Telesat Lightspeed – ‘I think we’re making headway’ on financing, CEO says

Just six weeks after releasing its full-year 2022 results, Telesat issued a small quarterly update while saying it is continuing discussions on financing the next-generation Lightspeed constellation. Telesat, a satellite services provider, has been battling to bring Lightspeed online for nearly two years – ever since its primary contractor (Thales Alenia) reported supply chain issues induced by the pandemic in late 2021. Inflation then caused the cost of the constellation to rise, so Telesat shrunk the scope. The company has removed 100 satellites from the constellation’s design to cut its overall scope to 198, which is still much more than what customers require, per past Telesat releases. But with inflation still not moderated, and the company unable to keep costs at $5 billion, Telesat has been seeking forms of financing the constellation for several months. (Existing finance agreements are with the governments of Canada, Quebec and Ontario, to name a couple of examples.) CEO Dan Goldberg told analysts today (May 11) that there is little progress to report on Lightspeed discussions since the 2022 results were only a few weeks ago, when he last spoke publicly about the matter. That said: "I think we're making headway" on financing the constellation, he said in the livestreamed phone call. "The discussions with the various parties are continuing. We're engaging with the parties that we've been engaging with," Goldberg said. The company has been emphasizing that the speed and reduced scope of Lightspeed will still be helpful for the businesses it is looking to lure, once the constellation is ready in 2026 or so, although Goldberg declined to put a figure on the cost of Lightspeed when asked by analysts. When asked about whether Telesat will pivot from using Thales Alenia as the supplier, Goldberg said his team is exploring "alternative ways" if necessary, as long as switching costs are not prohibitive. But Goldberg framed that discussion as an "optionality" at this point. Telesat's question and answer period with analysts just lasted 10 minutes following the release of the results. The quarter ending March 31 saw consolidated revenue of $183 million, nearly flat with the same period in 2022 absent some changes in foreign exchange rates that saw a $5 million diminishment. "The decrease was mainly due to a reduction of revenue from one of Telesat’s North American DTH [direct-to-home] customers, partially offset by higher equipment sales to Canadian government customers, combined with increased services provided to aero and maritime customers," Goldberg said in the call, echoing a statement released online. Adjusted EBITDA was $139 million, a decline of $7 million or 5 percent from 2022 (not taking into account foreign exchange rates.) Net income was $29 million, however, compared to $61 million last year – a decline of more than half. "The negative variation of $32 million was primarily due to the gain on extinguishment of debt in the first quarter of 2022, combined with higher interest expense and lower foreign exchange gains, partially offset by higher interest income," Telesat officials wrote in the release. Telesat made no adjustment to its full year revenue forecast of between $690 million and $710 million, or its adjusted EBITDA that will be between $500 million and $415 million. Its backlog stands at $1.7 billion as of March 31, with fleet utilization at 88 percent.