Satellite operator Telesat (NASDAQ and TSX: TSAT) today reported its financial results for the three-month and one-year periods ended December 31, 2023. For the year ended December 31, 2023, Telesat reported consolidated revenue of CDN$ 704 million, a decrease of 7% (CDN$ 55 million) compared to the same period in 2022.
All amounts are in Canadian dollars and reported under International Financial Reporting Standards (IFRS) unless otherwise noted.
For the year ended December 31, 2023, Telesat reported consolidated revenue of $704 million, a decrease of 7% ($55 million) compared to the same period in 2022. When adjusted for changes in foreign exchange rates, revenue declined 9% ($70 million) compared to 2022. The decrease was due to a rate reduction on the renewal of a long-term agreement with a North American DTH customer combined with a reduction of capacity and rate by another one of our North American DTH customers. The completion of an equipment sale in 2022 to the U.S. Defense Advanced Research Projects Agency (DARPA) which was not repeated in 2023 as well as lower revenue from certain Latin American customers also contributed to the revenue reduction relative to 2022.
Operating expenses for the full year 2023 were $205 million, a decrease of 21% ($54 million) from 2022. When adjusted for changes in foreign exchange rates, operating expenses decreased by 22% ($57 million) compared to 2022. The decrease was primarily due to lower non-cash share-based compensation, higher costs for equipment sales in 2022 relating to the DARPA program, and lower insurance costs.
Adjusted EBITDA1 for the full-year 2023 was $534 million, a decrease of 6% ($34 million) or, when adjusted for foreign exchange rates, a decrease of 8% ($46 million). The Adjusted EBITDA margin1 was 75.8%, compared to 74.8% in the same period in 2022.
For the year ended December 31, 2023, Telesat’s net income was $583 million compared to a net loss of $82 million for the prior year. The positive variation of $665 million was principally due to C-band clearing proceeds recognized in the second quarter of 2023 combined with a positive variation in foreign exchange gain (loss) on the conversion of U.S. dollar debt into Canadian dollars and a higher gain on the repurchase of debt.
For the quarter ended December 31, 2023, Telesat reported consolidated revenue of $166 million, a decrease of 20% ($41 million) compared to the same period in 2022. The decrease was primarily due to the completion of an equipment sale in 2022 to DARPA which was not repeated in 2023 and a rate reduction on the renewal of a long-term agreement with a North American DTH customer.
Operating expenses for the quarter were $50 million, a decrease of 38% ($30 million) from 2022.
The decrease was primarily due to lower non-cash share-based compensation and higher equipment sales in 2022 relating to the DARPA program.
Adjusted EBITDA for the quarter was $123 million, a decrease of 11% ($16 million). The Adjusted EBITDA margin1 was 74.3%, compared to 67.2% in the same period in 2022.
Telesat net income for the quarter was $39 million compared to net income of $91 million for the same period in the prior year.
“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 $1.3 billion, and significant cash flow, ending the year with a cash balance of $1.7 billion.”
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$2 billion relative to the approach we previously had been taking. I am also pleased that we have had extensive engagement with the Government of Canada regarding financing for Telesat Lightspeed and expect to share funding terms shortly. We estimate that, in addition to the roughly US$2 billion of capital cost savings, our total cost of borrowings is expected to be roughly US$750 million lower relative to our prior Telesat Lightspeed plan. The Government of Canada has been a strong supporter of the Lightspeed program and we are grateful for that support.”
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 34% at the mid-point of our 2024 guidance range. Our focus this year will be, on the one hand, maximizing our Adjusted EBITDA1 and cash flow by seeking to mitigate the anticipated revenue declines and rigorously managing our legacy cost structure while, on the other hand, ramping up all activities associated with building and commercializing Telesat Lightspeed, which we strongly believe will revolutionize broadband connectivity for enterprise and government users and represents a highly compelling growth and value creation opportunity for Telesat and its stakeholders.”
