T
Telesat Corp
NASDAQ:TSAT
Telesat Corp
NASDAQ:TSAT
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Earnings Call Transcript
Other Earnings Calls
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 Dan Goldberg, President and Chief Executive Officer of Telesat; and Andrew Browne, Chief Financial Officer of TeleFab. I would now like to turn the meeting over to Mr. Michael Bolitho, Director of Treasury and [indiscernible] Management. Please go ahead, Mr. Bolitho.
Thank you, and good morning. This morning, we filed our quarterly report for the period ending March 31, 2024, on Form 6-K with the SEC and on SEDAR plus. Our remarks today may contain forward-looking statements. There are risks and 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 updates 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.
Okay. Thanks, Michael. My opening remarks are quite short this morning, given we hosted an earnings call just 6 weeks ago when we released our Q4 and full year numbers. I really just want 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 CAD 1 billion and CAD 1.4 billion or around USD 750 million to USD 1 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 Q -- who will speak to the Q1 numbers in more detail, and then we'll open the call up to questions.
Thank you, Dan, and good morning, everyone. I would now like to focus on highlights from this morning's press release 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 at end of the quarter with $1.8 billion of cash.
For 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 lower 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 reportage of notes and Term Loan B.
This was particularly offset by an increase in interest rates in the U.S. dollar term loan B facility total. In the fourth quarter, we recorded a loss on foreign exchange of $68 million as compared to a gain of $10 million in the fourth quarter of 2023. The loss for the 3 months ended March 31, '24, was mainly the result of a stronger U.S. dollar -- Canadian dollar spot rate at March 31, '24 as compared to the spot rate as of December 31, 2023, and the resulting unfavorable impact on the translation of U.S. denominated debt.
Our net loss for the fourth quarter was $52 million compared to net income of $28 million for the same period in the prior year. The change was primarily due to the loss on foreign exchanges metered. 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, they were primarily related to a lower or with Constellation Telesat Lightspeed.
Guidance, as you will also have noted in our earnings release this morning, we have reaffirmed our 2024 guidance. This guidance assumes the Canadian dollar to U.S. dollar exchange rate of 1.35. For 2024, Telesat still expects the 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 expects to be between $340 million to $360 million. As highlighted on our last call, we will begin the process of showing GEO and leopathy and we have accordingly set out in our note 4 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 USD 200 million of borrowings available under revolving credit facility.
Approximately $1.25 billion of cash was held in our unrestricted subsidiaries. In addition, we continue 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 on the terms of the amended senior secured credit facilities was 5.7x to 1 one.
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, 2024, where we purchased debt with a cumulative principal amount of USD 219.5 million in exchange for an aggregate cost of $98.9 million. Combined with the debt repurchase was completed in '22 or '23, Telesat has now reported the cumulative principal amount of USD 806.5 million at an aggregate cost of $438.3 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 USD 1.1 billion. In addition, this also results in interest savings of approximately $55 million annually. A reconciliation between 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 NDA. The nonguarantor subsidiaries shown are essentially the unrestricted subsidiaries of minor differences. So with that, I think we will conclude our prepared remarks for the call. I'm very happy to answer any questions that you may have. We will now turn back to the operator.
[Operator Instructions]
the first question is from Edison Yu from Scotiabank.
Maybe just some housekeeping ones. On the cash flow, it's quite strong in the quarter despite the EBITDA declining. Were there any onetime benefits here? And how do you think this kind of trends for the rest of the year?
No. I think our cash flows, I think, underscores the high margins that we've got. If you look at our Geo business, our margins are approximately 80%, and I think some of the great things of our existing business, notwithstanding the fact that indeed, we've identified that we will see drops this year, but that's the underlying cash flow.
Understood. And then I appreciate the -- obviously, the breakdown of GEO and LEO and you've got some consulting revenue in the LEO side. Is the 1Q a good run rate to take for the rest of the year -- contribution from Real consulting?
I don't think so. It's not a big part of our business at this stage. Obviously, not until LEO is sort of up and in service late 2027 are we going to see meaningful revenue. Up until then, there might be some more kind of incidental stuff. We're doing some work with the U.S. government that's sort of lumpy in nature, and I think this came from a contract that we have with NASA that we've talked about before, we're demonstrating some features on LEO's ability to communicate with other in-orbit spacecraft.
So -- but it's kind of low to no margin stuff, too. It's a good thing for us to be doing to be demonstrating capabilities and tightening the relationship with the important U.S. government user, but yes, it's not kind of going to be a big driver of our top line results or certainly our adjusted EBITDA for the year.
The next question is from Arun Seshadri from Benari.
Just a couple from me. First, I just wanted to understand. So the government of Canada is planning to take senior equity, I guess, above the above lenders and shareholders. Is that right? Like so their equity in LEO is going to be structurally senior equity ahead of exiting lenders and shareholders?
So maybe a couple of things. I mean there -- what we announced 6 weeks ago is that the government of Canada, we reached terms to the government of Canada on a roughly CAD 2.1 billion loan, and we disclosed -- what the terms of that are, it's 15 years. It picks during construction. It's got a carries a rate of Cora plus 475 basis points. So it's fundamentally alone, and the government of Canada will be the kind of alongside of the government of Quebec and our -- and the vendor financing that we're getting.
It will be the sort of senior secured lender in connection with the Lightspeed Constellation and in the unrestricted group, where we're building light speed. So that's kind of number one. But yes, as part of the deal, there is kind of an equity feature. The government of Canada is getting a 10 -- warrants covering 10% of the equity in the Lightspeed project, and those warrants are struck at an equity value of USD 3 billion for the Lightspeed project.
So anyway, I'm just trying to be responsive to your question about senior equity. It is kind of a form of equity participation in the Lightspeed project itself as opposed to the common shares of Telesat Corporation.
So effectively, that was clear. So I think what you're saying is that it is effectively equity that's gated first preference on Lightspeed and then residual equity would be what flows through to the equity of...
Yes. I wouldn't think about it as first -- I wouldn't think about it as first preference. I think about it that right now, Telesat owns 100% of light speed. And in the future, if the Government of Canada exercised these warrants, they would be an equity participant alongside of Telesat.
Okay. So you're saying that it's not structurally senior equity then. Then it's actually alongside whatever equity there is.
No. that's right. Yes, that's exactly right.
And then is there any -- I mean, I guess, like -- is there anything specific either direction, i.e., is it -- as you finish off the financing, would you -- from the government of Canada's perspective, would it make sense for them to have the entire Telesat cash flow also being as credit support or that financing?
Or is -- I guess, on the flip side, would they insist that light speed be separated from Telesat in order to sort of finish off the financing. And I guess if the latter is the case, then would you -- how would you manage solvency requirements to make sure that, that happens?
So maybe I'll start answering this. And -- so first off, I mean just so everyone understands how this -- the government of Canada is lending us money. It's going to be in the unrestricted group and the cash that Telesat Lightspeed is going to be used to support the borrowings in that unrestricted group.
And so again, we've mentioned that our funding sources beyond our own $1.6 billion equity contribution is going to be borrowings from the Government of Canada, the government of Quebec and some vendor financing. And so those borrowings are going to be supported and secured in or secured by our Lightspeed activities.
And so yes, so could we, in the future, could, in the future, others potentially be behind the government of Canada in terms of being supported by Lightspeed cash flows or could, with the government's consent, something different be done, yes. But right now, that's kind of how it's set up.
I think we've always been pretty clear about how Lightspeed is getting financed and the fact that we've got a restricted group and an unrestricted group. And I mean, it's fundamentally, it's being project financed and our financing sources are Government of Canada, government in Quebec, some vendor financing and then again, our own meaningful equity contribution. So I hope that's helpful. And then we should probably move on.
Ye's. I think that's very helpful. And then can I ask one last thing, and that is, I noticed that the restricted payment hasn't fully been made yet. Just would you -- I guess the expectation is that risk of repayment will be made. And then once that's done, are there any other things that need to be done to put a go on -- I guess what else needs to be done from a timing standpoint to blow on the all of the financing requirements?
So the restricted payment, I think it's $125 million...
$120 million, yes. There's a remaining restricted payment of 150 -- $120 million to be made under the $150 million general asset.
Yes. And we expect that will get done in the coming days?
yes, coming days. Right.
Yes, and then beyond that, again, we'll -- at this point in time, we've got all of the financing lined up for the 156 satellites. We do need to conclude definitive funding agreements with those sources that I've described, Government of Canada, Quebec and the vendor financing. But we've already kind of started down that road and are highly confident that we're going to get there.
So that's, I'd say, the final bow that needs to be tied. But we're moving forward, as we said in our remarks, I mean, we've got meaningful cash on our balance sheet at this point in time. And we're going to start spending that money so that we can move this program forward as quickly as we can because we are hugely bullish on the opportunities that are out there in the market, and we want to come to market and get in service as quickly as we can.
The next question is from Chris Quilty from Quilty Space.
Dan, just to follow up, and I'm not going to hold you to it, but on the Government of Canada, Quebec and the vendor, is that something that in the next 3 to 6 months sort of time...
Yes, yes, yes. Yes, Chris. Yes. No, we believe that should get done before the end of the summer. And hopefully -- yes, we're -- we've got a lot of momentum with the government of Canada, as you can imagine, and the government in Quebec, which are the big contributors here. So yes, we're talking about in the coming months.
Got you. So I was going to say the summer ends in October and for [indiscernible] I'm assuming you're talking...
Well, I'm working on an Ottawa summer, which ends a little bit earlier, yes. Anyway, spring hasn't really even shown up yet. So anyway, yes.
Yes. So -- and also the CapEx in Q1 -- I mean, obviously, you just closed the financing deal, but CapEx in Q1 was a little bit lower than I was expecting. Is it fair to assume you're probably more towards the $1 million and the $1.4 billion? And Andrew, typically, in these large scale long-term programs, is it fair to assume year 1 30%, year 2 40%, year 3, 30% type of of how it falls out in timing? Or should we look at this as sort of a longer, slower climb? Just a general framework of how you expect to pay out.
Yes. I think, Chris, that given the nature of the program on supply chain and getting everything sort of moving forward. So I think in this year that we -- our guidance $1 billion to $1.4 billion. We think that's a solid number. And so by [indiscernible] , it means we'll see kind of more payments upfront as we get all of the suppliers in place.
So that's probably the best way I would characterize it. And then thereafter, as we go through the different milestones over the next 2 to 3 years, it will be more of a kind of a slow types of the contract and the operational milestones, Chris.
Great. And one other question for you, Andrew. The -- you had given the expected OpEx for the Lightspeed program. I'm assuming that is OpEx that's running through the P&L and strips out whatever is getting capitalized.
And can you give a sense of what is getting capitalized in as part of the program? And is that -- again, as the construction goes and more gets capitalized, do we see that Telesat OpEx staying flat because everything gets rolled into the capitalization? Or do you expect it to grow during the out years? I mean it's going to grow in the out years, but...
Yes. So in terms of the sources and uses, we try to make it a little bit clear in terms of the CapEx spend is third-party CapEx spend, so with vendors. So labor is in the operational uses whether it's capitalized or not, just so you can see the outflow of funds and what the purpose of the outflow of funds is.
So in that regard, the capitalized costs are there. In terms of the overall level of effort, the amount of capitalized stock, we build up, we ramp up our staffing infrastructure quite rapidly, and therefore, you get to sort of a constant state relatively quick in the program in terms of the level. understand.
Another question. I mean you've predicted the data side of the business being down about $75 million, as some of those contracts roll off, have you programmed in being able to resell some of that capacity? And what sort of luck have you seen on the data side in resell?
Yes, for sure, we assume that there's some capacity that has come back in the inventory that will resell. And I suspect we've already resold some of it. And the guidance that we gave for this year will have kind of captured our assumptions at least about all of that. Was there another part to your question, Chris?
No, that was it. was that -- But I will ask you a difficult question, which is the elephant in the room question. Intelsat SES, and you'll probably have Lightspeed on or before the regulators get done with that. But what are your general thoughts on that transaction and how it impacts you?
Yes. Well, first off, I mean, we all know that those were conversations that have been taking place between SES and Intlosat some time ago. And they both confirmed that there had been discussions and then they both -- they each announced that those discussions had come to NN.
But yes, I was never I'd say, persuaded that, that was the end of it. So it wasn't a big surprise to us, I'd say that they made the announcement that they did recently. And I think it's -- that announcement, I think, fits within kind of the same framework that we've been talking about for a little while, which is to say the industry is changing quickly.
There are these new entrants and Starlink and in the future, Kiper,that are impact in the industry, and we all believe that industry consolidation would be a response to that. And we've seen some already with Viasat in Inmarsat and Eutelsat and OneWeb and now this big transaction as companies kind of organize themselves to remain competitive in this changing landscape.
For us, I don't think it's going to have any real impact in terms of how we compete in the market, what the prospects of Lightspeed and the like are. We've been competing against each of them for decades now. And they've each -- they're already each meaningfully larger than Telesat. Coming together, obviously, they'll be larger still, but I don't think there's anything that should be too dramatically different in the combined competitive profile versus us competing against each of them individually. So yes. All to say, we weren't surprised.
It fits with our expectation that consolidation would happen in the industry. It's probably not the last deal. Certainly, there'll be -- there are fewer players as more consolidation takes place, but I suspect that there could be more consolidation still in the future. So anyway, that's how we think about it.
And again, I mean, we're -- actions speak louder thanwords vision is that -- and I don't think it's even a vision anymore. I think we're all watching it real time. There is a transition that's taking place in the industry right now as particularly what we think of as enterprise users, which is to say, non-video, it's in the process of transitioning off of GEO and down the Leo.
And for good reason, something that we saw coming, something that we think that we're well organized for with our friends for Lightspeed. So anyway, that's where our focus is right now, just making sure that we execute well on Lightspeed and bring to the market what we're convinced our addressable market is focused on.
So our enterprise customers, government customers and the aero and maritime customers, they're wanting affordable, high throughput, low latency, distributed resilient kind of seamlessly connected -- connectivity, and we'll be able to deliver that in light speed.
The next question is from Marcello Chermisqui from Ares Management.
You said earlier in response to a question that you will be making a CAD 120 million restricted payment in the coming days. Given that you already have such a significant amount of cash at the LEO entity and are waiting to spend the money until once you finalize terms later this summer, what is a rush to make the cash transfer so soon?
Marcello, thanks for the question. First off, I think the -- I'm looking at our first...
It's USD 150 million -- that's USD 120 million.
Yes. So the payment is USD 120 million. And then as far as urgency, look, we're moving forward with Lightspeed in advance. And by moving forward Lightspeed, I mean, we are going to be spending meaningful amounts of money this year. You've heard the CapEx guidance that we've given. In advance of completing these definitive agreements, we have a sufficiently high level of confidence on the one hand that will conclude those definitive agreements.
And on the other hand, kind of a strategic urgency to get going with the Lightspeed program. So we're moving out. And when we talk about the CapEx spending that we've guided to this year, that like we're opening the spigots now and MDA is going to be and our other vendors, contracting with the supply chain ordering parts, hiring people, we're moving out here. So that's -- that's the plan. That's what we'll be doing.
That makes sense. And in terms of discussions regarding an extension on your revolving line of credit, I know it's due later this year. I know today you're in compliance with the revolver covenant, but if I roll forward your leverage ratio at the year-end based on the guidance, and I understand the -- and I understand you're not tested today since there's no revolver usage.
But I think the company may not gain compliance by year-end. Like do you think that could impact like the revolver? And do you think it's fine without having a revolver? Or how are you thinking about discussions?
Okay. Yes, Marc, it's certainly something that we look at that we review we have a business that generates our GEO business as we talked about earlier a few minutes ago, is still generating cash. And in terms of a revolver, in 17 years, I believe we have drawn our revolver once.
Yes, it totally makes sense. And -- and just one last question. On utilization, that has declined so much sequentially. I know there's an interplay between utilization and then just like what your pricing per transponder is. Can you talk about just like when you think about utilization, like are you targeting a certain utilization? Or how do you think about where utilization is versus where you want to be?
Yes. No, I'll take it. Yes, we target 110% utilization, to be honest with you. I mean that's where we'd like to be. Probably everyone does, but barely anyone really gets there. I still think even with the decline in utilization that we've had, we still probably have one of the highest asset utilization numbers in the sector right now at concluded this quarter at 77%.
But it is down meaningfully from where we ended Q4, which was up at around 85%. And it's -- and what's driven that, the biggest culprit has been the business we've lost in the maritime space fundamentally. We talked about that on our last call that there was some renewals that we did not secure particularly in the maritime space that is -- that have moved mostly as far as we can tell, over to Starlink -- and so we're -- and I'm not going to guide right now on what we think utilization will be in the future, but we're focused on remarketing that capacity.
From a pricing perspective, there has been downward rate pressure in the industry for years now and the kind of the slope of that decline has varied throughout those years. So we were seeing significant downward pricing pressure. I'm looking at one of my colleagues, probably 5 or 6 years ago, it moderated.
It's still downward price pressure, but the extent of it had moderated. And again, I'm speaking as if we're living in homogenous world, it really varies by region. And we had noted before that probably where we were seeing the steepest declines were in Africa, in Latin America.
But again, things started to moderate a little bit. Right now, I'd say, the slope of the downward pressure is probably picking up a little bit again, but not dramatically. So -- so anyway, so -- but look, I mean, the laws of supply and demand are aligning well in our industry like in others.
And so -- so yes, but that's what has accounted for the decline in utilization. It's mostly been in the maritime space. There is some downward pricing pressure. But not what I would describe as sort of extreme at this point.
The next question is from Matt Lapides from AB Partners.
Wanted to follow up on the maritime comments. Can you talk about what type of maritime customers you've been losing. Are they cruise lines? Are they large global shipping companies are they both for the personal yacht segment? Any color you can provide on the type of near-time customers where you're seeing the most defection, I suppose...
Yes, the biggest has been in the cruise space. And in particular, probably for us in the Caribbean, we just had a meaningful amount of capacity there. So I'd say that accounts for the lion's share of the losses, crews in Caribbean. And then there's probably on the margins, there's been some erosion. I don't know, maybe maritime transport and stuff like that, but the driver has been cruised.
Got it. And can you talk about how much of that business if you look back a few years ago, how much of it is now gone? I mean is there more of it to come is really what I'm kind of get?
Yes. We've been staring at that. I'll ask my colleague, John. We've sorted a lot of the hit. John, do you want to offer any thoughts around that?
Yes, if you go back 3 years, that's probably not the right time to go back to because in the past 2 years, we had some pretty significant increases maritime. But from the past 2 years to this year, we're expecting roughly half revenue decline that roughly half...
From where were.
From where we were over the past couple of years.
Got it. That's helpful. And then just one follow-up to an earlier question about the Degen or Canada's equity position in RIO. I just want to make try to understand the flow front, if 5, 6 years from now, Lightspeed up, it's everything you hope it would be in terms of generating lots of cash and in the NEO subsidiary business, if there is excess cash flow after servicing the debt the dollar of excess cash flow. There is that first dollar doable?
Does it go to the equity holders they were go to the equity holders of the NEO subsidiary? Or is it shared rapidly amongst up with the ultimate holding company since that all stakeholders would get their pro rata share of that dollar. There is nothing in the contemplated definitive documents that we're talking about that would ratably share that between the equity holders at Telesat Corporation and Telesat LEO.
The next question is from Evan McLagan from Cormark Securities.
Okay. Yes, a couple of questions. So if I understand you right, I think you said that you expect to conclude the defending agreements with the government and it could take as long as to the end of the summer. Is that correct?
Yes. Yes. Again, I mean, we're dealing with the government of Canada here. So I can't be too precise about the timing on when exactly it would come to a close, but that's our expectation given the momentum that we have and what an extensive blueprint we have in terms of what the terms are, yes, we think that having this done by the end of the summer is a realistic time line.
Okay. And so even though you may not have those agreements concluded until the end of the summer, you're still going to spend $1 billion to $1.4 billion. And I guess you can do that because you have all that cash in nonrestricted set. Is that what gives you the confidence to just spend the way you are?
Well, it gives us -- I mean, what gives us the confidence to spend that money before having the definitive agreements concluded is just a lot of conviction that we'll get those definitive agreements done, given all the good work that we've done with these funding sources and how much of these funding sources want to see this project move forward.
And then, as I said, on the other hand, we got to get going. We've got pricing locked in with our suppliers, and we've got a great opportunity out there in the market. Our customers are wanting us to have this service available to them as quickly as we can. If they add their way, we'd have it available like now.
So we got to move and waiting around for another 3 or 4 months knowing as we do, and we believe that, again, a high degree of confidence that we're going to get all this funding that we need just doesn't seem to be on balance, the right thing to sit on our hands and go through a process that we're pretty have a lot of conviction about where we're going to land with these funding sources. We -- so yes, so we've decided to move forward and move forward with speed.
Okay. And so I would imagine that the vast majority of that spend on might be will be on satellite sales and design and everything, correct?
The most significant portion of the CapEx that we'll be investing this year is, yes, it's going to go towards satellites. There'll be some launch payments. There'll be some other stuff for user terminals and landing stations. But the biggie will be our friends at MDA giving them the cash that they need to turn on their supply chain and move forward.
Right. And so because MDA's time contract there, all that money is going to go though MDA, right?
I would say all of it, but I'd say a very meaningful portion of it.
Okay. Okay. And then just a question on your the fact that you've lost some business from Maritime, I think it's kind of Starlink. It's my understanding that Starlink doesn't offer any SLAs. And you -- when you have like up you would offer SLA. So wouldn't that give you a competitive advantage?
Yes, we think it will. But we need our constellation to deliver the service. So that's why we're bullish about our prospects to take the market share that we need in order for that project to be successful. I think there are a number of features of the Lightspeed constellation that will give us a good competitive advantage and allow us to present a tremendous value proposition to the customer community the ability to provide SLAs and CIR and give our customers an enormous amount of autonomy to manage the bandwidth that they will be contracting from us. I think all of those things will allow us to be successful. But yes, Ecan, that's one of the features for sure, we'll be offering our customers' SLAs. And we think that's important to some subset of them.
The next question is from Alex Nolan from Vasco.
My question was answered. I wasn't able to take one off of the queue.
[Operator Instructions]
The next question is from Walter Keck from LightChad.
Dan, I apologize if this is kind of a redundant question, but I've kind of heard this. I want to make sure that this is put to bed. This NDA will start constructing these satellites prior to you finalizing the agreements with the government of Canada, correct?
Correct.
Okay. And then in terms of the overall market, now that you've seen a little bit more of what Starlink has been doing, different verticals, they got -- they've gone into. I'm not sure many people at least initially expected them to go out for Maritime.
I know that there were some of your peers that were claiming they couldn't do airplanes and other on airplanes. Just curious, when you look at the market opportunity for your LEO constellation, has it changed at all? Or as you kind of approach construction now?
I don't believe so at all. And listen, Starlink is having a big impact on the market, and they're having an impact on our business, which I don't love. But what I do love is it is, I think, 100% validated the strategic direction that we took Telesat in going some years back. And you're right, there were folks that doubted whether they penetrate the maritime market and the backhaul market and doubts about the aero market.
We were convinced that LEO architecture was not only a good infrastructure to support those services. But one that would have a significant competitive advantage, and StarLink is demonstrating that in real time. And so -- but no, our market thesis, our business plan, it's intact. Yes, we're seeing -- yes, here again, for me, it's just reinforced everything. Our customers know now that LEO is the best way to address so many of these requirements.
They are taking services from Starlink and it provides a pretty good service, but it doesn't give everything -- it doesn't give everyone everything that they want. We've talked about the SLAs. We've talked about their ability to manage their own bandwidth pools and whatnot. So it doesn't give enterprise users everything they need, number one.
Number two, the customers don't want to put all their requirements with one supplier. They don't do that with all sorts of of their enterprise infrastructure, whether it's cloud or Internet connectivity, kind of writ large, whether it's satellite or not. So they want multiple providers. Yes, there's a huge opportunity here. So there's nothing that we've seen in Starling that causes us to question the various assumptions that we made when we got ourselves on this light speed path.
If anything, all of our thinking around the immensity of the opportunity and why LEO will have a competitive advantage capturing those requirements has been validated by everything we've witnessed over the last 12-plus months.
On past calls, I talked about -- or we talked about the ability to sign up people to pre-reserve the capacity, right, in existing enterprise customers for having new ones saying, "Hey, we're going to take part in this. And I think the issue was getting to that point of finalization and that once that occurred, we might be able to see some of those press releases start to hit. Understanding that things are financed -- or excuse me, finalized, if you started the construction, isn't that send enough of a message to these customers that we can start seeing some releases from you guys or some indications of enterprises signing up for capacity on the new constellation?
Yes. We're -- listen, you're right. I think calls like this one, and we're in a small industry. So when this supply chain all gets under contract, that will that will ripple through the industry. If anyone had any doubts about whether or not Telesat was going to proceed with this program, those should be put to rest they haven't already been put to rest.
I think they should be put to rest in the coming days and weeks. But -- so I think that it will be a great sign to the customer community that Lightspeed is coming. And look, we're only about 2 years away from launching our first satellite, right. So it isn't that far away. And we are going to be very focused on trying to secure customers and making those announcements and reporting backlog so that all sorts of different audiences can track the progress we're making.
My own expectation is it's -- it will still be closer to in service when we're able to make more of those announcements. But I still have an expectation that we'll be able to announce commitments in advance of being in service. And you can imagine that with all of my colleagues here on the commercial side, we're very focused, and we're very engaged with the customer community right now they're excited about Lightspeed.
So yes, all I'd say there is stay tuned. We're very focused on that, and we'll be very transparent about the commitments that we get.
If I can, just one last one on EchoStar. I mean, they're facing some financial distress, particularly as they approach the end of the year, which is, I think, the time for renewal. Have you had any preliminary discussions? Any thought on that, how that might play out?
Well, we talked about one of the headwinds that we're facing this year is an expectation that and the renewal that we have coming up, and it comes up in October, is on our NIC satellite, which they use -- they're the exclusive user of that satellite.
And so the guidance that we gave for this year captures all sorts of different outcomes that we might get there. And on the last call, we had said that we've started the conversation with EchoStar about their thoughts about whether they're going to want to renew or not. But we haven't advanced it that much since we had our last call just 6 weeks ago.
And so it's not clear to me where we'll end up. I think regardless of the scenario, we're going to see a meaningful reduction in the amount of revenue that we recognized from NIMC 5 post renewal date in October, but whether they renew all of it, some of it or none of it. It's still not clear to us at this point in time.
And we've got a great relationship with EchoStar. We've worked with them for years. We know that Mimic 5 is being used to distribute content today to their subscriber base. We know that they do have a lot of other things that they're focused on and saving cash is pretty high on that list. So anyway, all to say that Yes, we'll give an update once we have one. But right now, we don't have an update from the call that we had just 6 weeks ago.
Thanks, Walter. Thank you. At this time, we will turn the call back over to Mr. Goldberg. Please go ahead.
Okay. Well, operator, thank you very much, and everyone, thank you for joining us this morning. and we look forward to chatting with you when we release our Q2 results. So thank you all, and have a nice weekend.
Thank you.
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