Telesat Corp Q2 FY2022 Earnings Call

Thank you and good morning. This morning we filed our quarterly report on form 6-K with the SEC and on SEDAR. Our remarks today may contain forward-looking statements. There are risks that Telesat's actual results may differ materially from the results contemplated by the forward-looking statements as a result of known and unknown risks and uncertainties. For a discussion of known risks, see Telesat's annual and quarterly reports filed with the SEC and SEDAR. Telesat assumes no responsibility to update or revise these forward-looking statements. I will now turn the call over to Dan Goldberg, Telesat's President and Chief Executive Officer.

Okay. Thanks, Michael. This morning, I'll share some thoughts on our results and give an update on the business. I'll then hand over to Andrew who will speak to the numbers in detail, and then we'll open the call up to questions. As noted in the earnings release, we're off to a good start for the year and as a result, we're able to raise our full year guidance for both revenue and adjusted EBITDA. Our confidence around this comes from securing the partial DISH renewal, reselling the portion of capacity that DISH didn't renew. The rebound we've seen in traffic for mobility services over the course of the year, and a number of other contributors on both the revenue and expense side of the business. The pricing environment remains largely stable, and we continue to maintain relatively high utilization across the fleet. On our last earnings call, we noted that we purchased in the open market Telesat unsecured notes with an aggregate face value of USD 60 million and that our board had authorized us to purchase up to an incremental USD 100 million face value of Telesat debt which we did in Q2 last quarter. And at our board meeting yesterday we received the authority to purchase up to an additional USD 100 million face value in Telesat debt. Suffice to say we think our debt is trading below fair value and that this is a creative way for us to use our cash. I want to flag this morning an issue with our Anik F2 Satellite that we called out in the 6-K we filed. In previous filings we've noted that Anik F2 suffered anomalies on two of its thrusters and that as a result, we had to implement a workaround mode to maintain its orbital position and provide service to customers. We expected this approach would allow us to provide station-kept service until 2025. But it now appears that we can only maintain station-kept service until the end of this year, at which point the satellite will be put in inclined orbit. When that happens services currently supported on the satellite will be adversely impacted, some as early as next February, while other services will degrade over time depending on the size of the antennas receiving signals from the satellite. As a result beginning next year, we expect Anik F2 revenues will decline if we can't find alternative ways to support the services. But in an effort to provide continuity of service and preserve revenue, we're developing a range of potential mitigation strategies for Anik F2 including adding tracking antennas at certain of our sites, which would extend the service life for many of our customers and exploring repointing customer antennas to alternate Telesat satellites or to third party capacity. We're working closely with our Anik F2 customers and with government officials here in Canada on this effort, as most of the services on the satellite are provided in Canada. To give you a sense of the potential financial impact Anik F2 in related ground services represent around 8% of our revenue, so a little bit more than CAD 50 million. We don't anticipate any adverse revenue impact for this year 2022. For next year and assuming a given service ends when it can no longer be supported on the satellite, we estimate we lose around one third of Anik F2's revenue next year in 2023, which likely would be somewhat offset by resale of the freed-up capacity for mobility services, which Anik F2 can support when it's in inclined operations. But to be clear, we'll be seeking to use our own and third party capacity to find solutions for our Anik F2 customers in order to provide continuity of service and preserve the revenue on Anik F2 to the maximum extent possible. We will however incur incremental expenses for any third party capacity or other investments we make to extend the impacted service. So turning to Telesat Lightspeed, we received a few weeks ago a final proposal from Thales which we shared with the ECA lenders earlier this week. It took us longer than anticipated to get the Thales proposal. On our last earnings call, I indicated we hope to have a good sense of where we stood with the ECAs by the end of June, but given the delay in getting Thales' final proposal that's now slipped out a few months. We also believe that we're going to need to secure some additional financing, above and beyond the ECA borrowings as inflation and the delay in the schedule for Telesat Lightspeed has led to an increase in the cost of the program. To that end, we're in discussions with potential financing sources at this time. The contemplated incremental financing would be at the Lightspeed unrestricted subsidiary level and would be subordinate to the ECA lenders and the governments of Canada and Quebec investments. Lightspeed represents a compelling investment opportunity, but there's no assurance that these discussions will come to a successful conclusion. Although we've been disappointed with the supply chain challenges and inflationary pressures that we've encountered, we remain extremely bullish about the opportunity Telesat Lightspeed gives us to grow our business. We have a highly disruptive and robust constellation design, over USD 750 million in contractual backlog, and over USD 4 billion in financing arrangements. And the strong support of government partners at the Federal and Provincial levels here in Canada. Our overwhelming focus is on completing the financing, and commencing the full-scale construction of the program. So with that, I'll hand over to Andrew and then look forward to addressing any questions.

Thank you, Dan, and good morning, everyone. I would now like to focus on highlights from this morning's press release and filings. In the second quarter of 2022, Telesat reported revenues of $187 million, adjusted EBITDA of $146 million and generated cash from operations of $26 million with $1.5 billion of cash on the balance sheet at quarter end. For the second quarter of 2022 compared to the same period of 2021, revenues decreased by $1 million to $187 million, operating expenses decreased by $6 million to $59 million, and adjusted EBITDA decreased by $2 million to $146 million. The adjusted EBITDA margin was 78.4% compared to 78.7% in 2021. Between 2021 and 2022, changes in the U.S. dollar exchange rate had a negative impact of $4 million on revenues, and minimal impact on operating expenses and a negative impact of $4 million on adjusted EBITDA. When adjusted for the changes in foreign exchange rates, revenues decreased by $6 million for 2022 compared to 2021, operating expenses decreased by $7 million and adjusted EBITDA decreased by $5 million. The revenue decrease was primarily due to reduction on renewal of a long-term agreement with a North American direct-to-home customer partially offset by an increase in services provided to customers in the mobility market as it continues to recover from the impacts of COVID-19. The decrease in operating expenses was primarily due to lower non-cash share-based compensation and lower professional fees. Interest expense increased by $3 million in the second quarter compared to the same period of 2021. The increase in interest expense was primarily due to interest on the 2026 senior secured notes, which were issued in April 2021, combined with the higher interest on our U.S. Term Loan B facility. This was partially offset by the impact of the repurchase of our senior unsecured notes, combined with the impact of the maturity of one of our interest rate swaps in September 2021. During the 6 months ended June 30, 2022, we reported senior unsecured notes with a principal amount of CAD 22.1 million away evolving market purchases in exchange for $97.2 million. These repurchases resulted in a gain in the second quarter of $86 million and for the sixth month period, a total gain of $107 million. These notes have been retired. And also to point out, it represents an annual interest savings of approximately $10.4 million per year. As Dan has mentioned, we have also authorization to purchase up to a for USD 100 million sales value of debt. In 2022, we recorded a loss on foreign exchange of $99 million during the second quarter compared to a gain of $41 million in the second quarter of 2021. The loss for the 3 months ended June 30 was mainly the result of the stronger U.S. dollar to Canadian dollar with the resulting unfavorable impact on the translation of our U.S. denominated debt. Our net loss for the second quarter of 2022 was $4.4 million compared to net income of $63 million in the prior year. The variation of $57.4 million was principally due to non-cash foreign exchange losses for the 3 months ended June 30, 2022, compared to the same period in the prior year. This loss was partially offset by the gain on extinguishment of debt. For the first half of 2022, the cash inflows from operating activities were $69 million and the cash flows generated from investing activities were $31 million, included was $65 million by way of receipt of the remaining Phase 1 U.S. C-band clearing process and virtually all of the capital expenditures related to a lower orbit constellation, Telesat Lightspeed. Looking to guidance. As you would have noted in our earnings release this morning and as Dan has elaborated in his remarks, we are updating our previously stated 2022 guidance. For 2022, Telesat now expects its full year revenues to be between $740 million and $750 million and an increase from $720 million to $740 million. Also as stated when we provided the preliminary 2022 guidance on March 18, included in our revenue expectation is the recognition of a significant hardware sales with the provision of related services to DARPA later this year was part of an $18.3 million contract. In terms of adjusted EBITDA, Telesat now is expected to be between $540 million to $560 million an increase from $525 million to $545 million. Our guidance still reflects a Canadian dollar to U.S. dollar exchange rate of 1.3%. With respect to expected capital expenditures, we still expect our 2022 cash flows used in investing activities to be in the range of $100 million to $120 million, including capital expenditures to further advance our Lightspeed program. Once we have greater visibility around the construction and financing of our Telesat Lightspeed program, we'll provide a further update on our anticipated capital expenditures for the year, which could increase substantially. To meet our expected cash requirements for the next 12 months, including interest payments and capital expenditures, we have approximately $1.5 billion of cash into short-term investments at the end of June as well as approximately USD 200 million of borrowings available under our revolving credit facility. Approximately $1 billion in cash was held in our own restricted subsidiaries. In addition, we continue to generate a significant amount of cash from our ongoing operating activities. At the end of the second quarter, leverage as calculated on the terms of the amended senior secured credit facilities was 5.56x to 1. Telesat has complied with all the covenants in our credit agreement and indentures. A reconciliation between our financial statements and financial covenant calculations is provided in the report and filed this morning. Our 6-K provides the unaudited interim condensed financial information in the NDA. The non-guarantor subsidiaries shown are essentially unrestricted subsidiaries of minor businesses. So that concludes our prepared remarks for this call, and now we'll be happy to answer any questions you may have. With that, I will turn back to the operator.

The first question is from Walter Piecyk from LightShed.

Dan, can you give us a little bit more specific timeline on when you expect to finalize things with the ECA? I know that you just stated in your prepared remarks, finished up with Thales very recently contracted ECAs. When is that going to be finalized? And then what is the approximate amount of the incremental financing that you think that you're going to need to secure?

As for the timing of when things will be finalized, we had expected to have a clearer understanding of our status with the ECA by now. The process involves engaging with them, signing a term sheet, and then it takes some months to close the financing and finalize documents. Our advisers have indicated that once you have a term sheet, there's a high level of certainty around the financing. Therefore, while I initially thought we would know by now, I now anticipate we will have clarity in a couple of months, likely sometime in Q4. By then, we should have a good understanding of whether everything is coming together with the ECAs.

For that event though that you're saying is in Q4, is the term sheet? Or is that the finalization of the term sheet that was previously signed?

Yes, it's going to be finalized by the end of Q4. I think we've got a good sense of where we are, and maybe the full term sheet will be signed by that point too.

And then it would take another. So basically into Q1 to finalize a term sheet that would hopefully be?

I've never participated in one of the ECA processes, which have more procedures than commercial lenders. However, we expect to have a clear understanding of our situation with them in the next few months. The term sheet might take a bit longer after that, but it’s reasonable to think that it should be ready by the end of this year. Based on the advice we’ve received, once we obtain that term sheet, we will feel confident enough to make significant expenditures and advance with the program. The program launch does not need to wait for the entire definitive document process according to the guidance we've received. Do you have any other questions about that?

No, just on the incremental.

Yes. Regarding the incremental financing, there are a few points to note. As we have mentioned, the current inflationary environment and the extended schedule have led to increased program costs. We previously discussed Lightspeed as involving approximately $5 billion in capital expenditures. Given the current costs and inflationary pressures, we estimate that capital expenditures have risen by around 10%, which translates to several hundred million dollars. One significant uncertainty for us is understanding where the capital costs will ultimately land. While it took longer than anticipated, we now have a final proposal from Thales. Another uncertainty involves the Export Credit Agency (ECA) lenders, who typically require contingent capital to address various cost contingencies that may arise over the duration of a multiyear program. At this stage, we cannot determine the size of the contingent capital needed. We previously indicated that ECA financing should cover most of our remaining financing needs, but we anticipated needing to raise some additional funds. Therefore, when considering this incremental financing, I would estimate it will account for at least 10% of our total capital costs, and it could potentially be more, depending on how negotiations progress with the ECA lenders regarding contingent capital.

I think that's Dan, commentary from the ECAs in terms of them saying look we need you to do this incremental $500 million to $1 billion in order for us to get to our term sheet. And do they require that to specifically be equity? Or is it something that could be layered on as subordinate debt?

That's a good question. What they're mainly focused on is that it is subordinate to them and that it funds certain aspects. Yes, but beyond that, I think I have a better understanding of our general concepts than I initially thought. But yes, I believe that would satisfy them. We have been engaging with the ECA lenders for a while now, so we have a decent idea of what the overall financing package will need to look like. We're not finished yet, but we already have a sense of the requirements. With the final Thales proposal, we now have a clearer understanding of the total CapEx. It’s clear to us that we always knew we needed to raise some additional financing, but now we know it will need to be somewhat larger due to cost increases and our understanding of the contingent capital. Therefore, we have been actively looking to secure this financing.

Again, is it tied to the ECA meaning that are you going to have to do this before they reach their finalized term sheet in the fourth quarter?

I don't think so. However, they will need to see that we have all of our financing in place so they can proceed.

Given the Thales, it seems like you're kind of locked in on one at this point and prices go up, that doesn't seem like a favorable situation. What's their appetite for costing up some vendor financing given that they're partly responsible for not managing their own supply chain better?

Look, first off, we think that Thales is a top vendor for advanced satellite constellations #1. Look, the reality is we are operating in an inflationary environment. We are operating in an environment where supply chains are stretched. And I mean just look across the industry, kind of everybody is getting delayed in their program right now. But we're not locked into Thales. I mean I think they're a good prime contractor. I think they've got a great track record, but we're not locked into Thales.

And just like the time keeps pushing out a bit and then now the price creeps up to centralize on Thales, I mean at some point, right?

I'm sorry, Walter, one more time.

Should maybe send a message at some point that maybe they need to manage their situation a bit better?

Look, suffice to say, they've been sent the message. I'm comfortable where we are now. Our huge focus right now is getting this thing financed right now. Our objective is to get that done and to get going on the construction of the program by the end of the year. That's what we're trying to execute on right now. Has it been frustrating that we've encountered these delays? Yes. It hasn't been what we wanted. But since you're teed up right now, and they're going to be teed up with the ECAs and whatnot, and we're going to know a whole lot more in a few months' time. That's my expectation.

I'm sorry, for the other.

Hey, Walter, I got to say I love talking to you. But you can't fill us to run the call here. So maybe one more for you.

Okay. I'll re-register. Okay, one more on then. Just on the equity versus debt, meaning that you said you've already been having conversations. Can you give us a sense on where that is in the cap structure on the initial conversation you had? That is my final question.

That's a great question. I'm glad we let you ask one more. So look, just like we think our debt has been trading below fair value, we don't think our current share price is a fair representation of the value of Telesat and the value of our future prospects with Lightspeed and whatnot. That's how management feels, our Board strongly feels that way, our two largest shareholders feel that way. So suffice to say, when we think about raising this incremental financing, we're all really focused on raising it in a way that's not dilutive to the equity at a minimum, but rather that's accretive to the equity. So that's what our focus has been.

Next question is from Mike Pace from JPMorgan.

Just a follow-up on the incremental financing. Does the 10% of the budget include or consider any additional funding from the restricted group? I believe there might still be a couple of hundred million dollars available, or is that amount not included?

Andrew, do you want to take that?

Yes. No, it does not. What Dan is talking about is indeed like looking at other sources of financing, and that is not part of what we're speaking about, Mike.

Okay. And then the follow-up to that, I guess. You've been buying back a lot of debt in the open market, I guess. How do you think about balancing bond buybacks with the potential need for GEO to help continue to support LEO in the context of the GEO free cash flow?

I mean, Andrew, can I take the first?

Yes.

Look, we're totally committed to our GEO business and are totally prepared to make incremental investments in Geo so long as we've got a good business case. And so I think that what we've been doing with some of our cash to repurchase this debt, it's been a smart thing for us to do. And we shared this morning that the Board just authorized us to buy up to an incremental USD 100 million of debt. But like we said before, we're not committing to do that. We don't have to do that. So yes, our business is generating a lot of cash. A lot of that cash gets built up in the restricted group. And we're focused on putting it to use in good ways to support the overall business where our debt is trading where it is. I don't know. I mean it just strikes us that we can spend the money that we've been spending to be accretive to the overall business, but still leave us with sufficient cash to make the investments that we need to make to continue to support the GEO business. And I don't know, it sounds like a long answer, but that's exactly how we think about it. And we look at new GEO programs on a regular basis. I'm looking around the room because there are some things that we're thinking about now. So as long as it's a good business case for us to put money to work to invest in the GEO business, and there might be some opportunities out there, we're going to do that.

That's right. Yes.

Okay. And then Dan or Andre, I don't know want to take this one. But I guess with the guidance raise, is that a function of Q2 outperforming for you guys, maybe that, I guess, termination fee from a LatAm customer? And if you can quantify that latter point, that would be really helpful. And if it wasn't a Q2 beat, what changed in the second half of the year for you guys to get to plus $15 million or so midpoint to midpoint?

I'll start. I think it's all the things that I hit in our script. If you remember when we originally gave guidance we were clear that the big uncertainty for the year was where we were going to land with DISH on the renewals. So when we gave guidance at the outset of the year, we were real clear that the guidance embraced kind of all possible outcomes. We get no renewal, we get a partial renewal. And then obviously, we got the partial renewal, and I think we already said on our last call, that gave us the confidence to start making noises that we're going to be kind of higher up in the guidance range. And then beyond that, the environment has just been pretty good. We've been signing a good amount of business on the mobility side. You see the utilization of the fleet growing, on the expense side. Frankly, with some of the delays in LEO, we put off some of the OpEx that we had thought that we might incur earlier in the year. So I don't know, it's kind of been all of those things that led us to do it. And then no, it really wasn't that termination charge really at all. And so everyone knows, I mean they try to be transparent about this stuff, which is why we called it out in the release. That was order of magnitude about CAD 5 million. But on the year, it really didn't have any impact on the year. It probably put more revenue in Q2 than it otherwise would have, but that's revenue that we would have captured over the course of the year anyway. So in terms of how we have thought about our guidance at the outset of the year, it wasn't, that wouldn't have been impactful.

I'll just add on the operating side of the house, we're pretty laser on controlling our expenses. So we're all over that. So that's contributed as well.

Yes. And I'm sorry, Mike, just while we're on the topic of guidance and whatnot. We've shared with everyone that we got this, I think, very positive contract with DARPA to build 2 satellites in LEO that we'll be using to demonstrate. It's mostly about demonstrating inter-satellite optical links. And we said there's really not a whole lot of margin for us in that opportunity. And I think we gave the dollar value contribution. Andrew, what did we say?

Yes. In fact, just part of the opening remarks, we actually said that. In fact, we called it out and said that. I'll just read, also a state has been provided in the preliminary 2022 guidance on March 18, included in our revenue expectations, the recognition of a significant hardware sale with the provision of related services to DARPA later this year, and that was part of a USD 18.3 million.

Yes. We expect to recognize that revenue this year, although there is a possibility it could be delayed until next year. If that happens, it would affect our revenue, but since the margin is quite low, we believe it won't impact adjusted EBITDA. Just wanted to mention that again for everyone.

The next question is from Arun Seshadri from Credit Suisse.

First for me is just if you could provide, Dan, there's a more realistic view, I guess, on Lightspeed in the context of smaller constellation, Amazon timing, I guess, coinciding with the new launch dates, possibly in that 25, 26 timeline? And then obviously, Eutelsat OneWeb. Are you in your revised or if you've revised your plans on Lightspeed, any context you can give in terms of, I guess, for fixed income investors, a little bit more of a cadence of what those kind of year 1, 2, 5 look like under the new kind of Lightspeed configuration?

I apologize if I'm not entirely clear on that. Here’s how we view the timeline. Once we secure our financing and launch the program, we will provide updates on our scheduling expectations. We are actively engaging with customers, and there's a general eagerness for Lightspeed to arrive sooner rather than later. This delay has been frustrating for both them and us. Nonetheless, we are confident in what we plan to bring to the market. Our initial offering includes 188 satellites and high-capacity services, which will form a very capable and disruptive constellation. I believe we will be successful and gradually expand just as other companies in low Earth orbit are doing with their constellations. Our focus is primarily on the enterprise sector, including government, and we have integrated enterprise-grade features that we think will set us apart from other constellations. We anticipate strong interest from sectors like aviation and maritime connectivity, as well as enterprise services for corporations, telecommunications companies, and internet service providers. Currently, we have a backlog of CAD 750 million, and we are still in the process of securing more. We are committed to keeping this fully financed and our aim is to launch later this year. Once operations begin and customers see the tangible development from Telesat and Thales, along with more in-orbit demonstrations, we expect to sign up additional customers and expand our backlog, which we will update quarterly. It’s important to note that while we’ll be striving for a share of the considerable market, estimated to be around $420 billion by 2030, we will not dominate it. Companies like Amazon, SpaceX, OneWeb, Viasat, Inmarsat, and SES will all be competitive players. It’s a large market, and we firmly believe that a strong value proposition is critical for success. We think Telesat Lightspeed represents that value, and our discussions with customers support this belief. I hope this answers your questions.

No, it's helpful from a high-level context, so I appreciate that. Then I just wanted to understand the mechanics around the ECA discussion. Our prior expectation was that the inflation in the overall program was effectively addressed by shrinking the satellite constellation by roughly one-third. Are we talking about inflation being an additional 10% on top of that shrinkage accounting for the inflation? That's question one. Question two is, in terms of additional funding being required junior to the ECA, was that purely a function of the additional inflation? Or are we talking about a portion of the original funding now required, with the ECA saying it's a smaller constellation, therefore, here's what we're going to give you on an ECA level and the rest has to be raised in a junior fashion? Or is it more about a structural change? So those are the two questions.

Yes, those are good questions. Regarding the increase in the cost of the capital program, it's due to two main factors: inflation and a longer schedule. Thales revisited their proposal and sought updated quotes from their suppliers, which contributed to the inflation. Additionally, a longer schedule means we have to extend our expenses over a longer period of time. As for your second question about the incremental debt, there are also two key aspects to consider. First, since the cost of the program has risen, we need to secure more funding. Second, we previously mentioned the need for incremental financing. We initially considered raising some of this through equity, but given our share prices and our belief that their current value is not reflective of fair value, we are less inclined to pursue equity financing now. We are also aware of the contingent capital requirements that the export credit agencies (ECAs) may impose. While we've engaged with them and understand they typically request this for programs they finance, there hasn't been a significant change in our expectations despite the shift from 298 to 188 with the ECAs. Ultimately, the main issues are inflation, the effects of a longer schedule, and the necessity of seeking additional financing, while equity issuance has become a less viable option given market conditions. We must also prepare for the outcome regarding the contingent capital requirements from the lenders.

Has there been any change to the French ECA's posture on participating post one Eutelsat?

Not that we can see and certainly not anything that we've heard from Thales. But in truth, BPI, which is the export credit agency in France that we've been engaged with. BPI has always been a large, if not the largest, Eutelsat shareholder. So for us, kind of nothing's really changed, if you know what I mean, they're a big Eutelsat shareholder now. They have been for I'm sure as long as we've been engaged with them on this project, and assuming that the OneWeb transaction goes through, it looks like there'll continue to be a big Eutelsat shareholders. So I don't think it's really changed the complexion.

Okay. And then the only reason I asked the question is this whole context of creating a LEO sort of European LEO champion and if the Eutelsat LEO kind of Eutelsat, OneWeb combination kind of de facto becomes that and does that change the dynamic? Was the sort of the thought, but it sounds like it's not really impacting you?

Well, I think that I know savant on BPI's mandate. But I believe fundamentally, these export credit agencies are there to support their domestic exporters to help create jobs and develop technologies and whatnot. And Thales obviously, will be a big beneficiary of the Lightspeed contract and intends to hire a lot of people and will be developing state-of-the-art technologies. And so I think that fits quite nicely within BPI's mandate.

One last thing if I could sneak in. On 2023, you've mentioned the Anik F2 issue and sort of quantify that. Thank you for that. Can you provide some insight into how DISH looks in 2023 at a high level? Specifically, how do you see the backlog and the trend line for 2023 compared to 2022 on the restricted group set, considering the impacts of X-DISH and X-Anik F2?

We received a 2-year renewal from DISH towards the end of April this year, and they have the option to extend for an additional year beyond that. We expect DISH to maintain stability throughout 2023 and 2024, so there shouldn't be any impact on that front. It's still too early to provide guidance for 2023, but we want to clarify our view on the Anik F2 anomaly, what it currently contributes, and the potential financial impact for 2023. We'll provide updates as we analyze this, as we believe there are several measures we can take to lessen the effect of the F2 issue, and we're currently discussing this with our customers. We expect to share more information on this later.

We will look at it as we go along for sure.

The next question is from Jason Kim from Goldman Sachs.

I'm going to add the Lightspeed cadence question in a different way. You're obviously focused on finalizing the financing for the project. But given the delays, your expected revenue ramp will also going to happen later than you probably initially planned for. So at this point, in the context of your debt coming due in 2026, how do you envision the refinancing to take place for your existing debt? Are you assuming that there will be enough of a revenue backlog and visibility into the LEO business such that you can refinance the cap structure before the debt becomes current, the balance sheet?

Yes. I'll take a crack at this. Yes, look, by the time we get out to when our debt is in the main kind of maturing, everyone's going to know a whole lot about Telesat light speed and the traction that we're getting in the market. We'll have been reporting our backlog all along the way. So I think the market will have massive visibility into how we're doing, how our competitors are doing, what portion of this TAM or are we getting where exactly we are in terms of cadence of, just everything. So I think yes, I think the market will have great visibility, and we'll be able to assess Telesat future prospects based on where Lightspeed is at that time. Anyway, Jason, that's how we think about it. And we're going to be very transparent with everyone around how we're doing on Lightspeed.

And then have your launch schedules pushed out as well?

Has the launch scheduled? Look, the last update we gave on schedule, we said we'd be launching in 2025. And when we finalize our financing and get the program going, we'll update all the schedules, when launches occur, when the Board constellations in service, when global coverage. So we'll provide an update then.

And then I'll end with the big picture question for Dan. And that is for years, we've been talking about M&A in the space, but not much has happened. But just over the past year, we've seen 2 deals announced one with Viasat and Inmarsat, and then another one, obviously, with between Eutelsat and OneWeb and we saw some press supports involving a few of your other satellite peers just in the past week. So how are you thinking about all of these M&A activities and what that means for Telesat?

Yes, we've definitely been discussing the potential for industry consolidation for quite some time, and I believe we expect it to occur. With the changes in technology, new entrants, and the synergies that can be achieved through bringing companies together, the trends and feedback from the market align with our expectations. The two deals you mentioned represent different types of transactions. Inmarsat and Viasat, along with Eutelsat and OneWeb, highlight several important aspects. The market is undergoing changes, and we see a transition in our industry. We believe that the largest and most promising growth opportunities lie in broadband connectivity—high throughput, low cost, and highly reliable secure global broadband connectivity. This is a significant motivator for the merger between Inmarsat and Viasat. Similarly, we observe Eutelsat's actions in light of their positioning to capture what we expect to be a vast and rapidly growing market. I was not surprised by Eutelsat's announcement a couple of weeks ago. As you can see, we are aligning our business strategy toward LEO, which we believe represents the future and the best architecture for delivering value in the global broadband connectivity market, especially for enterprise applications. What we are witnessing today reinforces our thesis about the market's direction and the optimal technology to meet this demand. Overall, I view this as a positive development for the industry. For years, there were too many operators introducing overlapping capacity; some consolidation should lead to rationalization in supply, benefiting the sector. Eutelsat's move with OneWeb and our efforts with Lightspeed are essential technologies that need development for satellite to remain relevant in an environment where enterprise users require high throughput, low latency, and affordable broadband connectivity. So, that's our perspective, and we're excited about the direction we're taking.

Okay. We are out of time for questions. Dan? End of Q&A

Yes. Okay. Michael, thank you. Thank you, everyone, for participating. Thank you, operator, and we look forward to chatting with everyone when we issue our Q3 results. So thank you very much.

Yes. Thank you.

Thank you. The conference has now ended. Please disconnect your lines at this time, and thank you for your participation.