Telesat Corp Q4 FY2022 Earnings Call

Thank you, and good morning. This morning, we filed our annual report for the year ended December 31, 2022, on Form 20-F 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 report filed earlier today with the SEC. 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 financial 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 will open the call up to questions. Looking at our financial performance for the quarter and the full year, I'm pleased with where we landed. We beat the guidance we gave at the outset of the year as well as the updated guidance we shared when we released our Q2 numbers. We also continue to run the business in a highly disciplined and focused manner, closing the year with an adjusted EBITDA margin of roughly 75% and with $1.7 billion of cash on the balance sheet. As we mentioned on our last call, the overall operating environment was pretty stable from a demand and pricing perspective, and I was pleased to see our capacity utilization tick up throughout the year. Our big headwind for 2022, and it will be a headwind for the first four months of this year too, was the DISH renewal on our Anik F3 satellite. As we've discussed previously, it was at a lower rate and for less capacity than the previous deal. And even though we promptly resold the balance of the capacity that DISH didn't renew, it was still the biggest contributor to the decline in revenue and adjusted EBITDA we experienced last year. Also worth noting was the revenue we recognized in Q4 from the contract we have with DARPA, the US DoD's research arm. As we said before, the contract generated approximately $20 million in revenue and about an equal amount in expense, meaning it was essentially neutral at the EBITDA line and overall dilutive to margins. But because that work is all about demonstrating to the US government and to the market more broadly the efficacy and capabilities of optical inter-satellite links, which are a key feature of our Lightspeed satellites, it made good strategic sense for us to do that contract even though it was EBITDA neutral. The last thing I'd note on our performance last year is something else we've discussed before, which was the anomaly we had on our Anik F2 satellite that shortened its station keeping life. As we covered on our last call, I think we've done a really good job with our customers in upgrading ground infrastructure to extend Anik F2 services and where that wasn't enough, transitioning users who needed station keeping capacity to other satellites, including an in-orbit satellite we bought from another operator, other Telesat satellites, and third-party satellites as well. As a result of all that excellent work, we expect to retain over 90% of the revenue we originally expected from Anik F2 this year, recognizing there's some additional CapEx and OpEx we've incurred with the OpEx getting captured in our guidance for this year. The press release we issued this morning sets out our 2023 guidance, and I know Andrew plans to speak to that in his remarks. We're forecasting decreases in revenue and adjusted EBITDA, and I just wanted to flag here the two biggest contributors. The first, as I mentioned a few moments ago, is the residual headwinds from the Anik F3 DISH renewal, which will show up in the first four months of this year. The second is an expected renewal with Bell for Nimiq 4, which comes up for renewal in early October this year. At this time, we expect Bell to renew all the DTH capacity on Nimiq 4 but at a materially lower rate than the current one. Those two renewals, DISH and Bell, account for approximately half of our anticipated revenue and adjusted EBITDA decline for this year. So now on the status of Telesat Lightspeed. On our Q3 earnings call, we reiterated we were in discussions with certain additional financing sources to cover the increased cost of the program and that we expected to have a better sense of where we stood on the financing around the end of the year. Unfortunately, we're not there yet. That said, we continue to make progress with the various parties we're engaged with and we remain optimistic that we're going to secure the financing we need to move forward with the program, recognizing, of course, that there's no assurance that we'll ultimately get there. 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 soon. Finally, we wanted to share that Telesat's Board has authorized up to $200 million in cash for repurchases of our debt if management determines that such repurchases are in the best interest of the company. With that, I'll hand over to Andrew, and then look forward to addressing any questions you have.

Thank you, Dan. Good morning, everyone. I would now like to focus on highlights from this morning's press release and filings. Telesat ended the year 2022 with reported revenues of $759 million, adjusted EBITDA of $568 million, and generated cash from operations of $229 million, with $1.7 billion of cash on the balance sheet at year-end. As Dan has mentioned, we outperformed our 2022 financial guidance, which we increased and actually updated when we issued our second-quarter results in August of last year. In the fourth quarter of 2022, Telesat reported revenues of $207 million, adjusted EBITDA of $139 million, and generated cash from operations of $69 million. For the fourth quarter of 2022 compared to the same period of 2021, revenues increased by $19 million to $207 million, operating expenses increased by $8 million to $80 million, and adjusted EBITDA decreased by $6 million to $139 million. The adjusted EBITDA margin was 67.2% compared to 77.1% in the same period last year. Between 2021 and 2022, changes in the US dollar exchange rate had a positive impact of $8 million in revenues, a negative impact of $1 million in operating expenses, and a positive impact of $7 million on adjusted EBITDA. When adjusted for changes in foreign exchange rates, revenues increased by $11 million, operating expenses increased by $7 million, and the noncash expense related to share-based compensation increased by $16 million. Overall, results showed a decrease in adjusted EBITDA of $12 million. Looking at revenues, the revenue increase was primarily due to the completion of equipment sales at DARPA, as Dan has mentioned, as well as higher revenues from aero and maritime customers, which was partially offset by a reduction in revenues upon renewal of a long-term agreement with a North American DTH customer. The increase in operating expenses was primarily due to higher equipment sales related to the DARPA program, as previously mentioned, partly offset by lower noncash share-based compensation and lower bonus expenses relating to 2021. Interest expenses increased by $18 million in the fourth quarter when compared to the same period in 2021. The increase was due to an increase in interest rates in the US Term Loan B facility combined with the foreign exchange impact on the conversion of US dollar-denominated debt. This was partially offset by the impact of the repurchase retirement of senior unsecured notes in 2022. As a reminder and as discussed previously, we repurchased notes with a principal amount of $160 million in 2022. These repurchases resulted in a gain of CAD107 million. This also represents an annual interest savings of approximately $10.4 million. In the fourth quarter, we recorded a gain in foreign exchange of $72 million compared to a gain of $20 million in the fourth quarter of 2021. The gain for the three months ended December 31, 2022, was mainly the result of the stronger US dollar to Canadian dollar compared to the spot rate as of September 30, 2022, with resulting favorable impact on the translation of our US dollar-denominated debt. Our net income for the fourth quarter of 2022 was $92 million compared to net income of $113 million in the prior year. The variation of $21 million was principally due to the recognition of US C-band clearing payments in the fourth quarter of last year, partly offset by higher noncash foreign exchange gains compared to the same period last year along with a lower tax expense. Cash flows for the year ended 2022 showed cash inflows from operating activities of $229 million, which included $65 million by way of receipt of the remaining stage one US C-band clearing proceeds. In terms of overall C-band proceeds, we have received approximately $85 million to date and expect forward proceeds of around $260 million. In terms of capital expenditures during 2022, virtually all are related to our Low Earth Orbit Telesat Lightspeed. Guidance, as Dan has mentioned, and you've noticed in our earnings release, we have provided preliminary 2023 guidance. The guidance assumes the Canadian dollar to US dollar exchange rate of 1.35. Telesat expects its full year revenues to be between $690 million and $710 million. For adjusted EBITDA, Telesat expects to be between $500 million to $550 million. For capital expenditures, we expect our cash flow used in investing activities to be in the range of $40 million to $70 million. Once we have greater visibility around the construction and financing of our Telesat Lightspeed program, we will provide a further update on our anticipated capital expenditures for the year. To meet our expected cash requirements for the next 12 months, including interest payments and capital expenditures, we have approximately $1.7 billion of cash and short-term investments at the end of December, as well as approximately $200 million of borrowings available under our revolver. Approximately $1 billion in cash is held in our unrestricted subsidiaries. In addition, we continue to generate a significant amount of cash from our ongoing operating activities. As Dan has indicated this morning, the Board has authorized up to $200 million in cash for repurchases of our debt if management determines repurchases to be in the best interest of the company. At the end of the fourth quarter, leverage as calculated under the terms of our amended senior secured credit facilities was 6.17 times to 1. Telesat has complied with all the covenants in our credit agreement and indenture. A reconciliation between our financial statements and financial covenant calculations is provided in the report we filed this morning. The non-guarantor subsidiary shown are essentially the unrestricted subsidiaries with minor differences. So I think that concludes our prepared remarks for the call and now we'll be more than happy to answer any questions you may have. And with that, we'll turn back to the operator.

And the first question is from Walter Piecyk from LightShed.

So SG&A is something that obviously would start to escalate if you proceeded with Lightspeed, same thing with CapEx. So given these ongoing delays in terms of getting the financing, should we just basically freeze expectations for valuation purposes on SG&A until we get the go-ahead that you can actually get the financing or do you guys have some confidence level that you start to engage in increased OpEx and CapEx because you're optimistic that you're going to get this financing queued up for Lightspeed?

Maybe I'll take a shot, and then Andrew can chime in as well. So in putting our budget together for the year and then giving the guidance, we're spending right now on the OpEx side moving forward with Lightspeed, right? So we've been doing a lot of work on it, and we've got a lot of people in the company dedicated to it. And our guidance on the EBITDA side takes into account that, yes, we're making investments. We're spending on the development of the Lightspeed program. We're confident that it's going to go forward, and we're doing real work on it. On the CapEx side, I think Andrew was careful to say that we've guided to $40 million to $70 million a year, but said that more or less, we'll update our guidance once we've got Lightspeed fully underway because once it's fully underway, certainly, our CapEx spending will look a lot different than the $40 million to $70 million. The $40 million to $70 million is just kind of spending outside of the full program moving forward. So Andrew, I don't know if you want to add anything to that?

I think as you said, Dan, in terms of CapEx, we're very prudent. And as Dan had said, as soon as we've got the go-ahead for Lightspeed, we will come back indeed and talk about guidance for there. And on the SG&A perspective, we're very prudent. And indeed, as Dan had said, we are adding resources. But if you look at our implied guidance, in fact, you see the increase in OpEx is pretty small year-on-year. So we continue to be very, very prudent until we have the go-ahead on Lightspeed.

From a sum of the parts valuation standpoint, what would you say the percentage mix of SG&A is to Lightspeed? The reason I ask is that my follow-up question is about when you would reconsider your view on the revenue opportunity if the market has shifted due to delays, leading you to revert to a base valuation based on a core EBITDA number, which is currently being affected by some of these investments on the operating expense side. So, there are really two or three parts to that question: the percentage of operating expenses that this represents; if, hypothetically, you decided to abandon LEO, how much could your operating expenses decrease; has the market revenue opportunity you outlined, which I believe is now almost a year old, changed; and third, what gives you confidence that Lightspeed can reach a point where we can advance?

Andrew, you want to?

Yes, in terms of the OpEx as we go through our program that we're spending, we will capitalize and continue to do that up until if a determination was ever made about Lightspeed that it wouldn't go ahead. But we're totally confident as Dan has said that we will go ahead. And therefore, we see within the confines of our total operating box and even last year, we're off about $22 million in OpEx. And just to give you a sense of that, the big driver of that was indeed the cost of the DARPA program itself. So year-on-year, the incremental costs in relation to LEO are not that significant. And we've got full plans, full business plans that indeed, in terms of attacking the market, customers rolling out the ground infrastructure, that once we have the green light to go ahead, we will come back and we'll communicate that guidance to you to make it very, very clear.

And maybe I'll offer some thoughts on kind of where we are with LEO and the optionality that we have around it. But we're not required to move forward with Lightspeed, right? There's no legal compulsion work that also had asked to move forward with Lightspeed. We're focused on Lightspeed because we think it's a great commercial opportunity. We think it's a great way to grow the business and to create a lot of equity value for our shareholders. And yes, it's taken us longer for sure than we had originally anticipated. But I continue to believe that the original investment thesis is totally intact, which is to say, there's a huge market for a well-engineered, well-executed, enterprise-grade, enterprise-focused LEO constellation. If anything, I'm just more and more convinced of that with the passage of time, the importance of having low latency, a highly distributed network, achieving lower cost per bit, driving down the small user terminals, just everything that we've seen over the last while has, I don't know, confirmed for us that we're on the right path there. And certainly, all the conversations we're having with commercial customers, with government users, all of that. Certainly, I'd say the experience that we see in Ukraine in terms of how the Starlink constellation, how crucial that's been to that conflict, all go to reinforce the logic around having a LEO constellation and the strategic importance. And so that's that, which is to say we're not seeing anything different in terms of commercial developments, technology developments, anything that persuades us that this isn't a good path. Why do we have confidence that will ultimately get there? I think that was another question. We've got a ton of momentum on this. We've lined up already over $4 billion of financing commitments. We've already got something like $750 million worth of backlog. So we've got strong support from our government, we've got strong support from our customers, we've got strong support from our Board. So yes, it's taking longer than we wanted. But all of those things, I think, make us feel confident that we're going to get there. And then the last thing I'd say is if we don't for some reason, and I think that we will, but if we don't, look, we're still generating a significant amount of cash. We've got over $1.5 billion of cash on our balance sheet right now. It's not like we will have left ourselves in a horrible place. Lightspeed is what we're focused on. Lightspeed is still the right move for Telesat, and I think that we're still, from a timing perspective, in a good place. But if for some reason that we can anticipate right now something different happens then we'll revisit it. Anyway, there's a long-winded answer, but they were good questions.

The next question is from Marcello from Ares.

This is Marcello Chermisqui from Ares. I had a couple of questions. One was there's a new comment in the Form 20-F that you're not actively seeking to raise equity funding for Lightspeed. What kind of equity partner are you looking for, is it just an investment fund to provide capital, are you looking to partner with a satellite manufacturer or even another GEO or LEO network operator?

I don't think there's any new information to share. We mentioned in our Q2 call that due to rising costs related to Lightspeed, we were in talks with some potential equity investors, and we reiterated that in our last call. So, I don't believe there's anything different to report. We indicated that any investments, if they happen, would be at the LEO level and would rank below other financing sources we've been pursuing, which include BPI, the French export credit agency, the Canadian government, and the Quebec government, all of which we have been in discussions with regarding financing. So again, I don’t think there’s anything new there.

And as it relates to the LEO development milestones, in order to maintain the US spectrum authorizations? What are the key dates that we should keep in mind? I was under the impression the first date is next week in April. So if you don't hit that date and cannot negotiate an extension, what potentially happens?

I mentioned our regulatory considerations earlier. We have several applications in the first and second processing rounds, along with activities at the FCC and IT levels, and numerous filings in both areas. I won't delve into the specifics of the first and second rounds, but I am confident that when we are ready to proceed with Lightspeed, we will secure the necessary regulatory rights globally to deliver our services. For more details, I recommend referring to the 20-F, where you'll find some disclosure on this topic.

And as it relates to the GEO satellites, at what point do you have to make a decision whether you want to invest in new ones to replace aging satellites? I know you have the CapEx guidance of $40 million to $70 million, but also in the 20-F, you increased the cost to launch a GEO satellite to $200 million to $500 million, which implies that you'd have to step up CapEx if that's the path you want to take or is there another path you potentially think about?

We'll take it kind of satellite by satellite. We're only going to replace a GEO satellite or launch an expansion GEO satellite or frankly spend any CapEx if we are convinced we've got a strong business case for it. And so whenever a satellite comes up towards the end of its life, we take a hard look at what's the best way forward here. And there are some other things we can do. I mean there are some newer technologies out there that can extend the life of the satellite and we've been evaluating some of those as well. So right now, as you can tell, we don't have any plans right now to spend money this year at least on replacement GEO satellites. We're open to doing just that, though, when those satellites come up for renewal. And I got to say we're open to building new GEO satellites and we've looked at opportunities from time to time to do that. But yes, we'll just evaluate every business case kind of on a stand-alone basis and make sure that there is a strong risk-adjusted rate of return on that. But right now, as you see, we don't have any CapEx spending for replacement or expansion GEO satellites right now in our plan for this year.

The kind of segue like back to Walter's question earlier. Like if you did not end up pursuing Lightspeed, you have the $1.5 billion of cash. Is that potentially cash you would, I guess, bring back from that subsidiary to invest in GEO or how would you think about that?

Yes, I probably rather not speculate too much right now on what alternative paths we could take. As I've said, our focus is on moving forward with Lightspeed, and we're very bullish on that. But yes, to your point, could we bring cash back? Yes, we could. There's nothing I'm staring at our General Counsel about. There's certainly nothing that prevents us from doing that. We'll cross that bridge if and when we get there. I think we've been running this business for a pretty long time. We've been pretty hard-headed and pragmatic about how we use our cash and pretty disciplined around that. So anyway, again, the focus right now is moving forward with Lightspeed. If for some reason that didn't happen, we'll chat with you guys then about what we might do with the cash that we've been building up.

The next question is from Brandon Karsch from Kennedy Lewis.

Just want to turn back to '23 guidance here. You mentioned that half of it was from DISH and the Bell Canada renewal. Could you bucket the other half a little bit? How much of that is Anik F2 changes, any kind of degradation in the core business, FX or any other variances?

So the other pieces are that DARPA contract that we recognized in Q4, that was kind of a one-time arrangement with DARPA. We said that was about $20 million. So that's another big piece of the revenue decline. And then beyond that, I mean, that right there accounts for, I don't know, three-quarters of the downturn roughly. Beyond that, it's odds and ends here and there, some renewals maybe at a lower rate, some lost renewals. It's just a whole bunch of other stuff that builds up to the balance of the decline.

I thought the DARPA contract was about EBITDA neutral. So I was wondering…

The DARPA contract was indeed EBITDA neutral. I was referring more to the revenue side. We do have some increased expenses from the third-party capacity necessary to support customers on Anik F2. This is probably the primary factor contributing to the increase in operating expenses. While there are some reductions in operating expenses, they are offset by increases, particularly due to the third-party capacity needed for Anik F2 customers. Most of the changes are revenue-driven, with significant contributions coming from DISH, the expected renewal with Bell, and other aspects related to our regular customer business.

Would it be possible to quantify what the Anik F2 expense was and also maybe discuss some of your assumptions around the Bell renewal and what makes you so confident that you're one going to renew that until you're going to get the prices that you're building into the budget here?

Yes, I’ll address that. Honestly, I don’t believe we will provide any additional details on F2 as we have already shared a lot. Regarding Bell, our confidence comes from our strong understanding of them as a major customer and our ongoing discussions. The expectations we incorporated into our guidance closely reflect the comprehensive conversations we’ve had about the upcoming renewal, which supports our confidence in the situation.

And then on the bond buybacks, good to see that you reauthorized more buybacks, but it's been a few quarters since you've done any. But any reason that you've been holding off and has your appetite for that changed at all?

It's important to understand that public companies face significant regulations when it comes to issuing and repurchasing securities. There were many factors to consider at the time. We have aimed to be transparent with the market regarding the authority we've received from our Board and our intentions, so that everyone understands our perspective. There are various factors we need to consider, and we have taken those into account. The Board has increased our authorization for debt repurchases. We believe that our debt is not fairly valued at current prices, and using our cash, particularly in the restricted group, could be beneficial. We want to inform everyone that we have this increased authorization from the Board. If we determine that it's the right decision, we will proceed with repurchasing the debt. We're not committing to this action, but we want to make sure the market is aware that we have the authority to do it.

And if I could just sneak one more in here. Just on the Lightspeed side, I appreciate that you say that you've had some momentum building, but it sounds like the commentary has been pretty similar to what we've heard the last couple of quarters. So maybe if there's anything else you could share, maybe at least do you think at this point, this incremental subordinated capital, do you think that's going to come from private investors or are you talking to government entities for that?

I don't want to get into who the potential financing sources could be. I will say that we are in discussions with financing sources for the funding that we need. I feel pretty good about where those conversations are. Although, it ain’t over until it's over, so no guarantees. Yes, I don't think I can offer that much more incremental insight. But only to say that, yes, personally, I remain optimistic that we're going to get the funding that we need to move Lightspeed forward. And yes, we're excited to do that.

The next question is from Arun Seshadri from BNP Paribas.

Most have been asked, just on the Lightspeed topic, could I ask the question a little bit different way. I mean, have there been some new parties, either investors or partners that have emerged in the last three or six months that would make you more confident today than you would have been a few months ago?

I believe there is significant interest in LEO currently, and many parties align with our vision regarding the substantial opportunity available. There aren't numerous LEO operators to invest in if you're optimistic about this opportunity, so I want to emphasize that. Additionally, I want to highlight that we have arranged a considerable portion of our financing, which reassures us that we have already secured much of the funding we need. We are in discussions with various stakeholders, and I believe there are investors keen on backing a project like ours. We'll see how those discussions progress.

And then as far as timing goes, how would you handicap the timing of an announcement on Lightspeed? I mean, would you say this is like a month or a couple of months away or do you think theoretically could be significantly longer?

I acknowledge that I have misjudged this before, so I am hesitant to make bold predictions. It's not that I don't believe it will happen, but finalizing everything has taken longer than expected. I want to be cautious with my words, but I do feel we are making progress and we will provide some clarity soon. Although I dislike using phrases like "in the near term," I genuinely believe we are doing all the right things. We have a great opportunity here and we want to ensure we get it right. It would be easy to just spend the cash we have on hand, but that is not our approach. So, stay tuned. We are making progress and hope to have something more definitive to share soon.

One last thing on the Lightspeed topic. Are there any additional changes in the scope of the overall project possible or likely due to potential new investors and finalizing the terms?

Potentially, there are opportunities to tweak some things. Maybe just to step back. Fundamentally, I think we have a really good design for Lightspeed. It is a massively capable constellation that we've designed, it's capital efficient, it's much fewer satellites than the thousands of satellites that some of the other folks are deploying. We just don't think that we need to do that to effectively serve the enterprise and government market that we're focused on. So I'd say fundamentally, the core building blocks of the project, couple of hundred satellites, process payloads, digital antennas, optical inter-satellite links, all of those things, I think, remain intact. Is there a little tweaking that can be done here and there to maybe improve things a little bit further? Yes, I think so, and we've been exploring some of that. Some of the investors have particular focuses in terms of markets that they're focused on. Yes, they do. And there's potential tweaking that we can do to address their focus areas. But yes, beyond that, I'd say, again, fundamentally, the design that we've been talking to the market about, our customers about, remains intact.

The next question is from David Windley from Jefferies.

Most of mine have been answered, but just one or two others from me. Could you maybe talk a little bit about the utilization increase, was that more a function of the anomaly or is there other stuff going on there?

I think we promised in the past, if utilization is meaningfully affected by a satellite coming out of service or something. No, I'm looking at one of my colleagues, who's totally close to this. No, it's just been hitting a lot of singles and doubles, frankly, quarter after quarter, just steadily filling up maybe some beams that in the past have had a little bit less utilization. I think we've got a very good team that is just constantly looking for ways to regroom the capacity. It's always the case in a business like ours that you sell out of capacity in some areas that are very hot and you have available capacity in other areas where there's just less demand. But the satellites have certain flexibility to swap capacity around, and you're always looking for opportunities to continue to do that. So that's what the utilization increases have come from, just in the trenches, making good careful capacity planning decisions. Demand, as we've said, has been pretty good and just, yes, chipping away at filling up. And look, our utilization is pretty high right now, 89%. I think if you look across the industry, that's got to be up there in terms of utilization. I do think we do a good job of making full use of the capacity that we're investing in. And as you can see from all the cash we've been building up, it'd be easy for us to go out and buy two new GEO satellites and throw them up there. But yes, it's just kind of not the way we approach the business.

And I appreciate all the color around the Bell renewal later this year. Are there any other contracts that you can maybe point us to for maybe the early part of '24 or any other bigger ones that you can maybe give us some color on?

I think the other kind of more meaningful stuff that comes up. So we renewed DISH for two years and they've got an option to renew for an additional year. So that would come up if memory serves kind of early Q2 next year, I think that's right. And then beyond that, probably later more like Q4 just looking at something like Q4 next year, Nimiq 5 with DISH would be coming up for renewal. So those are I'd say the more meaningful ones that come up next.

And then just one last one from me. But how should we be thinking about potential spectrum constraints on the Ka-band with other guys launching satellites pretty quickly? Like is that something that could be an issue in five years' time or something like that, how should we be thinking about that?

We've got a whole team that's dedicated to the regulatory rights and coordinating with other operators out there and whatnot. From everything that we see right now and all the analysis that we've been doing, we feel comfortable that we're going to have access to the spectrum that we need to operate Lightspeed in a way that allows us to achieve our business plan objectives. So yes. And look, again, we've got a few hundred satellites that we're going to be using, they're very advanced. They have beams that are hopping and a lot of flexibility in terms of how we use the satellites, but it's something that we pay a lot of attention to. And we believe that we're good in terms of our ability to operate the constellation and access the spectrum that we need.

So that's something you think maybe becomes an industry-wide problem, maybe 10 years out or something, but just not with any current projections?

Yes, hard to say. Spectrum is certainly a finite resource. At some point, that could become an issue for the foreseeable future, I think. Yes, I think that we're in a good spot.

The next question is from Raghav Garg from DoubleLine.

SES has confirmed talks with Intelsat. Just wanted to get your thoughts on M&A in general with Viasat soon to be merging with Inmarsat and Eutelsat, OneWeb. Do you feel like do you need to do something or just be patient?

We observed the reports this morning regarding rumors about SES and Intelsat. I wouldn’t say these rumors are new, and I can't say we were caught off guard by them, nor were we surprised by the ongoing merger and acquisition activity in the sector. Our industry goes through cycles, and as I mentioned on a previous call, we seem to be entering another one. With the Inmarsat and Viasat merger pending, along with Eutelsat and OneWeb, we will see if the rumors about SES and Intelsat turn out to be true. Overall, I believe this is positive for the industry; it's something we've anticipated for some time, and it could help to rationalize the supply side significantly. We'll keep an open mind about it. The most crucial aspect for any operator aiming to compete is to have the best value proposition for customers. This may sound like a cliché, but it holds true. That's why we have been so dedicated to advancing Lightspeed, as we've closely monitored the changes in our customer base and their usage applications—whether in cloud services, e-commerce, or how the government plans to utilize space-based infrastructure in the future. All of this points towards a network resembling Lightspeed. I believe that ensuring we have the offerings that customers desire today and what they may want in the future is our priority. We've been quite open about the challenges currently facing the satellite industry, particularly in the DTH segment, while also recognizing a significant opportunity in global broadband connectivity. Our growth areas align with where the industry is expanding, particularly in collaboration with Intelsat. If we manage to provide state-of-the-art infrastructure to meet customer demands effectively, we should perform well. This doesn't mean we are dismissive of inorganic growth opportunities. That’s how we approach the situation.

Last question on your capital structure. You commented, obviously, where your debt trades, you can do these buybacks. But just a bigger picture question on how you plan to address your capital structure; you have a few years here. But obviously, the market is telling you, you can refinance your debt today. So just how do you plan to deal with the maturities given it's unlikely that Leo will be a meaningful contributor, if any, by the time your capital structure comes due?

I'll share some thoughts on the matter, and then Andrew can add his insights. To start with, we are several years away, approximately four years, which gives us a significant amount of time. Second, we are still generating a substantial amount of cash and have been prudent with its use, resulting in a strong cash position on our balance sheet. Third, you are correct that if we proceed with Lightspeed, it may not deliver a large amount of EBITDA by the time we need to refinance. However, I anticipate that by then, Lightspeed will be well-advanced and that we will have acquired a considerable customer base. Currently, we have approximately three-quarters of a billion Canadian dollars in backlog with Lightspeed, and we haven't even fully committed to it yet. When we look to raise funds for Telesat in the future, whether through equity or debt, much will depend on investors' perceptions of the company's future prospects. I believe by the time that debt matures, our outlook will be promising because we will have successfully executed our plans with Lightspeed. Furthermore, there are many industry changes on the horizon that will influence our position in the next few years. Overall, that encapsulates our thinking. Additionally, we are open to exploring market opportunities or making significant changes to our debt if necessary in the future. We have various strategies available to address these challenges moving forward.

From my perspective, there's not much more I can add to that, that's pretty comprehensive. And indeed, that's the way we see it; $1.7 billion in cash, generated over $200 million this year alone, maturities are out 2026 and 2027. I think that covered the way we see it. So there's no more I could add.

And the last question will be from Mr. Wei from Invescore.

Just in terms of the delays in raising money for LEO. How is that impacting your supply agreements with the satellite manufacturers? And do those agreements have a drop-dead date or do they need an expiration date at which point they would need to be renegotiated, or are they being renegotiated on an ongoing basis at this point?

The prime contractor we are working with is Thales. When COVID and inflation affected us, we had to spend a significant amount of time with Thales to rescope the program. They had to reach out to their supply chain for updated bids, which took much longer than we anticipated. Eventually, we received all the necessary information and were able to present an updated business plan to our financing sources. Based on our recent conversations with Thales, the pricing established during that effort remains intact. Thales will need to reconfirm their price to us, but in a recent discussion, we feel reassured that the pricing for the constellation will remain consistent with the last quotes we received. Additionally, we are confident that the prices for other components of the program, particularly launch vehicles and elements related to landing stations and user terminals, align with the business case we have been developing.

Okay. Operator, well, thank you very much. Thank you all for participating in our full-year results conference call, and we look forward to speaking with you again in the not too distant future when we release our Q1 numbers. So thank you very much.

Thank you very much.

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