Telesat will have news “in the coming weeks,” or shortly thereafter, about government funding for the Lightspeed constellation still scheduled for launch in 2026 after delays.
Chief Executive Dan Goldberg told investors during a call on Aug. 14 that the company still expects to have an announcement by the end of the summer, maintaining guidance from the First quarter 2024 results.
“I am pleased to say that we have maintained a positive and sustained relationship with government representatives and are optimistic that we will remain on track to achieve this goal,” he said. “We will make a separate announcement once final funding arrangements are finalized.”
While negotiations with the federal government and the provincial government of Quebec are ongoing, “I don’t see any significant impediments or obstacles to getting this done in the next few weeks,” Goldberg added. “It’s a big funding deal with multiple agreements and we’re working through all of that, but there’s nothing extraordinary about what remains to be done.”
Goldberg said some of the complexity comes from mixing vendor agreements with government pacts, and noted that as a lawyer by training he wouldn't feel comfortable saying definitively that funding is secured, but all signs remain positive with weeks to go.
“Our suppliers need the money. They are asking for equipment right now,” he said, adding that his suppliers are looking for secure funding to move forward with the project. “Don’t forget that we will be launching satellites within two years, which means those satellites will be built in the next few months.”
Goldberg also highlighted “great progress in executing the Lightspeed program,” especially with regard to satellite prime contractor MDA Space. MDA Space has said it has onboarded 90 percent of its supply chain for Lightspeed, and Goldberg added that Telesat has increased its fiscal 2024 headcount by nearly 20 percent in preparation for the program’s rollout.
Telesat’s second-quarter results, reported June 30, were also made available to investors on Aug. 14 and show declines in key metrics that the company expects to correct once Lightspeed services become available.
“We are very optimistic about our market prospects and our ability to deliver extraordinary value,” Goldberg said of Lightspeed. He added that in the near term, the company will look to “manage its cost structure” in geostationary activities to address declining revenue from that business line. In addition, Telesat will focus on closing financing deals for Lightspeed, which will be in low Earth orbit.
Revenue fell 15% to $152 million from a year earlier, due to service reductions and a lower renewal rate at a North American direct-to-home TV customer, among other factors. Operating expenses were $56 million, up about 10% from a year earlier, due to issues such as higher salaries and costs with consulting contracts.
Adjusted EBITDA fell 25% to $103 million, while net income was down sharply to $129 million (from $519 million). The drop in net income was mainly due to Band C compensation income recognised in 2023, although it was partially affected by exchange rates.
On a more positive note, Telesat’s order backlog stands at $1.1 billion, excluding revenue commitments associated with Telesat Lightspeed. The company also maintained its full-year guidance for revenue of $545 million to $565 million and adjusted EBITDA of $340 million to $360 million.
While Goldberg said maintaining costs is a short-term consideration, overall results this quarter were consistent with guidance: “Another quarter played out as we expected.”
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Correction: We incorrectly stated that Telesat had onboarded “90 suppliers,” but they had onboarded “90 percent of their supply chain.”
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