• Consolidated Revenue: $138 million for Q3 2024, a decrease of $37 million compared to Q3 2023.
• Adjusted EBITDA: $96 million for Q3 2024, down $37 million from the previous year.
• Adjusted EBITDA Margin: 69.5% in Q3 2024, compared to 75.9% in Q3 2023.
• Net Income: $68 million for Q3 2024, compared to a net loss of $4 million in Q3 2023.
• Cash from Operations: $64 million for the first nine months of 2024.
• Capital Expenditures: $661 million for the first nine months of 2024, primarily related to Telesat Lightspeed.
• Interest Expense: Decreased by $6 million compared to Q3 2023.
• Foreign Exchange Gain: $36 million in Q3 2024, compared to a loss of $77 million in Q3 2023.
• Debt Repurchases: $262 million year-to-date at a cost of $190 million, with cumulative principal repurchased totaling $849 million.
• Cash and Short-term Investments: $1.1 billion at the end of September 2024.

• Warning! GuruFocus has detected 5 Warning Signs with TSAT.

Release Date: November 14, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Telesat Corp (NASDAQ:TSAT) closed the funding for its Lightspeed program, ensuring full financing for global service.
• The company reported strong engagement with the customer community, indicating potential growth in securing customer commitments for Lightspeed.
• Telesat Corp (NASDAQ:TSAT) entered into a five-year renewal agreement with Echostar, maintaining a significant customer relationship.
• The company reported a gain on foreign exchange of $36 million, contributing to a net income of $68 million for the third quarter.
• Telesat Corp (NASDAQ:TSAT) has reduced its overall debt by approximately 36%, resulting in annual interest savings of about $54 million.

Negative Points

• Revenues for the third quarter decreased by $37 million compared to the same period in 2023, primarily due to reductions in services and lower rates on renewals.
• The adjusted EBITDA margin decreased from 75.9% in Q3 2023 to 69.5% in Q3 2024.
• The company restructured its contract with Canadian ISP Explore, leading to a $4 million expected revenue decline next year.
• Telesat Corp (NASDAQ:TSAT) is facing a lawsuit with Shaw Communications over unpaid revenue, seeking $45 million in damages.
• The company anticipates a significant reduction in revenue from its Echostar renewal, with a 70% reduction in cash received compared to previous terms.

Q & A Highlights

Q: Can you provide more details on the EchoStar renewal and its financial impact? A: Daniel Goldberg, President and CEO, explained that the renewal involves a reduction in capacity and revenue. The revenue will decrease by about 70% as EchoStar ramps down its capacity usage over the first year. The capacity coming back will be used to support other customer requirements, but it won't fully replace the lost revenue from EchoStar.

Q: How does the CapEx guidance of $1 to $1.4 billion relate to the cash flow statement? A: Andrew Browne, CFO, clarified that the CapEx guidance reflects cash payments related to the satellite program and property and equipment. The cash payments made so far amount to $550 million, with an additional $111 million accrued, totaling $661 million in capital expenses.

Q: Can you update us on the discussions with the government of Taiwan regarding Lightspeed? A: Daniel Goldberg stated that while they do not comment on specific discussions, Lightspeed is seen as impactful for government communications. They are having discussions with various governments and see opportunities to leverage Lightspeed's capabilities.

Q: How does Lightspeed compare to Starlink, especially with Starlink's plans for higher speeds? A: Daniel Goldberg acknowledged Starlink's strong market presence and improvements. Telesat plans to compete by offering high-quality service, competitive pricing, and features valued by enterprise users. They aim to provide a competitive alternative to Starlink.

Q: What are the drivers for the implied step-down in Q4 guidance? A: Daniel Goldberg noted that the biggest driver is the re-rating of the EchoStar contract, which will have a full impact in Q4. Additionally, there is a ramp-up in costs related to LEO activities.

Q: Can you provide an update on the lawsuit with Shaw? A: Daniel Goldberg mentioned that Shaw stopped payments, leading Telesat to file a lawsuit seeking $45 million in damages. The lawsuit is ongoing, and Telesat is confident in their claims.

Q: What is the status of the Lightspeed gateway infrastructure? A: Daniel Goldberg stated that they have ordered antennas from Intellian, covering about 27 gateways. They are making good progress on site selection and infrastructure development in various regions.

Q: Are there any plans for interoperability with the US military's PWSA constellation? A: Daniel Goldberg indicated that Telesat aims for interoperability with other constellations, including the US military's, by using compatible technology and software platforms.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.