Telesat Reports Results for the Quarter and Twelve Months Ended December 31, 2023
- Positive financial performance with Adjusted EBITDA above guidance.
- High capacity utilization and a substantial contractual backlog of $1.3 billion.
- Revenue declined by 7% in 2023 compared to 2022.
- Operating expenses decreased by 21%, leading to a 6% decrease in Adjusted EBITDA for the year.
- Net income improved to $583 million from a net loss of $82 million in the prior year.
- Revenue decline due to rate reductions and lower revenue from certain customers.
- Substantial decrease in Adjusted EBITDA expected for 2024.
- Increased operating expenditures related to Telesat Lightspeed development.
Insights
The recent financial disclosure by Telesat indicates a mixed financial landscape. While the company has achieved a substantial contractual backlog of $1.3 billion, signaling potential future revenue stability, the decline in year-over-year revenue by 7% is a cause for concern. This decline is attributed to reductions in rates and capacity for North American DTH customers and the non-repetition of a significant equipment sale to DARPA. The Adjusted EBITDA margin increase from 74.8% to 75.8% showcases efficient cost management, despite the revenue drop. However, investors should be cautious about the projected 34% decrease in Adjusted EBITDA for 2024, as it suggests a potential weakening in profitability amidst increasing competition in the satellite services market.
Telesat's net income for 2023 stands in stark contrast to the previous year's net loss, primarily due to C-band clearing proceeds and favorable foreign exchange variations. This one-time gain should be considered as non-recurring when assessing the company's operational performance. Looking forward, the substantial capital expenditures forecasted for the Telesat Lightspeed project, while a potential driver for future growth, will likely strain cash flows in the short term. The expected cost savings and reduced borrowing costs due to the shift in strategy for Telesat Lightspeed and potential government support can mitigate some financial risk, but the actual impact will depend on the successful execution and market adoption of the new satellite program.
Telesat's strategic pivot to the Telesat Lightspeed program reflects an attempt to capture market share in the burgeoning LEO satellite broadband sector. The industry is witnessing increased demand for high-speed, low-latency internet services, particularly in remote and underserved areas. The company's partnership with MDA Space and the launch agreement with SpaceX are significant steps toward realizing this goal. However, the anticipated revenue decline due to competition and the shift away from North American DTH satellite video customers illustrates the challenges Telesat faces in its legacy business segments.
Investors should note the competitive landscape of the satellite broadband market, which includes players like SpaceX's Starlink and Amazon's Project Kuiper. Telesat's success with Lightspeed will hinge on its ability to differentiate its services and capture key government and enterprise contracts. The fleet utilization rate of 85% is a positive indicator of asset efficiency, yet the focus will be on how well Telesat can transition its business model to capitalize on the next generation of satellite technology.
The telecommunications industry is undergoing a significant transformation, with LEO satellite technology at the forefront. Telesat's Lightspeed program aims to leverage this shift, promising enhanced network performance and efficiency. The industry is closely watching the capital cost savings of approximately US$2 billion that Telesat claims to achieve with its new approach. This figure is substantial and could position Telesat favorably against competitors if these savings are realized without compromising the quality and reliability of the satellite network.
Furthermore, the C-band spectrum clearing proceeds Telesat recognized in 2023 are part of a broader industry realignment of spectrum usage to accommodate the growing demand for wireless services. While this has provided a temporary financial boost, the long-term value for Telesat lies in its ability to repurpose its spectrum assets effectively within the Lightspeed program. The industry will monitor how the company balances its capital and operating expenditures as it scales up the Lightspeed project, as this will be critical to maintaining financial health and investor confidence.
OTTAWA, March 28, 2024 (GLOBE NEWSWIRE) -- Telesat (NASDAQ and TSX: TSAT), one of the world’s largest and most innovative satellite operators, today announced its financial results for the three-month and one-year periods ended December 31, 2023. All amounts are in Canadian dollars and reported under International Financial Reporting Standards (IFRS) unless otherwise noted.
“Telesat achieved a great deal in 2023 and I am pleased with our financial performance and, more importantly in terms of our future, the breakthrough we had in moving Telesat Lightspeed, our advanced Low Earth Orbit (LEO) satellite program, forward,” commented Dan Goldberg, Telesat’s President and CEO. “Our financial results reflect our continued disciplined execution, delivering Adjusted EBITDA1 above our 2023 guidance as well as industry-leading Adjusted EBITDA margins1, high capacity utilization, a substantial contractual backlog2 of
Goldberg added: “Certainly the big development for Telesat last year was our announcement in August that we selected MDA Space to be the prime satellite contractor for Telesat Lightspeed, that the program is fully funded through global service delivery (subject to certain conditions) and that, by leveraging a number of key technology advances, Telesat Lightspeed will have improved network performance and efficiency and still achieve an expected capital cost savings of approximately US
Goldberg concluded: “For 2024, and as reflected in our financial guidance for the year, we expect continued reduction in revenues from our North American direct-to-home (DTH) satellite video customers as well as reduced revenues from customers for enterprise services owing to significant competition in the satellite services market. We also expect meaningful increases in operating and capital expenditures as we accelerate the development of Telesat Lightspeed. The reduction in revenue and increase in operating expenditures is expected to result in a substantial decrease in Adjusted EBITDA1 relative to 2023, down
For the year ended December 31, 2023, Telesat reported consolidated revenue of
Operating expenses for the full year 2023 were
Adjusted EBITDA1 for the full-year 2023 was
For the year ended December 31, 2023, Telesat’s net income was
For the quarter ended December 31, 2023, Telesat reported consolidated revenue of
Operating expenses for the quarter were
The decrease was primarily due to lower non-cash share-based compensation and higher equipment sales in 2022 relating to the DARPA program.
Adjusted EBITDA1 for the quarter was
Telesat net income for the quarter was
Business Highlights
- MDA Space Satellite Agreement and Telesat Lightspeed Financing:
- Telesat announced on August 11, 2023, that space technology company MDA Space Ltd. has been contracted to build the advanced satellites for the Telesat Lightspeed program and that, subject to certain conditions, Telesat Lightspeed was fully funded funding through global service delivery.
- SpaceX Launch Agreement:
- In September 2023, Telesat announced that it had entered into a launch agreement with SpaceX for 14 launches on SpaceX’s Falcon 9. These launches will carry up to 18 of its Telesat Lightspeed satellites per launch from SpaceX’s launch facilities in California and Florida and is the largest commercial satellite launch agreement in SpaceX’s history.
- Launch of LEO 3 Demonstration Satellite:
- In July 2023, Telesat launched its LEO 3 demonstration satellite, which has successfully completed in-orbit testing.
- The LEO 3 satellite features Ka- and V-band payloads and will provide continuity for customer and ecosystem vendor testing campaigns following the decommissioning of Telesat’s Phase 1 LEO satellite.
- C-band Spectrum Cleared:
- On June 30, 2023, the Wireless Telecommunications Bureau of the U.S. Federal Communications Commission (FCC) completed its validation of Telesat’s Phase II certification of accelerated C-band clearing activities in the 3.7 GHz band, making Telesat eligible to receive US
$259.6 million , its second accelerated relocation payment. - An amount of
$344.9 million (US$259.6 million ) was recognized during the three months ended June 30, 2023, and was recorded under other operating gains (losses), net and the payment was received in the three months ended September 30, 2023.
- On June 30, 2023, the Wireless Telecommunications Bureau of the U.S. Federal Communications Commission (FCC) completed its validation of Telesat’s Phase II certification of accelerated C-band clearing activities in the 3.7 GHz band, making Telesat eligible to receive US
- Debt Repurchase:
- For the year ended December 31, 2023, Telesat repurchased debt with a cumulative principal amount of US
$427.0 million in exchange for an aggregate cost of US$255.6 million .- Combined with the debt repurchases completed in 2022, Telesat has repurchased a cumulative principal amount of US
$587.0 million for an aggregate cost of US$332.7 million .
- Combined with the debt repurchases completed in 2022, Telesat has repurchased a cumulative principal amount of US
- For the year ended December 31, 2023, Telesat repurchased debt with a cumulative principal amount of US
- At December 31, 2023:
- Telesat had contracted backlog2 for future services of approximately
$1.3 billion (excluding approximately$740 million revenue commitments associated with Telesat Lightspeed). - Fleet utilization was
85% .
- Telesat had contracted backlog2 for future services of approximately
2024 Financial Outlook
(assumes a foreign exchange rate of US
For 2024, Telesat expects full year:
- revenues to be between
$545 million and$565 million ; - Adjusted EBITDA1 to be between
$340 million and$360 million , which reflects Telesat Lightspeed operating expenses of between$80 million and$90 million ; and - cash flows used in investing activities to be in the range of
$1,000 million to$1,400 million , which is nearly all related to expected Telesat Lightspeed capital expenditures.
Telesat’s annual report on Form 20-F for the year ended December 31, 2023, has been filed with the United States Securities and Exchange Commission (SEC) and the Canadian securities regulatory authorities, and may be accessed on the SEC’s website at www.sec.gov and on the System for Electronic Document Analysis and Retrieval+ (SEDAR) website at www.sedarplus.ca.
Conference Call
Telesat has scheduled a conference call on Thursday, March 28, 2024, at 10:30 a.m. ET to discuss its financial results for the three months and one year periods ended December 31, 2023. The call will be hosted by Daniel S. Goldberg, President and Chief Executive Officer, and Andrew Browne, Chief Financial Officer, of Telesat.
Dial-in Instructions:
The toll-free dial-in number for the teleconference is +1 800 806 5484. Callers outside of North America should dial +1 416 340 2217. The access code is 6484355 followed by the number sign (#). Please allow at least 15 minutes prior to the scheduled start time to connect to the teleconference. In the event of technical issues, please dial *0 and advise the conference call operator of the company name (Telesat) and the name of the moderator (Michael Bolitho).
Webcast:
The conference call can also be accessed, as a listen in only, at https://edge.media-server.com/mmc/p/8s2idbwz. A replay of the webcast will be archived on Telesat’s website under the tab “Investors”.
Dial-in Audio Replay:
A replay of the teleconference will be available one hour after the end of the call on March 28, 2024 until 11:59 p.m. ET on April 11, 2024. To access the replay, please call +1 800 408 3053. Callers from outside North America should dial +1 905 694 9451. The access code is 7879436 followed by the number sign (#).
About Telesat
Backed by a legacy of engineering excellence, reliability and industry-leading customer service, Telesat (NASDAQ and TSX: TSAT) is one of the largest and most successful global satellite operators. Telesat works collaboratively with its customers to deliver critical connectivity solutions that tackle the world’s most complex communications challenges, providing powerful advantages that improve their operations and drive profitable growth.
Continuously innovating to meet the connectivity demands of the future, Telesat Lightspeed, the company’s LEO satellite network, will be the first and only LEO network optimized to meet the rigorous requirements of telecom, government, maritime and aeronautical customers. Telesat Lightspeed will redefine global satellite connectivity with ubiquitous, affordable, high-capacity links with fibre-like speeds. For updates on Telesat, follow us on @Telesat on Twitter, LinkedIn, or visit www.telesat.com.
| Contacts: | |
| Investor Relations | |
| Hugh Harley | Michael Bolitho |
| +1 613 748 8424 | +1 613 748 8828 |
| ir@telesat.com | ir@telesat.com |
Forward-Looking Statements Safe Harbor
This news release contains statements that are not based on historical fact, including financial outlook for 2024 and the growth opportunities and expected timing around the financing of Telesat Lightspeed, and are “forward-looking statements’’ and “future-orientated financial performance” within the meaning of the Private Securities Litigation Reform Act of 1995 and Canadian securities laws. When used herein, statements which are not historical in nature, or which contain the words “will,” “expect,” “planned,” “believe”, “opportunity,” ”finalized” or similar expressions, are forward-looking statements. Actual results may differ materially from the expectations expressed or implied in the forward-looking statements and future-orientated financial information as a result of known and unknown risks and uncertainties. Future-orientated financial information contained in this news release about prospective financial performance, financial position, or cash flows are expected to give the reader a better understanding of the potential future performance of Telesat. Readers are cautioned that any such future-orientated financial information and financial outlook contained herein should not be used for purposes other than those disclosed herein. All statements made in this news release are made only as of the date set forth at the beginning of this release. Telesat undertakes no obligation to update the information made in this news release in the event facts or circumstances subsequently change after the date of this news release.
These forward-looking statements and future-orientated financial information are based on Telesat’s current expectations and are subject to a number of risks, uncertainties and assumptions. These statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, some of which are beyond Telesat control, are difficult to predict, and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements. Known risks and uncertainties include but are not limited to: inflation and rising interest rates, risks associated with operating satellites and providing satellite services, including satellite construction or launch delays, launch failures, in-orbit failures or impaired satellite performance; the ability to deploy successfully an advanced global LEO satellite constellation, and the timing of any such deployment including Telesat’s ability to enter into definitive funding agreements with Telesat’s Canadian federal and provincial government partners, and to meet the funding conditions of those agreements and of Telesat’s vendor financing, technological hurdles, including Telesat’s and Telesat’s contractors’ development and deployment of the new technologies required to complete the constellation in time to meet Telesat’s schedule, or at all, the availability of services and components from Telesat’s and Telesat’s contractors’ supply chains, competition with other LEO systems, deployed, and to be deployed, including systems deployed by SpaceX, Amazon Kuiper and Eutelsat/OneWeb; risks associated with domestic and foreign government regulation, including access to sufficient orbital spectrum to be able to deliver services effectively and access to sufficient geographic markets in which to sell those services; Telesat’s ability to develop significant commercial and operational capabilities; volatility in exchange rates; and the ability to expand Telesat’s existing satellite utilization. The foregoing list of important factors is not exhaustive. Investors should review the other risk factors discussed in Telesat’s annual report on Form 20-F for the year ended December 31, 2023, that was filed on March 28, 2024, with the United States Securities and Exchange Commission (SEC) and the Canadian securities regulatory authorities at the System for Electronic Document Analysis and Retrieval (SEDAR+), and may be accessed on the SEC’s website at www.sec.gov and SEDAR’s website at www.sedarplus.ca.
| Telesat Corporation Consolidated Statements of Income (Loss) For the periods ended December 31 | |||||||||||||||||
| Three months | Twelve months | ||||||||||||||||
| (in thousands of Canadian dollars, except per share amounts) | 2023 | 2022(4) | 2023 | 2022(4) | |||||||||||||
| Revenue | $ | 165,901 | $ | 206,684 | $ | 704,161 | $ | 759,169 | |||||||||
| Operating expenses | (49,901 | ) | (79,961 | ) | (204,552 | ) | (258,989 | ) | |||||||||
| Depreciation | (42,602 | ) | (46,691 | ) | (182,669 | ) | (188,755 | ) | |||||||||
| Amortization | (3,166 | ) | (3,775 | ) | (13,093 | ) | (14,979 | ) | |||||||||
| Other operating gains (losses), net | (79,900 | ) | 7 | 264,999 | 7 | ||||||||||||
| Operating income | (9,668 | ) | 76,264 | 568,846 | 296,453 | ||||||||||||
| Interest expense | (65,179 | ) | (67,304 | ) | (270,350 | ) | (221,756 | ) | |||||||||
| Gain on repurchase of debt | 8,618 | — | 230,080 | 106,916 | |||||||||||||
| Interest and other income | 17,768 | 12,915 | 66,532 | 23,476 | |||||||||||||
| Gain (loss) on changes in fair value of financial instruments | — | — | — | 4,314 | |||||||||||||
| Gain (loss) on foreign exchange | 77,577 | 72,251 | 77,758 | (239,591 | ) | ||||||||||||
| Income (loss) before income taxes | 29,116 | 94,126 | 672,866 | (30,188 | ) | ||||||||||||
| Tax (expense) recovery | 10,224 | (3,266 | ) | (89,596 | ) | (51,409 | ) | ||||||||||
| Net income (loss) | $ | 39,340 | $ | 90,860 | $ | 583,270 | $ | (81,597 | ) | ||||||||
| Net income (loss) attributable to: | |||||||||||||||||
| Telesat Corporation shareholders | $ | 10,465 | $ | 22,753 | $ | 157,118 | $ | (23,764 | ) | ||||||||
| Non-controlling interest | 28,875 | 68,107 | 426,152 | (57,833 | ) | ||||||||||||
| $ | 39,340 | $ | 90,860 | $ | 583,270 | $ | (81,597 | ) | |||||||||
| Net income (loss) per common share attributable to Telesat Corporation shareholders | |||||||||||||||||
| Basic | $ | 0.77 | $ | 1.80 | $ | 11.71 | $ | (1.93 | ) | ||||||||
| Diluted | $ | 0.74 | $ | 1.73 | $ | 11.29 | $ | (1.93 | ) | ||||||||
| Total Weighted Average Common Shares Outstanding | |||||||||||||||||
| Basic | 13,602,952 | 12,611,700 | 13,417,290 | 12,311,264 | |||||||||||||
| Diluted | 15,679,834 | 14,610,705 | 15,288,221 | 12,311,264 | |||||||||||||
| Telesat Corporation Consolidated Balance Sheets | |||||||
| (in thousands of Canadian dollars) | December 31, 2023 | December 31, 2022(4) | |||||
| Assets | |||||||
| Cash and cash equivalents | $ | 1,669,089 | $ | 1,677,792 | |||
| Trade and other receivables | 78,289 | 41,248 | |||||
| Other current financial assets | 631 | 515 | |||||
| Current income tax recoverable | 16,510 | 18,409 | |||||
| Prepaid expenses and other current assets | 52,169 | 50,324 | |||||
| Total current assets | 1,816,688 | 1,788,288 | |||||
| Satellites, property and other equipment | 1,260,298 | 1,364,084 | |||||
| Deferred tax assets | 2,954 | 49,984 | |||||
| Other long-term financial assets | 6,633 | 10,476 | |||||
| Long-term income tax recoverable | 7,497 | 15,303 | |||||
| Other long-term assets | 40,926 | 47,977 | |||||
| Intangible assets | 692,756 | 756,878 | |||||
| Goodwill | 2,446,603 | 2,446,603 | |||||
| Total assets | $ | 6,274,355 | $ | 6,479,593 | |||
| Liabilities | |||||||
| Trade and other payables | $ | 43,626 | $ | 43,555 | |||
| Other current financial liabilities | 29,061 | 48,397 | |||||
| Income taxes payable | 1,921 | 3,476 | |||||
| Other current liabilities | 63,119 | 75,968 | |||||
| Total current liabilities | 137,727 | 171,396 | |||||
| Long-term indebtedness | 3,197,019 | 3,850,081 | |||||
| Deferred tax liabilities | 235,247 | 271,246 | |||||
| Other long-term financial liabilities | 14,938 | 19,663 | |||||
| Other long-term liabilities | 290,441 | 327,055 | |||||
| Total liabilities | 3,875,372 | 4,639,441 | |||||
| Shareholders’ Equity | |||||||
| Share capital | 51,252 | 46,554 | |||||
| Accumulated earnings | 534,058 | 356,273 | |||||
| Reserves | 76,608 | 78,609 | |||||
| Total Telesat Corporation shareholders’ equity | 661,918 | 481,436 | |||||
| Non-controlling interest | 1,737,065 | 1,358,716 | |||||
| Total shareholders’ equity | 2,398,983 | 1,840,152 | |||||
| Total liabilities and shareholders’ equity | $ | 6,274,355 | $ | 6,479,593 | |||
| Telesat Corporation Consolidated Statements of Cash Flows For the years ended December 31 | |||||||||
| (in thousands of Canadian dollars) | 2023 | 2022(4) | |||||||
| Cash flows from operating activities | |||||||||
| Net income (loss) | $ | 583,270 | $ | (81,597 | ) | ||||
| Adjustments to reconcile net income (loss) to cash flows from operating activities | |||||||||
| Depreciation | 182,669 | 188,755 | |||||||
| Amortization | 13,093 | 14,979 | |||||||
| Tax expense (recovery) | 89,596 | 51,409 | |||||||
| Interest expense | 270,350 | 221,756 | |||||||
| Interest income | (63,838 | ) | (23,564 | ) | |||||
| (Gain) loss on foreign exchange | (77,758 | ) | 239,591 | ||||||
| (Gain) loss on changes in fair value of financial instruments | — | (4,314 | ) | ||||||
| Share-based compensation | 33,015 | 67,428 | |||||||
| (Gain) loss on disposal of assets | (59 | ) | (7 | ) | |||||
| Gain on repurchase of debt | (230,080 | ) | (106,916 | ) | |||||
| Impairment | 79,740 | — | |||||||
| Deferred revenue amortization | (59,337 | ) | (77,075 | ) | |||||
| Pension expense | 5,674 | 7,587 | |||||||
| C-band clearing income | (344,892 | ) | — | ||||||
| Other | 2,958 | (1,184 | ) | ||||||
| Income taxes paid, net of income taxes received | (66,841 | ) | (98,143 | ) | |||||
| Interest paid, net of interest received | (209,261 | ) | (163,113 | ) | |||||
| Operating assets and liabilities | (39,212 | ) | (6,744 | ) | |||||
| Net cash from operating activities | 169,087 | 228,848 | |||||||
| Cash flows (used in) generated from investing activities | |||||||||
| Cash payments related to satellite programs | (83,319 | ) | (31,805 | ) | |||||
| Cash payments related to property and other equipment | (42,920 | ) | (32,701 | ) | |||||
| Purchase of intangible assets | (13,267 | ) | (71 | ) | |||||
| C-band clearing proceeds | 351,438 | 64,651 | |||||||
| Net cash (used in) generated from investing activities | 211,932 | 74 | |||||||
| Cash flows (used in) generated from financing activities | |||||||||
| Repurchase of indebtedness | (344,014 | ) | (97,234 | ) | |||||
| Payments of principal on lease liabilities | (2,171 | ) | (2,498 | ) | |||||
| Satellite performance incentive payments | (6,385 | ) | (6,667 | ) | |||||
| Proceeds from exercise of stock options | 27 | — | |||||||
| Tax withholdings on settlement of restricted share units | (3,198 | ) | — | ||||||
| Government grant received | 1,089 | 22,324 | |||||||
| Final Transaction adjustment payment | — | (20,790 | ) | ||||||
| Net cash (used in) generated from financing activities | (354,652 | ) | (104,865 | ) | |||||
| Effect of changes in exchange rates on cash and cash equivalents | (35,070 | ) | 104,142 | ||||||
| Changes in cash and cash equivalents | (8,703 | ) | 228,199 | ||||||
| Cash and cash equivalents, beginning of year | 1,677,792 | 1,449,593 | |||||||
| Cash and cash equivalents, end of year | $ | 1,669,089 | $ | 1,677,792 | |||||
| Telesat’s Adjusted EBITDA margin(1): | ||||||||||||||||
| The following table provides a quantitative reconciliation of net income to Adjusted EBITDA and Adjusted EBITDA margin, each of which are non-IFRS measures. | ||||||||||||||||
| Three Months Ended December 31, | Twelve Months Ended December 31, | |||||||||||||||
| (in thousands of Canadian dollars) (unaudited) | 2023 | 2022(4) | 2023 | 2022(4) | ||||||||||||
| Net income (loss) | $ | 39,340 | $ | 90,860 | $ | 583,270 | $ | (81,597 | ) | |||||||
| Tax expense (recovery) | (10,224 | ) | 3,266 | 89,596 | 51,409 | |||||||||||
| (Gain) loss on changes in fair value of financial instruments | — | — | — | (4,314 | ) | |||||||||||
| (Gain) loss on foreign exchange | (77,577 | ) | (72,251 | ) | (77,758 | ) | 239,591 | |||||||||
| Interest and other income | (17,768 | ) | (12,915 | ) | (66,532 | ) | (23,476 | ) | ||||||||
| Interest expense | 65,179 | 67,304 | 270,350 | 221,756 | ||||||||||||
| Gain on repurchase of debt | (8,618 | ) | — | (230,080 | ) | (106,916 | ) | |||||||||
| Depreciation | 42,602 | 46,691 | 182,669 | 188,755 | ||||||||||||
| Amortization | 3,166 | 3,775 | 13,093 | 14,979 | ||||||||||||
| Other operating (gains) losses, net | 79,900 | (7 | ) | (264,999 | ) | (7 | ) | |||||||||
| Non-recurring compensation expenses(3) | 385 | 303 | 1,078 | 305 | ||||||||||||
| Non-cash expense related to share-based compensation | 6,949 | 11,968 | 33,015 | 67,428 | ||||||||||||
| Adjusted EBITDA | $ | 123,334 | $ | 138,994 | $ | 533,702 | $ | 567,913 | ||||||||
| Revenue | $ | 165,901 | $ | 206,684 | $ | 704,161 | $ | 759,169 | ||||||||
| Adjusted EBITDA Margin | 74.3 | % | 67.2 | % | 75.8 | % | 74.8 | % | ||||||||
End Notes
1 The common definition of EBITDA is “Earnings Before Interest, Taxes, Depreciation and Amortization.” In evaluating financial performance, Telesat uses revenue and deducts certain operating expenses (including share-based compensation expense and unusual and non-recurring items, including restructuring related expenses) to obtain operating income before interest expense, taxes, depreciation and amortization (“Adjusted EBITDA”) and the Adjusted EBITDA margin (defined as the ratio of Adjusted EBITDA to revenue) as measures of Telesat’s operating performance.
Adjusted EBITDA allows Telesat and investors to compare Telesat’s operating results with that of competitors exclusive of depreciation and amortization, interest and investment income, interest expense, taxes and certain other expenses. Financial results of competitors in the satellite services industry have significant variations that can result from timing of capital expenditures, the amount of intangible assets recorded, the differences in assets’ lives, the timing and amount of investments, the effects of other income (expense), and unusual and non-recurring items. The use of Adjusted EBITDA assists Telesat and investors to compare operating results exclusive of these items. Competitors in the satellite services industry have significantly different capital structures. Telesat believes the use of Adjusted EBITDA improves comparability of performance by excluding interest expense.
Telesat believes the use of Adjusted EBITDA and the Adjusted EBITDA margin along with IFRS financial measures enhances the understanding of Telesat’s operating results and is useful to Telesat and investors in comparing performance with competitors, estimating enterprise value and making investment decisions. Adjusted EBITDA as used here may not be the same as similarly titled measures reported by competitors. Adjusted EBITDA should be used in conjunction with IFRS financial measures and is not presented as a substitute for cash flows from operations as a measure of Telesat’s liquidity or as a substitute for net income as an indicator of Telesat’s operating performance.
2 Remaining performance obligations, which Telesat refers to as contracted revenue backlog (‘backlog’), represents Telesat’s expected future revenue from existing service contracts (without discounting for present value) including any deferred revenue that Telesat will recognize in the future in respect of cash already received. The calculation of the backlog reflects the revenue recognition policies adopted under IFRS 15. The majority of Telesat’s contracted revenue backlog is generated from contractual agreements for satellite capacity.
3 Includes severance payments and special compensation and benefits for executives and employees.
4 The figures from 2022 were restated to take into account the impact of the amendment from IAS 12, Income Taxes. For additional details on the restatement, refer to Note 3 of the consolidated financial statements that may be accessed on the SEC’s website at www.sec.gov and SEDAR’s website at www.sedarplus.ca.
FAQ
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