Telesat Corporation ((TSE:TSAT)) has held its Q2 earnings call. Read on for the main highlights of the call.
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Telesat Corporation’s recent earnings call presented a mixed sentiment, reflecting both achievements and challenges. The company showcased significant strides in debt management and the performance of its LEO segment. However, it also faces hurdles with declining revenues, particularly in the GEO segment, and uncertainties surrounding debt refinancing. Despite these challenges, Telesat maintains a robust cash position, though its net income has seen a reduction. Overall, the call balanced both positive and negative aspects of the company’s current financial standing.
Strong LEO Segment Performance
Telesat’s LEO segment, particularly Telesat Lightspeed, demonstrated strong performance with a committed backlog exceeding CAD 1 billion by the end of the second quarter. This growth, adjusted for foreign exchange movements, highlights a robust pipeline of opportunities, especially from the aero and government sectors.
Debt Repurchase and Interest Savings
The company made significant progress in managing its debt, repurchasing USD 857 million at a cost of USD 462 million. This strategic move resulted in annual interest savings of approximately USD 53 million and reduced overall debt by 36%, showcasing Telesat’s effective financial management.
Operating Expense Management
Telesat successfully reduced its operating expenses by $6 million, bringing them down to $51 million. This decrease was attributed to higher capitalized engineering costs and lower consulting and share-based compensation costs, reflecting efficient expense management.
Strong Cash Position
The company ended the quarter with a solid cash position of CAD 547 million and has access to $2.2 billion under funding agreements with the Canadian and Quebec governments. This strong cash reserve provides Telesat with financial flexibility for future investments and operations.
Positive Foreign Exchange Impact
Telesat benefited from a positive foreign exchange impact, recording a gain of $115 million in Q2 2025 compared to a loss of $34 million in the same quarter of the previous year. This gain contributed positively to the company’s financial results.
Revenue Decline
Despite positive developments, Telesat experienced a revenue decline of $46 million, bringing consolidated revenues down to $106 million. This decrease was primarily due to lower rates on the renewal of a long-term agreement with a North American direct-to-home customer and reductions in enterprise services.
Decreased Adjusted EBITDA
The company’s adjusted EBITDA fell by $45 million to $59 million, with an adjusted EBITDA margin of 55%. This decline reflects the challenges Telesat faces in maintaining its profitability amidst revenue pressures.
Challenges in GEO Segment
The GEO segment faced revenue decreases due to lower rates on renewals and reduced services for certain enterprise customers, notably in the Indonesian rural broadband program. This segment’s challenges highlight the competitive pressures and market dynamics impacting Telesat.
Uncertainty in Debt Refinancing
Telesat has yet to engage with restricted group debt holders for refinancing, leaving uncertainty around the timeline for concluding this process. This uncertainty poses a risk to the company’s future financial planning.
Net Income Drop
Net income for the second quarter dropped to $76 million from $129 million in the prior year, driven by lower revenues and smaller gains on debt repurchases. This decline underscores the financial challenges Telesat is navigating.
Forward-Looking Guidance
Telesat reiterated its 2025 guidance during the earnings call, projecting full-year revenues between $405 million and $425 million, with adjusted EBITDA expected to range from $170 million to $190 million. Operating expenses for Telesat Lightspeed are anticipated to be approximately $110 million to $120 million. The company plans capital expenditures between CAD 900 million to CAD 1.1 billion, primarily for Telesat Lightspeed, and highlighted progress in debt refinancing and CFO recruitment.
In summary, Telesat Corporation’s earnings call reflected a balanced sentiment with notable achievements in debt management and the LEO segment, contrasted by challenges in revenue and debt refinancing. The company’s forward-looking guidance remains optimistic, with strategic plans for investment and growth. Investors and stakeholders will be closely watching how Telesat navigates these challenges and capitalizes on its opportunities in the coming quarters.