold some of it. And the guidance that we gave for this year will have kind of captured our assumptions, at least, about all of that. Was there another part to your question, Chris?

No, that was it. It was that simple. Okay, yeah. But I will ask you a difficult question, which is the elephant in the room question, Intelsat SES. And you'll probably have light speed on order before the regulators get done with that. But what are your general thoughts on that transaction and how it impacts you?

Yeah. Well, first off, I mean, we all know that those were conversations that have been taking place between SES and InfoSat some time ago. And they both confirmed that. There had been discussions, and then they both, you know, they each announced that those discussions had come to an end. But, yeah, I was never, I'd say, persuaded that, you know, that that was the end of it. So it wasn't a big surprise to us, I'd say, that they made the announcement that they did recently. And I think it's – that announcement, I think, fits within – kind of the same framework that we've been talking about for a little while, which is to say the industry is changing quickly. There are these new entrants in Starlink and in the future Kuiper that are impacting the industry. And we all believe that industry consolidation would be a response to that. And we've seen some already with Viasat and Inmarsat and Utilsat and OneWeb and now this big transaction as companies kind of organize themselves to remain competitive in this changing landscape. For us, I don't think it's going to have any real impact in terms of how we compete in the market, what the prospects of Lightspeed and the like are. We've been competing against each of them, you know, for decades now, and they've each, you know, they're already each, you know, meaningfully larger than Telosat. Coming together, obviously, they'll be larger still, but I don't think there's anything that should be you know, too dramatically different in the combined competitive profile versus us competing against each of them individually. So, yeah, you know, all to say we weren't surprised. It fits with our expectation that consolidation would happen in the industry. It's probably not. the last deal of this. Certainly there'll be, you know, there, there, there are fewer players as more consolidation takes place, but I suspect that, you know, there could be more consolidation still in the future. So anyway, that's how we think about it. And, and again, I mean, we're, you know, actions speak louder than words, you know, our vision is that, and I don't think it's even a vision anymore. I think we're all watching it real time. There is a, a transition that's taking place in the industry right now as particularly, you know, what we think of as, you know, enterprise users, which is to say non-video, it's in the process of transitioning off of GEO and down to LEO, and for good reason, something that, you know, we saw coming, something that we think that we're well organized with our friends for Lightspeed. So anyway, that's where our focus is right now, just making sure that we execute well on Lightspeed and bring to the market what we're convinced our addressable market is focused on. So our enterprise customers, government customers, and the aero and maritime customers, they're wanting... you know, affordable, high throughput, low latency, distributed, resilient, kind of seamlessly connected connectivity, and we'll be able to deliver that in light speed.

Great. I appreciate it, and I hope spring comes in for you.

Thank you, Chris. Thanks, Chris.

Thank you. The next question is from Marcelo. Chair Misqui from IRS Management. Please go ahead. Your line is open.

Hey, guys. Thanks for taking the question. You said earlier in response to a question that you will be making a Canadian 120 million restricted payment in the coming days. Given that you already have such a significant amount of cash at the LEO entity and are waiting to spend the money until once you finalize terms later this summer, what is the rush to make the cash transfer so soon?

Hey, Marcel, thanks for the question. First off, I think I'm looking at our first... It's $150 U.S.

It's $120 U.S.

Yeah, so the payment is $120 U.S. And then as far as urgency, look, we're moving forward with Lightspeed in advance. And by moving forward with Lightspeed, I mean we are going to be spending... meaningful amounts of money this year. You've heard the CapEx guidance that we've given. In advance of completing these definitive agreements, we have a sufficiently high level of confidence on the one hand that will conclude those definitive agreements, and on the other hand, kind of a strategic urgency to get going with the Lightspeed program. So we're moving out, and when we talk about the CapEx spending that we've guided to this year that like we're opening the spigots now and MDA is going to be and our other vendors you know contracting with the supply chain ordering parts hiring people we're moving out here so that's that's the plan that's what we'll be doing

Does that make sense? In terms of discussions regarding an extension on your revolving line of credit, I know it's due later this year. I know today you're in compliance with the revolver covenant, but if I roll forward your leverage ratio to year-end based on the guidance, and I understand the guidance, and I understand you're not tested today since there's no revolver usage, but I think the company may not be in compliance by year-end. Do you think that could impact a revolver, and do you think it's fine without having a revolver. How are you thinking about discussions?

Okay. Yeah, Marcelo. It's certainly something that we look at, that we review. You know, we have a business that generates our geo-business, as we talked about earlier, a few minutes ago, is still generating cash. And, you know, in terms of a revolver, in 17 years, I believe we have drawn a revolver once.

Yeah, it totally makes sense.

And just one last question. On utilization that has declined so much sequentially, I know there's an interplay between utilization and then just like what your pricing per transponder is. Can you talk about just like when you think about utilization, like are you targeting a certain utilization or how do you think about where utilization is versus where you want to be?

Yeah, no, I'll take it. Yeah, we target 110% utilization to be honest with you. I mean, that's where we'd like to be. Probably everyone does, but barely anyone really gets there. I still think even with the decline in utilization that we've had, we still probably have one of the highest asset utilization numbers in the sector right now. We concluded this quarter at 77%. But it is down meaningfully from where we ended Q4, which was up at around 85%. And what's driven that, the biggest culprit has been the business we've lost in the maritime space fundamentally. We talked about that on our last call, that there was some renewals that we did not secure, particularly in the maritime space, that have moved mostly, as far as we can tell, over to Starlink. And so we're... I'm not going to guide right now on what we think utilization will be in the future, but we're focused on remarketing that capacity. From a pricing perspective, there's been downward rate pressure in the industry for years now, and the kind of the slope of that decline has varied throughout those years. So we were seeing significant downward pricing pressure. I'm looking at one of my colleagues probably five or six years ago. It moderated. It was still downward price pressure, but the extent of it had moderated. And again, I'm speaking as if we're living in a homogenous world. It really varies by region. And we had noted before that probably where we were seeing the steepest declines were in Africa, in Latin America. But again, things started to moderate a little bit. Right now, I'd say the slope of the downward pressure is probably picking up a little bit again, but not dramatically. So So anyway, so, but look, I mean, the laws of supply and demand are alive and well in our industry like in others. And so, yeah, but that's what has accounted for the decline in utilization. It's mostly been in the maritime space. There is some downward pricing pressure, but not what I would describe as sort of extreme at this point.

Great. Thanks so much.

Okay. Thank you.

Thank you. The next question is from Matt Lapides from AB Partners. Please go ahead. Your line is open.

Hey, guys. Thanks for all the color here. I wanted to follow up on the maritime comments. Can you talk about what type of maritime customers you've been losing? Are they cruise lines? Are they large global shipping companies? Are they both? Are they personal yacht segment, any color you can provide on the type of maritime customers where you're seeing the most defection, I suppose. Yeah, yeah, yeah.

Yeah, the biggest has been in the cruise space and in particular probably for us in the Caribbean. We just had a meaningful amount of capacity there. So I'd say that accounts for the lion's share of the losses, crews in Caribbean. And then there's, you know, probably on the margins, there's been some erosion, I don't know, maybe maritime transport and stuff like that, but the driver's been cruised.

Can you talk about how much of that business If you look back three years ago, how much of it is now gone? I mean, is there more of it to come is really what I'm trying to get at.

Yeah, we've been staring at that. I'll ask my colleague, John. We've absorbed a lot of the hit.

John, do you want to offer any thoughts around that? Yeah, if you go back three years, that's probably not the right time to go back to because In the past two years, we had some pretty significant increases in maritime, but from the past two years to this year, we're expecting roughly half the revenue, revenue declined by roughly half from where we were over the past couple of years.

That's helpful. And then just one follow-up to the earlier question about the government of Canada's, uh, equity position in Leo. I just want to make sure I understand the flow of funds. If you know, five, six years from now, let's be up with everything you hoped it would be in terms of generating lots of cash and in the Leo subsidiary business, if there's excess cashflow after servicing the debt with a dollar of excess cashflow, Where does that extra first dollar go to? Does it go to the equity holders of the Leo subsidiary or is it shared radically amongst up at the ultimate holding company such that all stakeholders would get their pro rata share of that dollar?

There's nothing in the contemplated definitive documents that we're talking about that would radically share that between the equity holders at Telesat Corporation and Telesat, Leo, no.

Okay, thank you for clarifying. Okay, for me, appreciate it. Thank you.

Thank you. The next question is from Evan McFagan from Texas. Carmark Securities, please go ahead. Your line is open.

Okay, thank you. Yeah, a couple of questions. So if I understand you right, I think you said that you expect to conclude the definitive agreements with the government and it could take as long as to the end of the summer. Is that correct?

Yeah, yeah. Again, I mean, we're dealing with the government of Canada here, so can't be too precise about the timing on when exactly it would come to a close, but that's our expectation given the momentum that we have and what an extensive blueprint we have in terms of what the terms are. Yeah, we think that having this done by the end of the summer is a realistic timeline.

Okay. And so even though you may not have those agreements concluded, until the end of the summer, you're still going to spend $1 to $1.4 billion, and I guess you can do that because you have all that cash sitting in non-restricted sets. Is that what gives you the confidence to just spend the way you are?

Well, it gives us, I mean, what gives us the confidence to spend that money before having the definitive agreements concluded is just a lot of conviction that we'll get those definitive agreements done given all the good work that we've done with these funding sources, and how much these funding sources want to see this project move forward. And then, as I said, on the other hand, we've got to get going. We've got pricing locked in with our suppliers, and we've got a great opportunity out there in the market. Our customers are wanting us to have this service available to them as quickly as we can. If they had their way, you know, we'd have it, you know, available like now. So we got to move. And waiting around for another three or four months, knowing as we do, and we believe that, again, a high degree of confidence that we're going to get all this funding that we need just, you know, doesn't seem to be on balance the right thing to sit on our hands and and go through a process that we're pretty, you know, have a lot of conviction about where we're going to land with these funding sources. So, yeah, so we've decided to move forward and move forward with speed.

Okay. And so I would imagine that the vast majority of that spend on light speed will be on satellite build and design and everything, correct?

The most significant portion of the CapEx that we'll be investing this year is, yeah, it's going to go towards satellites. There'll be some launch payments. There'll be some other stuff for user terminals and landing stations. But the biggie will be, you know, our friends at MDA giving them the cash that they need to turn on their supply chain.

uh and move forward right and so because mba is prime contractor all that money is going to go through mba right i wouldn't say all of it but i'd say a very meaningful portion of it all right okay okay and then um just on just a question on your um you know the fact that you've lost some business to maritime you think it's going to start like It's my understanding that Starlink doesn't offer any SLAs. And when you have Lightspeed up, you would offer SLAs. So wouldn't that give you a better advantage?

Yeah, we think it will. But we need our Lightspeed Constellation to deliver the service. So that's why we're bullish about our prospects to take, you know... the market share that we need in order for that project to be successful. I think there are a number of features of the Lightspeed Constellation that will give us a good competitive advantage and allow us to present a tremendous value proposition to the customer community. The ability to provide SLAs and CIR and give our customers an enormous amount of autonomy to manage the bandwidth that they'll be contracting from us. I think all of those things will allow us to be successful. But, yeah, Evan, that's one of the features for sure. We'll be offering our customers SOAs, and we think that's important to some subset of them.

Okay. All right. Thank you so much.

Okay. Thank you.

Thank you. The next question is from Alex Nolan from Nevesco. Please go ahead. Your line is open.

Thanks. My question was answered. I wasn't able to take myself out of the queue.

Thanks. Thank you.

Thank you. Thank you. Once again, please press star 1 on your device's keypad if you have a question. The next question is from Walter Pichuk from LightShed. Please go ahead. Your line is open.

Thanks, Dan. I apologize that this is kind of a redundant question, but I've kind of heard this. I want to make sure that this is put to bed. This NDA will start constructing these satellites prior to you finalizing the agreements with the government of Canada, correct? Correct. Okay. And then in terms of the overall market, You know, now that you've seen a little bit more of what Starlink has been doing, different verticals they've gone into, I'm not sure many people, at least initially, expected them to go after maritime. I know that there were some of your peers that were claiming they couldn't do airplanes and not own airplanes. Just curious, when you look at the market opportunity for your LEO constellation, has it changed at all as you kind of approach construction now?

I don't believe so at all. And listen, Starlink's having a big impact on the market, and they're having an impact on our business, which I don't love. But what I do love is it is, I think, 100% validated the strategic direction that we took Telesat in going some years back. And you're right, there were folks that doubted whether they'd penetrate the maritime market and the backhaul market and doubts about the aero market. We were convinced that a LEO architecture was not only a good infrastructure to support those services, but one that would have a significant competitive advantage. And Starlink is demonstrating that in real time. But no, our market thesis, our business plan, it's intact. Yeah, we're seeing, yeah, here again, for me, it's just reinforced everything. Our customers know now that Leo is the best way to address so many of these requirements. They are taking services from Starlink, and it provides a pretty good but it doesn't give everyone everything that they want. We've talked about the SLAs. We've talked about their ability to manage their own bandwidth pools and whatnot. So it doesn't give enterprise users everything they need, number one. Number two, the customers don't want to put all of their requirements with one supplier. They don't do that with all sorts of of their enterprise infrastructure, whether it's cloud or Internet connectivity kind of writ large, whether it's satellite or not. So they want multiple providers. Yeah, there's huge opportunity here. So there's nothing that we've seen in Starlink that causes us to question the various assumptions that we made when we got ourselves on this lightspeed path, if anything, all of our thinking around the immensity of the opportunity and why Leo will have a competitive advantage capturing those requirements has been validated by everything we've witnessed over the last, you know, 12 plus months.

You know, on past calls, I talked about or we talked about the ability to sign up, you know, people to, you know, pre-reserve the capacity, right, in existing enterprise customers or maybe new ones saying, hey, we're going to take part in this. And I think the issue was, you know, getting to that point of finalization and that once that occurred, we might be able to see some of those press releases start to hit. You know, understanding that things aren't financed or, excuse me, finalized, if you started the construction, isn't that sending enough of a message to these customers that we can start seeing some releases from you guys or some indications of enterprises, um, signing up for capacity on the new constellation?

Yeah, we're listening. You're, you're, you're right. I think, you know, calls like this one and, and, and we're, we're in a small industry. So when this supply chain all gets under contract, you know, that, that, that'll, that'll ripple through the industry. If anyone had any doubts about whether or not tell us that was going to proceed with this program, those, those, should be put to rest. They haven't already been put to rest. I think they should be put to rest in the coming days and weeks. So I think that it will be a great sign to the customer community that light speed is coming. And look, we're only about two years away from launching our first satellite, so it ain't that far away. And we are going to be very focused on trying to secure customers and making those announcements and reporting backlogs so that all sorts of different audiences can track the progress we're making. My own expectation is it'll still be closer to in-service when we're able to make more of those announcements, but I still have an expectation that we'll be able to announce commitments in advance of being in service. And you can imagine that with all of my colleagues here on the commercial side, we're very focused and we're very engaged with the customer community right now They're excited about Lightspeed. So, yeah, all I'd say there is stay tuned. We're very focused on that, and we'll be very transparent about the commitments that we get.

If I can, just one last one on Echo Star. I mean, they're facing some financial distress, particularly as they approach the end of the year, which is, I think, the time for a renewal. Have you had any preliminary discussions, any thought on how that might play out?

Well, you know, we talked about what one of the headwinds that we're facing this year is an expectation that, and the renewal that we have coming up, it comes up in October, is on our NMIC-5 satellite, which they use, they're the exclusive user of that satellite. you know, the guidance that we gave for this year, you know, captures all sorts of different outcomes that we might get there. And on the last call, we had said that we've started the conversation with Echo Star about their thoughts about whether, you know, they're going to want to renew or not. But we haven't advanced it that much since we had our last call just six weeks ago. And so it's not clear to me Where we'll end up, I think regardless of the scenario, we're going to see a meaningful reduction in the amount of revenue that we recognize from NMIC 5 post renewal date in October. But whether they renew all of it, some of it, or none of it, it's still not clear to us at this point in time. And we've got a great relationship with Echo Star. We've worked with them for years. We know that Nimic 5 is being used to distribute content today to their subscriber base. We know that they do have a lot of other things that they're focused on, and saving cash is pretty high on that list. So anyway, all to say that, yeah, we'll give an update once we have one, but right now we don't have an update from the call that we had just six weeks ago.

All right. Thank you.

Thank you, Walter. Thanks, Walter.

Thank you. At this time, we will turn the call back over to Mr. Goldberg. Please go ahead.

Okay. Well, operator, thank you very much, and everyone, thank you for joining us this morning, and we look forward to chatting with you when we release our Q2 results. So thank you all, and have a nice weekend. Thank you. Carry on.

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