Telesat has once again pushed back the completion of financing for its Lightspeed constellation as it seeks to pivot the group of satellites in a fast-changing environment.
Over the past two years the company at first delayed Lightspeed’s implementation due to supply chain issues with a supplier, then shrunk the scope as inflation costs rose. Last we heard in 2022, Telesat planned to secure additional financing to deal with costs that were continuing to rise despite the reduced number of satellites.
In quarterly results released Wednesday (March 29), however, CEO Dan Goldberg said the financing is taking “longer than we anticipated” and that the company “will have greater clarity on those arrangements in the near term.” The company remains committed to the constellation, however, as he said enterprise and government customers will benefit once it is ready.
“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,” Goldberg said, adding the board has authorized up to $200 million USD in debt repurchases if management feels those are in the best interests of Telesat.
In questions with analysts, Goldberg acknowledged again the uncertainty about the Lightspeed discussions but emphasized that in his mind – despite competition like SpaceX continuing to deliver satellites regularly – there is still value in offering the constellation. The situation in Ukraine has shown one way in which backup options are required, he said, alluding to partnerships with Russia that severed all over the space industry.
Another strong indicator of interest is the $4 billion in financing commitments that remain in Lightspeed, along with a $750 million backlog. “We’ve got strong support from our customers and strong support from our board. So yeah, it’s longer than we wanted, but all of those things make us feel confident that we’re going to get there,” Goldberg said.
Goldberg failed to name the financing sources the company is speaking with, but said the discussions are progressing well and would cover “the funding that we need … although it ain’t over ’til it’s over, so no guarantees.” Further “tweaks” to the constellation’s design may come, he added, but at this time Telesat is not forecasting any major further descoping.
Goldberg also provided commentary on industry rumours that SES and Intelsat are considering a merger, which SES confirmed in a SpaceNews report. He noted that the satellite industry tends to go through cycles of mergers and acquisitions, which he said is “a good thing for the industry” to manage excessive supply. He added he was not surprised by the rumours given that Telesat (and its competitors) are seeing “headwinds in the satellite world.”
“The most important thing that any operator needs to do to compete,” he added, “is to have the most [service] that has the best value proposition for your customers It sounds like a truism, but it’s true, and it’s why we’ve been so focused on bringing Lightspeed forward.”
“We’ve been monitoring very closely the changes that we’ve been seeing in the customer community and user applications,” he continued, “whether that’s cloud commerce, or whether 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.”
The company posted a net loss of $80 million in 2022 (compared to a net income of $155 million in 2021), which the company attributed to foreign exchange losses on U.S. dollar debt, and “Phase 1 accelerated clearing payments for the repurposing of C-band spectrum.” Some debt, however, was removed in 2021 through debt repurchases and that lessened the loss. Adjusted EBITDA margin was 74.8%, slightly lower than the 79.2% posted in 2021.
In 2022, Telesat’s consolidated revenue was $759 million – similar to the year before, but with a slight decline (2% after foreign exchange rates adjustments) due to a long-term direct-to-home customer renewing services at a reduction. Some short-term services to another satellite operator in 2021 did not recur in 2022, either, but that had a much smaller impact. Higher revenue from an equipment sale to DARPA and higher consulting revenue from a DARPA and NASA project, both related to U.S. government low-Earth orbit programs, offset the declines.
Going forward, there will be further decreases in revenue and adjusted EBITDA, which Goldberg attributed to “headwinds” for contract renewals with DISH and Bell. The company also forecasts it will see a 10% decrease in revenue from Anik F2, a satellite that suffered an anomaly in 2022 but which can still maintain some customers. Other customers are being transitioned to different satellites.