Comments by Maxar on Telesat LEO open to interpretation

What was Maxar Technologies CEO Dan Jablonsky trying to tell analysts in the companies Q2 2020 conference call when during his opening comments when he said Maxar had “not factored the proposed Telesat LEO program into our current and multi-year outlook.” Indeed that was a question that come up twice during the Q&A with analysts.

Reaction on Twitter was swift with one person, an “investor & journalist” tweeting that “Telesat LEO awarded to Airbus/Thales team.” The tweet itself would be meaningless except for the fact it was retweeted by another account, @Megaconstellations, widely followed for their coverage of LEO constellations.

New hot take after listening to $MAXR call: Telesat LEO awarded to Airbus/Thales team. Look at $LORL $EADSY $THHLY and Mynaric share prices starting on July 31. French exim bank cut Telesat very good deal to get award to Thales/Airbus? @ChrisDeMuthJr @MarioGabelli — Mike (@indievestments) August 5, 2020

We can put to rest the notion at the moment that the Airbus and Thales Alenia Space bid has won. Telesat told SpaceQ in a call that a decision on who would build Telesat LEO would be announced in due course and said the tweet was false. They had no comment on Jablonsky’s comments.

This tweet was then followed by a news story in Space Intel Report with the title “Maxar throws in the towel on Telesat LEO, polishes its new US identity ahead of NRO competition.”

Peter B. de Selding, the author of the Space Intel Report article wrote “Satellite manufacturer and Earth observation satellite services provider Maxar Technologies told investors to forget about the multibillion-dollar Telesat LEO broadband satellite constellation, saying it’s not sure Telesat will actually proceed with the project.”

“The statement, by Maxar Chief Executive Dan Jablonsky, was purposely ambiguous, and could be taken to mean Maxar does not like its chances against rival Thales Alenia Space, or that even if won, a Telesat LEO contract would not meet Maxar’s minimum-profitability threshold. He evoked both explanations.”

Indeed, so what did Jablonsky actually say? Here’s his original comment in context followed by the Q&A from analysts.

Daniel Jablonsky: We are going to remain very disciplined in our approaches across both LEO and GEO offerings and we’ll look to carefully balance risk with reward as the dynamics of customer plans and initiatives evolve. We have an outstanding range of capabilities across both LEO and GEO and the capability to design, develop and build the wide span of network architectures that our customers are exploring.

But we will not likely pursue nor win every available program. And importantly, we have not factored the proposed Telesat LEO program into our current and multi-year outlook. I hope that our investors understand and appreciate that we are laser-focused on profitably growing the company.

Ok, so we now have context to the original comment. Here’s the Q&A.

The first question comes from Thanos Moschopoulos, BMO Capital Markets: Hey, Dan. Just to clarify on Telesat, you said you haven’t factored into your outlook. But just to be clear, is that still a piece of business that you’re actively pursuing at this point?

Hmm. Obviously Dan’s original comment was clear as mud. Here’s the answer.

Daniel Jablonsky: Well, I think what I’d say right now is, we’re – it’s kind of every quarter, it’s been the next quarter. In its current form, we’re not expecting active participation. We’re very happy to help the customer if it – their expectations or timing change here. We just didn’t want people thinking we were deep in the throes of this and getting ready to announce something in the near-term.

Telesat has been a longtime customer of ours. We built a lot of GEO satellites for them. If and when they need us, either for that or for the Telesat LEO program as it may morph in the future, we’re very happy to provide services. So it’s potential upside in the future, but I wouldn’t say something we’ve modeled into the guidance we’ve given long-term.

Sounds to me Maxar is frustrated with the progress of Telesat LEO. From a business perspective, and the audience they were talking to in the call, it seems to me Dan is trying to say that Maxar has to move on with executing its business and if Telesat becomes a factor, great, if not, well, we told you we were moving on with our business.

The next questions comes from Robert Spingarn, Credit Suisse: How are you? Really just some clarifications. I’ll start with Telesat. Dan, should I interpret what you were saying as it just may not materialize into an opportunity or the business case may not work for you?

Daniel Jablonsky: Well, I don’t want to get out ahead of anything this particular customer may or may not do. For us, I think the answer there is some combination of what you just said. We’re not in an active hunt right now. And it may or may not materialize eventually, back in our business, I’m not sure. But we don’t want to give anybody the impression, because it’s talked about quite a bit. It’s been in the press that we’re having an announcement around the corner or anything along those lines.

The second part of that, though, is we’re – as we roll off some of the lost four programs we had, we’re very cognizant of this, particularly in very, very large programs, making sure the risk reward profile matches what we expect the business to do. And so if there’s a lot of development work, if there’s a lot of potential for increased costs or anything like that, as you take on some of these firm fixed price programs, we’ve got to be very thoughtful about the risk-reward profile in the equation.

And – but we do take risk, make sure it’s manageable risk and we can mitigate it as we believe we can going forward. And also that there’s a commensurate reward for that, which is very different than the cost plus type programs that we’re able to pursue in the future, particularly on the US government side here.

So which is it? The opportunity won’t materialize? Or the business case doesn’t work for you? Once again you can hear the frustration Jablonsky has with the progress of Telesat LEO.

So from a material business perspective of a public company, Maxar has to move forward with its business. Telesat for its part must be feeling the pressure to make a decision.

In Telesat’s conference call last week CEO Dan Goldberg reiterated that they would be making some definitive decisions with respect to Telesat LEO “in the coming months.” The ball as they say, is in their court.