Telesat Corporation (TSAT) Q1 2022 Earnings Report, Transcript and Summary

Good morning, ladies and gentlemen. Welcome to the conference call to report the First Quarter 2022 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 Telesat. I would like to turn the meeting over to Mr. Michael Bolitho, Director of Treasury and Risk Management. Please go ahead, Mr. Bolitho.

Thank you, and good morning. This morning, we filed our quarterly report on Form 6-K with the SEC and on SEDAR. Our remarks today may contain forward-looking statements. There are risks that 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, Telesat's annual and quarterly reports 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.

Thank you, Michael. Good morning, everyone. This morning, I'll share some thoughts on the quarter, and I'll give an update on the business. I'll then hand over to Andrew, who will speak to the numbers in detail, and then we'll open the call up to questions. In the past, I think there's probably been too much overlap in what Andrew and I have each shared in terms of financial performance. So I'm really going to try to focus my comments on the key developments in the quarter and the key objectives we're working on. So as noted in the earnings release, we're off to a good start for the year. As you know, we had a key contract with the DISH network on our Anik F3 satellite that came up for renewal at the end of last month. As I suggested would likely be the case on our Q4 earnings call in March, we ended up getting a partial renewal. DISH renewed a little more than half the capacity they had previously been taking, although at a rate that's lower than what they had been paying. The renewal is for 2 years with an option to extend for an additional year beyond that. Separately, we entered into a contract with another long-term customer for almost all of the capacity that DISH didn't renew. Capacity that will be used for broadband connectivity for the cruise market. With the DISH renewal and the separate agreement for cruise services, we're well positioned to deliver on our guidance for the year. Taking a step back and looking at the market for satellite services more broadly, it appears to us that the level of activity and the demand for services is somewhat stronger than what we saw at this time last year with the pricing environment that we described is broadly stable. With COVID restrictions easing, we've seen more demand in the aero and maritime markets, and it appears also that higher energy prices may be leading to a bit of an uptick in activity in that market as well. With an 84% capacity utilization rate at the end of last quarter, however, one of our challenges tends to be finding available capacity on the fleet to satisfy some of the opportunities we're seeing out there. Shifting gears. In March and April, we purchased Telesat unsecured notes with an aggregate face value of USD 60 million, something we believe will be accretive to the company and signals our confidence in our future prospects. Consistent with our covenants, the notes that we purchased will be canceled. We've been authorized by our Board to purchase up to an incremental USD 100 million face value of additional Telesat debt. Finally, turning to Telesat Lightspeed. Last month, we shared the current Lightspeed business plan with the export credit agencies and now are fully reengaged with them to secure their commitments for the program. The plan is for 188 satellites plus 10 in-orbit spares, which keeps us within the same CapEx envelope we were working with previously, notwithstanding the cost increases we've seen from supply chain shortages and other inflationary pressures. On our last call, I said we expected to have a much better sense of where things sit with the ECA by the end of June, and we're still focused on that time frame. We remain enthusiastic about the prospects for Telesat Lightspeed and remain heavily focused on completing the financing and commencing the full-scale construction of the program. So with that, I'll hand it over to Andrew and then look forward to addressing any 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 2022, Telesat reported revenues of $186 million, adjusted EBITDA of $146 million and generated cash from operations of $43 million with over $1.5 billion of cash on the balance sheet at quarter end. For the quarter of 2022 compared to the same period in 2021, revenues decreased by $5 million to $186 million. Operating expenses increased by $24 million to $64 million and adjusted EBITDA decreased by $6 million to $146 million. The adjusted EBITDA margin was 78.4% compared to 79.8% in 2021. Between 2021 and 2022, changes in U.S. dollar exchange rate had a minimal impact on revenue, operating expenses and adjusted EBITDA. The revenue decrease was primarily due to reduction of service from one of Telesat's North America's direct-to-home customers, some reductions, terminations on contract renewals of certain services and a decrease in equipment sales to Canadian government customers. This was partially offset by increased services provided to customers in the mobility market as it continues to recover from the impact of COVID-19. The increase in operating expenses was principally due to higher noncash share-based compensation expense and to a lesser extent, the reversal of the bad debt provision in the fourth quarter of 2021, which had the impact of lowering operating expenses in the prior period and also including some higher expenses in respect to being a public company. These are partially offset by higher capitalized engineering costs associated with the increased activity in a Telesat Lightspeed program. Interest expense increased by $7 million in the fourth quarter when compared to the same period in 2021. The increase in interest expense was primarily due to interest on the 2026 senior secured notes, which were issued in April 2021, partially offset by the impact of the maturity of one of our interest rate swaps in September 2021. As Dan had mentioned, in March and April, we repurchased our senior secured notes with a face amount of $60 million by way of open market purchases. These repurchases resulted in a gain in the fourth quarter of CAD 21 million. We will also show a further a gain in the second quarter of approximately $17.5 million. All of the notes we purchased will be canceled. As Dan has also mentioned, we have authorization to purchase up to a further USD 100 million face value of debt. The gain on changes in fair value of financial instruments for the fourth quarter of 2022 reflects primarily changes in fair value of our interest rate swaps and prepayment options on our notes. The loss on changes in fair value of financial instruments for the fourth quarter of 2021, primarily reflect the changes in the fair value of our interest rate swaps and prepayment options. For the fourth quarter of 2022, the cash inflows from operating activities were $43 million and the cash flow generated from investing activities were $47 million. Included was $65 million by way of receipt of the remaining Phase 1 U.S. C-band clearing process and with virtually all the capital expenditures relating to our lower orbit constellation. Guidance. As you will also have noted in our earnings release this morning, we are reiterating our previously stated 2022 guidance. Our guidance reflects the Canadian dollar to U.S. dollar exchange rate of 1.3%. For 2022, Telesat expects its full year revenues to be between $720 million and $740 million. Telesat expects adjusted EBITDA to be between $525 million to $545 million in 2022. With respect to expected capital expenditures. And as Dan has also noted, we are continuing to work at this time to finalize our financing and contract with our key suppliers. For now, we expect our 2022 cash flows used in investing activities to be in the range of USD 100 million to USD 120 million, including capital expenditures to further advance our Lightspeed program. Once we have greater visibility around the construction and financing of our Telesat Lightspeed program, we will provide a further update on our anticipated capital expenditures for the year, which could increase substantially. To meet our expected cash requirements for the next 12 months, including interest payments and capital expenditures, we have approximately $1.5 billion of cash and short-term investments at the end of December as well as approximately USD 200 million of borrowings available under revolving credit facility. Approximately $1 billion in cash was held in our unrestricted subsidiaries. In addition, we continue to generate a significant amount of cash from our ongoing operating activities. At the end of the fourth quarter, leverage as calculated on the terms of our amended senior secured facilities was 5.67x:1. Telesat has complied with all the covenants in our credit agreements and indentures. A reconciliation between our financial statements and financial covenant calculations is also provided in the report we filed this morning. Our 6-K provides the unaudited interim condensed consolidating financial information in the MD&A. The non-accounted for subsidiaries shown are essentially the unrestricted subsidiaries with some minor differences. So that concludes our overall prepared remarks for the call. Now we'll be very happy to answer any questions we may have, we will turn back to the operator.

We will now take questions from the telephone lines. [Operator Instructions] And your first question is from Jason Kim from Goldman Sachs.

This is Julia on for Jason. On Lightspeed funding what are the additional steps that need to happen in order to complete the financing. And we continue to hear about the supply chain and inflation issues across all markets. How are you thinking about your early investment needs now versus your initial plan?

Julia, it's Dan Goldberg. So let's see a couple of things. So Lightspeed financing, fundamentally, we've been saying this for a while, the missing piece right now that we need to close on are the discussions that we're having with the export credit agencies. So I think we've said that we've already sort of lined up, I don't know, these are Canadian dollars. There's like $4.2 billion of financing between the cash debt. We have the contributions that we've made already, the commitments we have from the government of Canada, the government of Quebec and things like that. And so -- and we've talked about a CapEx envelope for the program of about USD 5 billion. So in any event, the heavy focus is concluding those discussions with the export credit agencies. The history here is we were, I think, making good progress with the ECAs in Q4. And then early in Q4, we got bitten by these supply chain issues, which caused delays and some inflationary pressures on the program. And so if you've followed the history here, we spent a lot of Q4 and a good chunk of the early months of this year working with Thales to update the schedule, reformulate the program and our other suppliers, too. So anyways, so an answer to -- but having now kind of updated the program and worked through those issues. We're now back reengaged with the export credit agencies. And so what I think I said on our last call that I said earlier this morning is that we're hoping that by the end of June, we're going to have a pretty good sense of where we're sitting with the ECAs. That's kind of the time line that we're trying to drive towards right now. And then on the inflationary pressures that we've been dealing with those. And I think that what we've done is we're moving forward with the constellation of -- and this is the plan that we're speaking to the export credit agencies about its 188 satellites in orbit plus 10 other in-orbit spares to provide some redundancy and resiliency and obviously, all the ground facilities that are integrated with the network and all the launch vehicles and the software platforms that we need. All of that is kind of covered in that kind of USD 5 billion number. So that's how we're addressing it. It's a hugely capable kind of enterprise-grade focus constellation. So we feel good about it. So that's where we are right now.

Awesome. Two more questions. On Anik F3, it's good to see the partial renewal with DISH and also leasing out the rest of the capacity. I think in the past, you said that DTH contracts generally generate around like CAD 70 million of annualized revenue and EBITDA. In the current construct, how much is Anik F3 satellite generating in revenue and EBITDA now? And how should we be thinking about that run rate for the -- for the next few years?

Yes. No. So you're right. We have said that our -- I don't know just kind of the typical DTH contract sort of generates that sort of revenue profile of about CAD 70 million. And yes, we're very pleased with the renewal that we got with DISH and probably even more pleased still how quickly we were able to get the rest of that capacity under contract and generating revenue. We're not going to, though, provide kind of a new run rate on Anik F3. We've given guidance for the year, certainly closing the DISH renewal and entering into that other big contract for all those cruise services makes us feel quite comfortable about the guidance that we've given, Andrew reiterated it just a few moments ago. But beyond that, we're not going to give kind of more granular information about what F3 is going to be throwing off going forward.

Got it. Makes sense. And then on Nimiq 5, that's coming up for renewal in 2024. I know that's a few years out, but in your view, are there any differences between Nimiq 5 and Anik F3 in terms of the importance to your customers?

Yes. We think there are real qualitative differences. And we talked about some of those with Anik -- when we were talking to the market about the Anik F3 renewal. Anik F3 was used to support services for DISH that -- talked about this a lot before, that really weren't kind of core to their central multichannel offering. It was used for kind of more niche market. It was used for ethnic broadcast services, so mostly not English and really sort -- kind of a niche market. That's not true really for any of our other DTH satellites, Nimiq 5 with DISH, which is very much kind of supporting their more core DIRECTV services that are kind of made widely available for their subscribers. And that would also be true for the other DTH contracts that we have with Bell that we have with Shaw. So F3 was -- yes, it was kind of different in that regard. It was providing important services, but services that really weren't core to the main DTH offering of DISH.

And then my last question is regarding the bond buyback program. Is there any reason for the size of USD 100 million face value program for -- that was authorized? And then your initial bond buyback focused on the unsecured bonds? And are they going to be your focus going forward, I guess, given where they're trading now.

As far as the amount, I'm sorry, my general council is -- as far as the amount. Yes, I don't know, we just sort of felt that was appropriate. I mean we look at the amount of cash that we have available for all the different things that we want to do. And so I don't know, there wasn't really any exact science to it. It just felt like the right amount. I mean, obviously, in the future, if we change our minds, we want to do something different, then we can do something different. And then as far as kind of -- I don't know, the tranches, I'd say we're sort of being open-minded about that, and we'll -- and look, we're also, I should say, we're not committing to buy back any debt. We've been authorized to buy back debt. We made the purchases that we made in March and April. I think it's good for the company to have the flexibility to do it. And we're just being pretty transparent with everyone that we have that authorization. But the fact that we have the authorization doesn't necessarily commit us to doing anything.

The next question is from Arun Seshadri from Crédit Suisse.

First, I wanted to ask, in terms of the, I guess, reduction in scope of Lightspeed, can you talk about whether there are any -- do you expect to use the full USD 5 billion for a 1/3 reduction in scope. Obviously, you're dealing with increased cost of the overall program. But is there any scope for a reduction in the required funding?

I doubt it. I mean I think we've -- look, we're well advanced in the development of this program. So it doesn't feel like it, Arun. I mean we're not people that like to spend more than we need to. But I don't think so. I think frankly, I think what we're doing is very capital efficient and you just look at the amount of capacity that we're going to deploy and the amount of capital that's required to deploy that much capacity. I mean, this constellation will have something like 10 terabits of capacity. It's more capacity than exists if you aggregate all the in-orbit GEO satellites. So I mean it's completely disruptive in terms of the capability that we're bringing. And I'd note, just in terms of capital efficiency. I think unlike some of the other lower orbit satellite programs that are moving forward, these satellites are real large, complex, capable satellites that have a service life of 10 years plus another year just for launching, getting them into their final orbit and for in-orbit testing and the like. And so -- so we actually feel -- I mean we didn't love obviously, the inflationary pressures that we're seeing out there. But even with them, we think that what we're bringing to market is going to be disruptive in terms of the quality of service that it will deliver and the price at which we can deliver it, still achieving the kinds of returns that we need to achieve. So that's a long-winded answer, but the short answer is, I don't think there's really a lot of scope to bring that number in.

Got it. And then just a broader question. Obviously, with the moving to the right of Lightspeed timing, you're obviously also seeing Kuiper come at a similar time now. I think you had probably a 1- to 2-year lead over them, which has sort of gone by the way, side somewhat. So just first, your thoughts on that. And second, given that Lightspeed has moved to the right, what are your current thoughts on the GEO satellite fleet and sort of a longer-term CapEx envelope that you would need to sort of deploy in order to keep that business in good shape.

So I'll start with your first question about Kuiper. Look, we always believe that Amazon is serious about building out Kuiper and frankly, a 1-year head start or whatever, I don't think that's really that material in terms of our competitive positioning. We're building a constellation that's very much focused on and built for this kind of enterprise and government market that Telesat's been serving for the last 50 years. For sure, Kuiper is going to be providing services to some of those verticals as well. But I think their constellation is really more optimized for the primary market, but they're focused on serving, which is more the consumer broadband market. And it looks like right now, they're not going to be having polar coverage. There are some limitations there. So our business case is intact fundamentally. It's a big, big market. We know this market well. We know the customers well. We've engineered our constellation to give us, and I think our customers, certain competitive advantages in the verticals that we're focused on. Back haul for ISPs and mobile network operators, the aero market, the maritime market, the government market, we're really happy. I didn't talk about it in my comments, but we landed that really interesting contract with NASA that took place in Q2 that we announced it in connection. We mentioned it in this earnings release. as well. So with the delay that we've had -- and I would note, everyone's getting delayed. I mean I haven't heard from a single satellite operator in the last, I don't know, 12 months, whether they're a new entrant, whether they're a long-standing operator, everyone's kind of getting moved to the right a little bit, mostly for the same reasons that we've been moved to the right, these supply chain issues and whatnot. So that's how we think about Kuiper. And then on GEO and replacement CapEx and whatnot, we're just kind of taking them one at a time. We're never going to replace a satellite unless we feel like we've got a sound business case to do it, right? I mean when we invest money, it's always with a view towards achieving the kinds of returns that our shareholders have come to expect and that we've been able to generate over our fairly long history in this market. And so that's what we're going to do going forward. We'd never say it's going to be, oh we're going forward or we're going to replace every single one of our GEO satellites. We're really going to take them one at a time as these satellites come up for renewal, we look at the existing book of business, we're engaged with the customers and we make a judgment about whether or not it makes sense to do it on the DTH side. That's going to be mostly about where we end up in conversations with DISH, Shaw and Bell with respect to each of the satellites that we're using to support their services. And as we said before, there are some new technologies out there that might mean that we can extend the life of some of these satellites without having a full-scale replacement in Intelsat, there's a bit of [Indiscernible] here extending the life of one of their GEO satellites. We've looked at that technology, too. We've also said in the past that particularly for some of the DTH satellites, the current contract term for our customer comes up long before the end of life comes up, and I'm thinking of satellites like Nimiq 6 and Anik G1. So in any event, but that's how we're thinking about it. And we've also said in the past, look, we're still going to pursue if there are attractive opportunities to build new geo satellites, never mind replacement. That's something that we're going to continue to think about too, provided that there's a good compelling business case that underpins it.

Got it. Got it. That's all I had.

The next question is from Raghav Garg from DoubleLine.

Can you just talk about the utilization? I saw it picked up from 80% to 84%. But can you tell us whether some reduction in supply? Or can you just walk us through that pickup in utilization?

The last bit of what you said, chilled off for me, but I think Chris got it.

I think he was asking about the increasing utilization. Is it a factor of increased usage or reduction in capacity.

Yes. it's a great question. So -- and we probably should have called this out. We took our Anik F1R satellite at the beginning of this year and put it in what we call inclined operations. So you're kind of backing up on your station keeping a little bit to preserve fuel. It's something that satellite operators routinely do to extend the life of their satellites that are nearing the end of their lives. So we have another satellite like that. Anik F1 that's been in inclined operations for quite some time. But when we report utilization, we're reporting utilization on station capacity. And it's a great question. I'm glad you asked it. So what happened was we ended last year with an 80% utilization rate. We put Anik F1 -- F1R into inclined operations in January probably of this year. And when we did that, we then removed that satellite from our utilization calculation for station capacity. Anik F1R on average was at lower utilization than on average, the rest of the fleet, and it had the effect when we removed it from the utilization calculation, it brought up the fleet-wide utilization to 84%. But if we corrected it and did an apples for apples comparison, it would have been flat. Utilization would have been 80% for Q1. So thanks for asking it. And in the future, if something like that happens, we'll do a better job of calling it out so that people don't have to wonder.

Got it. And a follow-up, just trying to triangulate on DISH. I know you probably can't talk about the specifics. But just looking at the 2023 backlog, it seems like it's only picked up an incremental $10 million between year-end and today. Am I missing anything just to get a sense of how big that contract and the maritime contract is? Is that the right way to think about it? If you can help me there?

Yes. No, it's another good question. But we signed the DISH contract in Q2 in April, and so it didn't get picked up in the Q1 backlog number. So you can ask me again in Q2 when we report our Q2 numbers. So -- but it's just not there right now because that backlog calculation gets done for contracts that are in place at the end -- before the end of March 31. And so yes, that contract got signed in April.

Very helpful. And just last question. The $750 million on the LEO backlog, what -- how quickly do you expect that to ramp? Is that -- is the -- getting the ECA deal a big piece of selling that capacity in the future? Or what kind of timing can you think about the ramp of the LEO capacity?

So maybe just on the question in terms of increasing the backlog you mean? I would suppose yes, increasing the backlog. Yes, for sure. I think our customers -- we've already got a material amount of backlog on LEO with the $750 million that we've reported to date. But it's certainly the case that once our financing is in place, we started the full-scale production of the constellation, we'll be signing more contracts with customers prelaunch, we're going to be very focused before any satellite is launched to have that backlog number needly higher than the $750 million where it sits today, and we'll be reporting that along the way.

The next question is from Amer Tiwana from Imperial Capital.

I have 2 questions. First one is regarding guidance. I just wanted to unscramble it a little bit. You obviously got the partial renewal from DISH done, and you were able to put some of the excess capacity or all of it from that satellite into a newer contract as well. Does it mean that we could be looking towards the higher end of guidance as you move through the year? Are you confident that you can hit that given that you've had these 2 positive things because I believe you said on the last call that if you didn't get the DISH contract, you'd be towards the low end of guidance. So just some comments around that would be helpful.

I'll take it. Andrew will probably tell me. But yes, your recollection is right. What we had said was that the guidance range that we gave kind of embraced the full range of outcomes with DISH and having gotten that renewal and having entered into that other contract. Yes, we feel quite comfortable that we're within the range. And here's the part where Andrew will tell me, yes, probably more -- gives us a better feeling that we're trending more towards the upper end of the range. So still only the end of -- what date have we today -- May 6. So still have a whole lot of ways to go through the year. But when we said in our earnings release, we feel like we're off to a good start and can reaffirm the guidance. Yes. We feel good about where we sit and it probably gives us a little bit more confidence that on balance, we're kind of more on the upper side than the lower side.

Sounds good then.

Okay. Maybe if you can talk about broadly, there's obviously delays all over the place on the LEO constellation. -- in -- is it right to assume that this is actually good for the GEO business. And in that sense, is it possible that we could potentially see some more business come to the GEO side over the next coming years? Just trying to understand the trajectory of the business. Obviously, it was declining at a higher single-digit rates. Now you're starting to see some stabilization on the revenue and EBITDA front. So just maybe talk about the opportunity that's out there for the GEO business in the near term.

Okay. Yes, I'd say I'll do the macro thing first, maybe for the legacy satellite operators as a whole. And yes, I think the longer these new disruptive constellations are kind of pushed to the right. It creates more opportunity for the GEO assets to remain full, and hopefully though, we'll start to see some better pricing dynamics as asset utilization rates across the industry get tighter. With respect to Telesat, we'll have to see. I had said in my opening comments that we're actually seeing an uptick in activity, but we can't really capture it given that our utilization rate is pretty high. I think certainly the fact that we resold all of that Anik F3 capacity that came back to us so quickly, is certainly a sign that there are particularly in certain markets getting to be some capacity shortages. You would think that you believe in the laws of supply and demand that those shortages should translate over time to some improved pricing dynamics, we haven't really seen it yet. We've seen it I'd say a little bit on the margins in a good way in some markets. And again, all these markets are not uniform. So you can have -- for instance, it feels right now like there's some capacity shortages building up on some of the key cruise markets, the Caribbean, maybe the Med. We don't have a ton of capacity there. But whereas there are other markets still that like Africa, for instance, there still seems to be more supply than we, as providers would want right now. So I don't know. I mean, on balance, it can't be a bad thing for the GEO operators, including Telesat, but we're not prepared to sit here right now and say, "Yes, we're materially changing our outlook." But yes, on balance, I think it's supportive. We'll put it that way.

I think that's all I have. So thank you very much for your time.

The next question is from Brandon Karsch from Kennedy Lewis.

You've mentioned a couple of times that you're seeing a lot of demand, but you're actually having a hard time supplying it based on your utilization, but you're only at 84% utilization. So can you help me understand what the delta is there? And what's preventing you from selling that other 16%? Is it just a location of your satellite? Or is it meeting some redundancy in orbit?

Yes. No, it's exactly what I was just referring to. We provide -- we have capacity that serves all sorts of different markets. Some of those markets, there's greater demand right now. And so I think where we probably have more excess capacity is in some of those areas that have been a little bit more challenging. And I mentioned Africa a moment ago. We've got some outstanding capacity over Africa. We're -- there are opportunities there. But if that capacity were available over some other markets, we'd be able to sell it a whole lot more quickly. So that's what it is. And I think, candidly, if you look at our utilization rate, it's pretty favorable, I think, relative to probably the industry as a whole right now. If you look at probably just kind of utilization rates across the industry, I got to believe it's lower than 80% right now. So that's what our challenge is. And it's not like you throw in the towel, we're always trying to get to 110%, but that's the reality of the situation. And I think if you go back and look at our utilization rates that we've been reporting, and we report them every quarter and have for decades, we've done a good job. I think it's trended up a little bit even through the pandemic and all of that. So anyway, that's what explains it. And also, I don't want to overstate it. It's not like we're besieged with demand right now that we can't satisfy. I was just noting a trend, which is we are seeing an improvement in certain verticals and in certain geographies, which is good. But we can't always satisfy, case in point, with Ukraine right now, there's been heightened demand for some government services. There have been some users that have had to come off of Russian satellites that need to be accommodated on other satellites, some of those requirements, folks have reached out for us on. And we just simply don't have the available capacity to meet those requirements. So that's an example of what I'm talking about.

Okay. That's helpful. And then I know you don't want to give specific numbers on new contracts on F3. But I mean, could you give me a sense generally of if you're trading from broadcast to enterprise on a given satellite for the same amount of capacity. So how does pricing typically compare between those 2 use cases?

It's [Indiscernible] this -- the thing that we did with DISH, right? I mean it's -- it's not -- you can't extrapolate from one to the other. And so yes, it's -- I'm not trying to avoid the question. It's just they're -- yes, I mean the DISH renewal, that's got its own dynamic around that. And then these other -- I'm looking at a colleague of mine for some help here. But I'm sorry, it's -- it's hard to say. If there were just some other, we had [Indiscernible] come up. It was for kind of more generic broadcast services, I'll pick a market, Latin America or something like that. I don't think it's fairly dissimilar to what we would see if we were selling in the broadcast or video market kind of writ large, but we put the dynamics around the DISH renewal in a different category.

Okay. Understood. And then just the last one for me. It seems like you're seeing some benefit from aero and maritime coming back as the world continues to reopen. If we just look at where we are now for that vertical compared to where we were pre-COVID, how far back do you think we are at this point?

You know what that's a great question, and I wish our Chief Commercial Officer was here because -- and I'm hoping that someone else in the room can help me here, but I saw a stat that said something like while only...

70% of the cruises.

Well, only 70% of the cruise are kind of back in the water going out with passengers and whatnot, that the bandwidth requirements that they have, which is like...

More than 100%.

It's well over 100% of where they were prepandemic. I mean it doesn't take a rocket scientist to figure out why everyone just wants a whole lot more bandwidth. It was meaning that the bandwidth requirement was meaningfully higher, like at the end of Q1 than it was pre-pandemic, even though they're only about 70% of the cruise ships out there. So here again, not a surprise everyone wants more bandwidth. That's kind of the inexorable trend. And yes, and the pandemic certainly accelerated that, right? If you're out on a ship, you need to have access to Zoom, you need just all of that. You're using cloud services. So that's kind of what it looks like. And we believe that's kind of the future of broadband connectivity demand. That's why we're building Telesat Lightspeed and why we're so bullish about it.

Okay. Great. So it sounds like some room to roam there still on the cruise side though, and then what about the aero side?

I'd say I haven't seen kind of direct numbers like that. But certainly, it's way back up. I mean it's way back up, both obviously, passengers and planes and demand. I don't know if bandwidth demand has eclipsed where we were pre-pandemic. My gut is we probably have, but I'm not -- I'm not sure. We're probably kind of back, but we'll have a look at that, and we'll be -- we'll try to be prepared to talk about that on our next call. But clearly, the dynamics are improving, which is why I called it out in my opening remarks. And we've definitely been a beneficiary for some of that so far this year.

The next question is from Walt Piecyk from LightShed.

Dan, you mentioned things being back on track with the ECAs. Can you just provide a little bit more color on what that means and whether that we should infer anything in terms of timing?

Well, what it means is that as we said before, back in October when we were informed by Thales that they couldn't support the schedule that they had previously shared with us. And when they also sort of warned us that there are also these pricing pressures. We had already been in very advanced discussions with the export credit agencies, and we had to pause those discussions because the business case that they were being asked to underwrite needed to get updated as a result of the news that we heard from Thales. And so when I say that we're reengaged with them, what I mean by that is we have a new schedule. We have a new, I should say, a current plan. And we shared that with them probably right before Easter, which allowed us to unpause -- and so we're back at it with them. We've had multi-hour sessions with them on technical updates, commercial updates, financing updates, regulatory, I mean, everything. So that's what I mean when I said that we're fully reengaged with them. And then I said from a timing perspective, they've got work to do. They've got technical advisers, commercial advisers, and they've got processes that we need to respect. And so they're absorbing all the information that we've shared with them. And what we said from a timing perspective is that we hope to have a good sense for where we're standing with them kind of around the end of Q2. So our Q2 is June 30 kind of thing. So that's where we are. We've shared a lot of information and they're doing their work. And we've told them that we want to get moving quickly. We think there's an awesome market here, and we want to get at it. So that's -- that's where things go.

Got it. You also announced, I think, recently something with NASA on the -- I believe it's related to the LEO project. But just in general, like as things develop going forward with ECA, Thales, as things kind of progress, where do you expect to have prelaunch success in terms of signing up contracts? And how would that pace look over the next, whatever, 6 to 12 months?

Well, I think verticals where we think that there is some good opportunities for -- prelaunch opportunities. It will be on the terrestrial side. So broadband connectivity that can be big rural broadband programs that Telesat Lightspeed is going to be really well positioned to serve. It will be working with mobile network operators, some of that -- and again, it's all rural, rural, rural. It will be network extension for ISPs and mobile network operators, we think in both developed and developing countries. We think that the maritime market is going to be another promising market for prelaunch deals. Aero, it's probably a longer sales cycle just given all the regulatory complexity around serving the aero market with all the certifications you need and how long it takes to deploy terminals on planes and all the requirements around that. I still think there are opportunities there to do prelaunch stuff, and I think that Lightspeed is going to be revolutionary for the aero market, just given the flexibility of the network, the optical satellite inter-satellite links that we have, our ability, like I think no other system to concentrate gigabits and gigabits of capacity around airports and high-density flight corridors. And then on the government side, it will be interesting, I mean governments have their own very Byzantine kind of procurement rules and cycles. But I am still cautiously optimistic there. Obviously, with allied nations certainly, the activities in Ukraine right now underscore the importance of resilient, ubiquitous, I think, low latency resilient satellite connectivity. And I think that allied governments are showing a renewed interest in spending and in understanding how integral space is to -- I hate to say it, but kind of modern warfare and whatnot. And so it will be interesting. I think that Lightspeed can be transformative for government users. How much of that we can do prelaunch? I think some. I mean, obviously, we're doing some really interesting work with DARPA right now. We're supposed to be launching 2 satellites. It's sort of like towards the end of this year to demonstrate the efficacy of these optical inter-satellite links. We announced that deal with NASA. That's more kind of inter satellite communications this time not with optical links, but with RF. So yes, and then as far as the pace and what I don't want to say right now, we're not going to throw out any backlog targets right now for Lightspeed. Look, I think it's amazing that we already had [$0.75 billion] of backlog, and we haven't really started in earnest the full build out of the constellation. So...

I mean that's a very detailed just to a certain extent, targeted view of the market. When you came up with your -- in the presentation from several months ago, I suppose that you think that the constellation can address 1% of a $430 billion market. Is that -- when you were contemplating that, was that kind of a thoughtful exercise built up from these, again, this list of different opportunities that you had? Or was it just like, look, if we launched this much capacity up there, we're going to capture 1%? Like can you give us a little bit more insight into that?

We don't roll like that. We have built -- I got to think the most granular business case and demand model. We have divided the world into like, I don't know, like 100,000 little micro quadrants. And in every single one of those quadrants, we look at all the different verticals that we plan to serve and make a judgment about whether in that little micro quadrant -- in that little micro quadrant, we make a judgment is fiber the best transmission medium to meet the requirement? Is it microwave? Is it some other satellite connectivity? So I think that's how we built our model up and soon we'll be engaging with all of you guys to help you understand what we've done. But no, this is not a -- yes, we'll invest $5 billion in Lightspeed. We'll have, I don't know, 10 terabits globally. And yes, we'll build it and...

Maybe you maybe you should have said 1.1% and people might have taken a little bit more...

Whatever -- but no, I mean, I cannot believe that there's anyone who's been more [Indiscernible] and forensic and rigorous in building up a demand model for every vertical -- and again, that's backhaul connectivity, again, every bit micro quadrant around the earth. That's aero, that's maritime, that's government. And then within aero, it's commercial, it's private jets. It's sizing every different jet in maritime. It's cruise. It's maritime transport. It's high-end yachts, it's smaller yachts. I mean that's how we've done it.

So it's just amazing that there is a focus on like small DISH renewals when there's a $4 billion target revenue...

I understand -- we -- I think there -- look, we look at kind of where the stock is trading right now and our market cap and just shake our heads, but shame on us, we need to go out there. And I understand why people care about the DISH renewal, and we care about it too. And I think we got a really good outcome there. But we've got to get out there and share a whole lot more information on Lightspeed. We're presenting at 2 investor conferences this month. And so yes, you'll be hearing a whole lot more from us. And it's why we're, again, so bullish on this opportunity. We need to work with these export credit agencies that we've been working with for some time. I can tell you the support that we've had from the Government of Canada and the Government of Quebec has been phenomenal, and it's -- they've been great partners for us, and they're foursquare behind what we're doing. So now we got to finish this work with the export credit agencies get going and then go out and kind of proselytize, not just with the customer community who we've mostly been focusing our time and energy on, but obviously with the investor community, too.

Okay. Thank you, everyone. We've run out of our allotted time. Operator?

Yes. Thank you.

So Dan, do you want to?

Yes. No. We've run out of our time. I think my answers were on the long winded/wholesome side. But in any event, yes, we appreciate everyone's time this morning. We will be presenting at Goldman Leveraged Finance Conference later this month, JPMorgan Equity Conference in Boston later this month. So we're looking forward to speaking with everyone about what's been happening in the business in our plans. We feel like we're off to a great start for the year. We had a really, I think, a positive Q1 and laid some good foundations for the rest of the year. And so with that, we appreciate everyone's time, and we'll talk to you when we put out our second quarter numbers. So thank you.

Thank you, cheerio.

Thank you. The conference has now ended. Please disconnect your lines at this time, and we thank you for your participation.