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Telesat reported a 15% drop in revenue in the second quarter of 2024 as the operator ramps up capital expenditures for the Lightspeed constellation and works to finalize funding agreements with Canadian governments.
Canadian satellite operator Telesat reported its second quarter financial results on August 14, reporting $152 million Canadian dollars ($111 million) in revenue.
The decrease in revenue was primarily due to a reduction of services and lower rate on the renewal with direct-to-home (DTH) customer Bell Canada for the Nimiq 4 satellite signed in October 2023, and lower revenue from mobility and Latin American customers.
The decline in Q2 was in line with expectations. Telesat maintained its outlook for 2024 of revenues between CA $545 million and CA $565 million, a decline of 21% year-over-year at the midpoint. Earlier this year, CEO Dan Goldberg said Telesat expected a decline in GEO revenue in 2024 in both enterprise and broadcast service.
Goldberg flagged three situations with Telesat customers that could impact revenue in the second half of the year. DTH customer EchoStar has an upcoming renewal in early October for service on the Nimiq 5 satellite. EchoStar uses all of the capacity on that satellite. EchoStar, which owns Dish Network, continues to shed subscribers and is reported to be at risk of bankruptcy. Goldberg commented that if Dish renews, it is expected to be “at a materially lower rate.”
Separately, Telesat customer Xplore, a rural broadband provider in Canada, is going through a restructuring and is making only partial payments to Telesat.
In addition, Goldberg said Telesat is considering selling a non-core business in the company’s restricted group in a deal that could happen in the near-term.
Adjusted EBITDA for the quarter was $103 million, a decrease of 25% year-over-year. The Adjusted EBITDA margin was 67.8%.
Telesat’s net income for the quarter was CA $129 million compared to net income of CA $519 million for the same period in the prior year. The change was primarily due to the recognition of C-band clearing income in 2023.
Lightspeed Update
Telesat is working to conclude funding agreements with the governments of Canada and Quebec, which have both pledged substantial funding for Lightspeed. Goldberg expects the agreements to conclude in the coming weeks.
“At this point in time I don’t see any significant impediments or obstacles in getting this done in the coming weeks,” Goldberg told investors on Wednesday. “It’s a big funding arrangement with multiple agreements. We’re working through all that, but there’s nothing extraordinary about what remains to get this done.”
Goldberg noted that Telesat has increased its headcount by nearly 20% this year as the company staffs up to execute on Lightspeed.
Telesat expects to spend CA $1 billion to $1.4 billion in capital expenditures on Lightspeed this year.
Prime contractor MDA Space has selected and onboarded 90% of suppliers for the Lightspeed program, recently announcing subcontracts with Tesat for optical terminals and Aerospacelab for other subsystems.
Goldberg also noted that Lightspeed has CA $750 million in take-or-pay commitments that are not part of Telesat’s CA $1.1 billion backlog.