Yahoo Finance Telesat Corporation (NASDAQ:TSAT) Q1 2024 Earnings Call Transcript
Telesat Corporation (NASDAQ:TSAT) Q1 2024 Earnings Call Transcript May 10, 2024
Telesat Corporation reports earnings inline with expectations. Reported EPS is $-0.8 EPS, expectations were $-0.8. Telesat Corporation isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Good morning, ladies and gentlemen, and welcome to the conference call to report the first quarter 2024 financial results for Telesat. Our speakers today will be Daniel Goldberg, President and Chief Executive Officer of Telesat, and Andrew Browne, Chief Financial Officer of Telesat. I would now like to turn the meeting over to Mr. Michael Bolitho, Director of Treasury and Risk Management. Please go ahead, Mr. Bolitho.
Michael Bolitho: Thank you and good morning. This morning, we filed our quarterly report for the period ending March 31, 2024, on Form 6-K to 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, please see Telesat's annual report and update filed 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.
Daniel Goldberg: Hey, thanks, Michael. My opening remarks were quite short this morning. 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. Now that we have understandings in place for all the financing, we need for our first 156 satellites. Our CapEx guidance, this year is for between CAD1 billion and CAD1.4 billion or around USD750 million to USD1 billion, which is pretty much entirely for Lightspeed. And you'll see that unfold as we report our results throughout the year. So with that, I'll hand over to Andrew and then I'll speak to the -- who will speak to the Q1 numbers in more detail, and then we'll open the call up to questions.
Andrew Browne: Thank you, Dan, and good morning, everyone. I would now like to focus on highlights from this morning's press releases and filings. In the fourth quarter of 2024 Telesat reported consolidated revenues of $152 million, adjusted EBITDA of $111 million and generated cash from operations of $76 million and ended the quarter with $1.8 billion of cash. But fourth quarter of 2024 compared to the same period in 2023 revenues decreased by $31 million to $152 million. Operating expenses decreased by $6 million to $47 million and adjusted EBITDA decreased by $28 million to $111 million. The adjusted EBITDA margin was 72.8% as compared to 75.7% in 2023. The revenue decrease for the quarter was primarily due to reduction in services and a low rate on the renewal of a long-term agreement with a North American direct to home customer, as well as lower revenues from certain mobility and Latin American customers and lower equipment sales to Canadian government customers.
Looking at OpEx, the decrease in OpEx is primarily due to lower noncash share-based compensation and higher capitalized engineering expenses relative to the prior period. Interest expense decreased by $4 million during the fourth quarter when compared to the same period in 2023. The decrease in interest expense was primarily due to the repurchase of notes and term loan B. This was particularly offset by an increase in interest rates on the US dollar term Loan B facility itself. In the fourth quarter, we recorded a loss on foreign exchange of $68 million as compared to a gain of $10 million in Q4 2023. The loss for the three months ended March 31, '24, was mainly the result of a stronger US dollar Canadian dollar spot rate March 31, '24, as compared to the spot rate as of December 31, 2023, and the resulting unfavorable impact on the translation of US denominated debt.
Our net loss for the fourth quarter was $52 million compared to net income of $28 million for the same period of the prior year. The change was primarily due to the loss on foreign exchange business. For the quarter ended March 31, 2024, the cash inflows from operating activities were $76 million, and the cash flows used by investing activities were $20 million. In terms of capital expenditures incurred that were primarily related to a lower orbit constellation Telesat Lightspeed. Guidance as you will also have noted in our earnings release this morning, we reaffirmed our 2024 guidance. This guidance assumes the Canadian dollar to US dollar exchange rate of $1.35. For 2024 Telesat still expects its total full year revenues to be between $545 million and $565 million.
In terms of operating expenses, excluding share-based compensation, we are still looking to spend between $80 million to $90 million attributed to the Telesat Lightspeed. In terms of total adjusted EBITDA Telesat's, it expects to be between $340 million and $360 million. As highlighted on our last call, we will begin the process of showing GEO and LEO separately, and we have accordingly set out this in all four of our financial statements. In respect to expected capital expenditures, as we disclosed last quarter, we continue to expect our 2024 cash flows used in investing activities to be in the range of $1 billion to $1.4 billion, as Dan has highlighted, which is nearly all related to expected Telesat Lightspeed Capital Expenditures. To meet our expected cash requirements for the next 12 months, including interest payments and capital expenditures.
We have approximately $1.8 billion of cash and short-term investments at the end of March, as well as approximately USD200 million of borrowings available under our evolving credit facility, approximately $1.25 billion of cash was held in our unrestricted subsidiaries. In addition, we continued to generate a significant amount of cash from our ongoing operating activities. Leverage at the end of the fourth quarter, total leverage ratio as calculated under the terms of the amended senior secured credit facilities was 5.7 times. Telesat has complied with all the covenants in our credit agreement and indentures. In terms of our debt repurchases, we were active subsequent to quarter end and up to May 8, '24, where we purchased that would assume the principal amounts of USD219.5 million in exchange for an aggregate cost of USD98.9 million, combined with the debt repurchases completed in '22 and '23.
Telesat has now reported the cumulative principal amount USD806.5 million at an aggregate cost of USD438.3 million. Just about including the repayment in 2020 of approximately $341 million of the outstanding term loan being combined with our repurchases, our overall debt has now been reduced by approximately 24% or USD1.1 billion. In addition to sell-through results and interest savings of approximately $55 million annually. A reconciliation between our financial statements and financial covenant calculations is provided in the report we filed this morning. Our 6-K provides the unaudited interim condensed consolidated financial information in the MD&A. The non-guarantor subsidiary shown are essentially the unrestricted subsidiaries of minor differences.
So with that, I think we will conclude our prepared remarks for the call and very happy to answer any questions that you may have. We will now turn back to the operator. Thank you.
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