Telesat reports rising expenses and drops in revenue, profit for Q2

Telesat Corporation, a newly-public satellite company with plans to connect Canadian communities to broadband internet using a low earth orbit (LEO) satellite constellation, reported decreases in revenue and profit for its second quarter Friday, as well as an increase in expenses it credits in part to its hiring of more staff to support its Telesat Lightspeed constellation program. Telesat, a decades-old company that announced in November it would be restructuring and going public, reported consolidated revenue of nearly $188 million for the quarter ended June 30, 2021 -- a decrease of 10 per cent or $20 million from the same quarter last year. It experienced a deeper drop in profit, with a net income of $60.8 million in the second quarter, a dive of about 62 per cent compared with its net income of about $161.6 million at the same time last year. Telesat said this was mostly the result of lower non-cash foreign exchange gains in 2021, “arising from the translation of Telesat’s U.S. dollar denominated debt into Canadian dollars and an increase in unusual/non-recurring items relating to share based compensation,” in a release on the results Friday. Thursday, the company announced the federal government is planning to invest $1.44 billion in the development of its Lightspeed constellation of 298 satellites, to start, through a $790 million loan and a $650 million preferred share equity investment. It expects to connect 40,000 households in rural and remote regions to broadband internet and LTE and 5G starting in 2024. “I am also pleased with the meaningful progress we are making with our groundbreaking Telesat Lightspeed constellation, including the important announcement we made yesterday regarding the Government of Canada’s $1.44 billion investment in the program and the announcement last week that the Government of Ontario is committing $109 million to use Telesat Lightspeed to provide high capacity broadband connectivity to remote communities throughout the province,” Telesat president and CEO Dan Goldberg, stated in the Friday release. “With the investment from the Government of Canada and other financing sources already in place, Telesat now has arrangements for approximately $4 billion in funding for the program. We expect to secure in the near term the remaining financial commitments required to fully finance Telesat Lightspeed.” In a release Friday, NDP critic for telecommunications Brian Masse asserted the investment announcement seems “well timed” with Prime Minister Justin Trudeau’s widely-expected election call, saying “the Liberals have left Canadians living in remote and rural areas without accessible internet for six years.” “People are being gouged, every month, because instead of standing up for consumers, the Liberal and Conservative governments have left it to the industry to set the prices. The result is that Canadian families are stuck with sky-high bills,” Masse said, adding that the profit margins of the biggest telecom companies in Canada “are over 40 per cent, while two million Canadians living in rural, remote and Northern areas still don’t have access to reliable internet service.” As part of the federal investment, the company committed to maintaining 700 jobs and offering 100 co-op jobs plus scholarships to post-secondary students with a focus on women in STEM programs. Along with the cost of previous hires -- which Telesat said Friday contributed to an $11 million increase in operating expenses for the latest quarter, up to $57.3 million from $46 million a year ago -- there was a $16 million increase in non-cash share-based compensation which caused a rise in its costs for the second quarter, partially offset by higher capitalized engineering and lower bad debt expense during the quarter. Although revenues and other markers such as its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) were down, Goldberg said “we continued to generate strong cash flows and maintained high operating margins, high fleet utilization, and a substantial contractual backlog, which provides good visibility into our future performance.” As of June 30, Telesat said it expects to bring in approximately $2.4 billion through existing service contracts, including any deferred revenue it will recognize in the future. It said the majority of its contracted revenue backlog is related to contracts for satellite capacity. The company reported total assets of $6.15 billion, including $1.29 billion in satellites, property, and other equipment. -- Reporting by Hannah Daley at hdaley@thewirereport.ca and editing by Michael Lee-Murphyat mleemurphy@thewirereport.ca

Telesat reports rising expenses and drops in revenue, profit for Q2

News | August 13, 2021

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Telesat reports rising expenses and drops in revenue, profit for Q2

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