Telesat officials said the company will meet its 2024 guidance and continue spending on Lightspeed after releasing first-quarter results on Friday (May 10).
That said, the company said it will need to maximize its EBITDA and cash flow “by seeking to mitigate anticipated revenue declines and rigorously manage our legacy cost structure” in its geostationary business, officials warned in the earnings statement. But as a phone call with investors showed, Telesat still believes that Lightspeed will lift that issue in the coming years.
Telesat plans to launch its delayed Lightspeed constellation in 2026; Lightspeed has undergone considerable changes after the pandemic disrupted supply chains and affected its main supplier, but Lightspeed received fresh financing from the government of Canada earlier this year. Launching is expected aboard SpaceX, Telesat announced in 2023.
“Given we hosted an earnings call just six weeks ago – when we released our Q4 and full-year numbers – I really just wanted 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,” CEO Dan Goldberg told investors in a conference call on Friday.
Low Earth orbit services should be picking up around late 2027, allowing for “meaningful revenue” around that time, Goldberg added.
As previously announced in Q4 results, the government of Canada announced a $2.14 billion loan for Telesat Lightspeed. In exchange, the government will receive warrants for 10% of the common shares of Telesat LEO Inc. based upon an equity valuation of US $3 billion. The loan has conditions attached to it, including definitive documentation with the government along with other financing sources for Telesat.
“Our own $1.6 billion equity contribution is going to be borrowings from the government of Canada, the government of Quebec and some vendor financing – and so those borrowings are going to be supported and secured by our Lightspeed activities,” Goldberg said. The spending is coming now because pricing is “locked in with our suppliers,” and customers are eager to see the service launch as soon as possible, he noted.
Goldberg added that like many others in the industry, he is anticipating more competitor consolidation such as the acquisition of SES by Intelsat announced at the end of April. New entrants like SpaceX’s Starlink are “impacting the industry,” he said, pointing to other examples in 2023 such as ViaSat’s acquisition of Inmarsat, and Eutelsat’s merger with OneWeb.
“We 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, but the prospects of Lightspeed and the like are we’ve been competing against each of them, you know, for decades now,” Goldberg said.
“There is a transition that’s taking place in the industry right now as particularly what we think of as enterprise users – which is to say, non-video – it’s in the process of transitioning off of GEO and down to LEO,” he added, saying that is why Telesat is focusing on Lightspeed and bringing it to market.
The company reported consolidated revenues of $152 million, down 17% or $31 million from the same period of 2023. That decrease came after a North American direct-to-home customer renewed with fewer services, and sales also decreased to Latin American customers and the Government of Canada.
Operating expenses also fell to $47 million, down 12% or $6 million, due to lower non-cash share-based compensation and higher capitalized engineering expense. Adjusted EBITDA fell to $111 million, which was 20% or $28 million than in 2023. Net loss was $52 million, largely due to a loss on foreign exchange, compared with $28 million in Q1 2023.
The company’s backlog stands at $1.2 billion, excluding $740 million in Lightspeed revenue commitments. Its 2024 full-year outlook shows revenues of between $545 million and $565 million, adjusted EBITDA to be between $340 million and $360 million, and cash flows for investing between $1 billion and $1.4 billion. A significant portion of the EBITDA operating expenses, along with the cash flow, is allocated for Lightspeed.