Telesat Corporation (TSAT) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. Welcome to the conference call to report the fourth quarter 2023 financial results for Telesat. Our speakers today will be Mr. Dan Goldberg, President and Chief Executive Officer of Telesat; and Andrew Browne, Chief Financial Officer of Telesat. I would now like to turn the [key] over to Mr. Michael Bolitho, Senior Director of Treasury and Risk Management. Please go ahead, Mr. Bolitho.

Thank you, and good morning. This morning, we filed our annual report for the year ending December 31, 2023, on Form 20-F with the SEC and on SEDAR+. Our remarks today may contain forward-looking statements. There are risks to 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 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. I'll say a few words this morning about our performance last year, share some thoughts about our expectations for this year, and then give an update as to progress to date on the Lightspeed program. I'll then hand over to Andrew to speak to the numbers in more detail, and then we'll open the call up to questions. I'm very pleased with our performance and the things we achieved in 2023. We did a really effective job in staying focused in beating our adjusted EBITDA guidance, maintaining our operating discipline and industry-leading operating margins, securing the C-band clearing proceeds and executing what I believe were some value-enhancing debt repurchases. But far and away, the most important thing we did last year was find an innovative and highly accretive path forward for Telesat Lightspeed including landmark agreements with MDA and SpaceX as well as important financing arrangements with our government partners in Canada. The satellite user community fully consistent with our long-standing expectations, is transitioning to LEO networks, and this transition will accelerate over time. For that reason, moving forward with our transformational Telesat Lightspeed program is our highest priority. 2024 marks the first full year where Telesat starts to make that transition to LEO in earnest. And to help all of you track what we're doing, starting this year, we're breaking down our financials between GEO and LEO and showing consolidated numbers as well. As you can see in our top line guidance that we released this morning, we're expecting some significant revenue declines around the CAD 150 million in GEO this year. Split pretty evenly between our video and non-video businesses. We're not giving guidance beyond 2024 today, though I would note, we're not expecting to see this magnitude of annual top line decline in the coming years. On video, the expected decline comes primarily from the full run rate impact of the lower rate on Nimiq 4 from the renewal we secured last October with Bell as well as a renewal we have with EchoStar on Nimiq 5 coming up in early Q4 this year. Over the past few years, we've talked about the headwinds we're facing in our DTH business really driven by cord cutting in the Ryzen over-the-top video platforms and the reductions we're expecting this year are very much a continuation of that trend. The other half of our expected revenue decline is coming from the enterprise side of our business, with the biggest contributor being erosion of maritime services revenues. Other meaningful expected reductions are from an aero customer, a number of customers in Latin America, a universal service program we support in Indonesia. And here in Canada, some point-of-sale retail networks in a number of government services. The biggest driver on the lost revenue in the enterprise segment is the migration of customer requirements from GEO to LEO, namely to StarLink as they're the first in the market with a disruptive LEO network. The reality is that enterprise customers want affordable, low latency broadband connectivity, which we've been talking about for quite some time. If anything, the transition to LEO is happening a little faster than even we expected. And although we don't love seeing StarLink cannibalize some of our GEO customer requirements, it's a strong validation of the market embrace of LEO and the compelling path that we're on with Telesat Lightspeed. We fully anticipated the transition to LEO, and it's precisely why we're building Lightspeed and why we're so bullish on it. Turning to OpEx. We expect to see an increase of roughly CAD 40 million year-over-year, which is all driven by the investments we're making in Lightspeed. For half the increase comes from headcount expansion. I'm happy to say though not surprised we're getting world-class professionals joining and wanting to join Telesat. Individuals who see where the industry is going and want to be part of building out and bringing to market a really advanced and revolutionary lower orbit global satellite broadband network. The project is a huge magnet for absolutely top-notch talent throughout our industry. To give you a sense, we had a little less than 500 people across the company at the end of last year and around 35% of them were working on Lightspeed. By the end of this year, we expect to have roughly 740 employees, a roughly 50% increase with nearly 2/3 of the team working on Lightspeed, dedicated GEO heads are actually coming down over 10% as we shift folks to Lightspeed and more broadly take steps to rightsize GEO OpEx for a declining GEO business. The rest of the OpEx increase is coming from higher Lightspeed revenue-related costs as well as costs associated with professional services, IT, travel, marketing and regulatory activities all tied to the development, implementation and commercialization of Lightspeed. It's full on, and we're making great progress working with MDA and our other suppliers. We've completed the major system requirements review milestone with MDA and are progressing toward preliminary design review in the third quarter of this year. They're ramping up staff just as we are. We're also making great progress with our software partners, developing the tools we need to dynamically manage the traffic on the network and the APIs and other interfaces our customers will use to purchase and manage Lightspeed services for their users' requirements. We're also making really good strides with various antenna suppliers for LEO user terminals for each of the verticals we're focused on as well as with suppliers for our landing stations. In short, we're moving out fast on all the key work streams necessary to bring Lightspeed into service. The customer community is enthusiastic with the approach we're taking and the services we'll be offering, and there's great interest also with potential strategic partners and governments around the world to leverage Lightspeed for their needs. Telcos, mobile network operators, satellite operators, service providers and users in every vertical around the world. For enterprise, for aero, maritime and government services they all recognize the transition to LEO that's underway in our industry, and everyone is actively looking for the best path or paths to ensure that they don't get left behind. Our CapEx guidance for this year has us investing roughly CAD 1 billion into Lightspeed this year. We remain focused on launching our first satellites in June 2026, slightly more than 2 years from now, offering beta services shortly thereafter and providing full global coverage and service by the end of 2027. Let me now give a quick update on Lightspeed funding. Over the past months, we've had extensive engagement with the government of Canada over funding for Lightspeed. We believe we've reached an understanding on detailed funding terms and expect to release a summary of those terms shortly, likely after markets closed today. Suffice to say that we're very pleased we've reached this point. As we've noted in our earnings release, we estimate that our total cost of borrowings is roughly USD 750 million lower than our prior funding plan, and that's on top of the USD 2 billion in CapEx savings. We're very grateful for the strong support we've had from the government of Canada on the Lightspeed program. And I'd note also that the Government of Canada isn't just an animated object, there are a ton of people throughout the government of Canada, who have worked really hard with Telesat and engaged closely with us over the past few years, and I -- just want to note that my colleagues and I appreciate all their hard work and commitment to the program. And I'd note also not a huge surprise given all the benefits that Telesat Lightspeed delivers to Canada, I'd say the world, whether that's bridging the digital divide, whether it's job creation, technology development, job creation, all of that, there are huge benefits that come from the Lightspeed program and the government of Canada and the people that work there recognize that, and we really appreciate that. So in sum, we accomplished a great deal last year and have a very full 2024 as we accelerate our efforts and investment in bringing light speed to market. Our industry is undergoing a significant transition as LEO networks gain ascendancy and market share. To that end, our highest priority is on focused execution of the Lightspeed program, both technically and commercially. We're hugely bullish on our prospects in the market as well as our ability to deliver an extraordinary value proposition for our customers and significant value creation for shareholders. With that, I'll hand over to Andrew and then look forward to addressing any questions you may have.

Thank you, Dan. Good morning, everyone. I would now like to focus on highlights from this morning's press release and filings. Telesat ended the year 2023 with reported revenues of $704 million, adjusted EBITDA of $534 million and generated cash from operations of $169 million, with $1.7 billion of cash on the balance sheet at year-end. As Dan has mentioned, we outperformed our 2023 adjusted EBITDA guidance. In the fourth quarter of 2023, Telesat reported revenues of $166 million, adjusted EBITDA of $123 million and generated cash from operations of $13 million. For the fourth quarter of 2023 and compared to the same period in 2022, revenues decreased by $41 million to $166 million. Operating expenses decreased by $30 million to $49.9 million, and adjusted EBITDA decreased by $15.7 billion to GBP 123.3 million. The adjusted EBITDA margin was 74.3% as compared to 67.2% in 2022. When adjusted for changes in foreign exchange rates, revenues decreased by $41.2 million. Operating expenses decreased by $30.2 million and adjusted EBITDA decreased by $15.9 million. The revenue decrease for the quarter 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 customer. The decrease in operating expenses is primarily due to lower noncash share-based compensation and higher equipment sales in 2022 related to the DARPA program, as I just mentioned. Interest expense decreased by $2 million during the fourth quarter when compared to the same period of 2022. The decrease was due to the repurchase of notes and Term Loan B in 2023. This was partially offset by an increase in interest rates in the U.S. Term Loan B facility. In the fourth quarter, we recorded a gain on foreign exchange of $78 million as compared to a gain of $72 million in the fourth quarter of 2022. The gain for the 3 months ended December 31, '23, was mainly the result of a weaker U.S. dollar to Canadian dollar spot rate as of December 31, compared to the spot rate as of September 30, '23 and the resulting favorable impact on the translation of our U.S.-denominated debt. Our net income for the quarter was $39 million compared to net income of $91 million for the same period in the prior year. Our net income for the year ended December 31 was $583 million compared to a net loss of $82 million for the prior year. The positive variation of $665 million was principally due the C-band clearing proceeds recognized in the second quarter of 2023, combined with the gain on the repurchase of our debt, and the foreign exchange gain and the conversion of a U.S. dollar debt. This was partially offset by the booking of an impairment of $79.8 million in quarter 4. For the year ended 31st of December, the cash inflows from operating activities were $169 million, and the cash flows generated from investing activities were $212 million, the cash flows generated from the investing activities was due to the proceeds received from the Phase II C-band clearing, as mentioned by that, partially offset by capital expenditures. In terms of CapEx incurred, it was primarily related to a lower constellation Telesat Lightspeed and the newly acquired Anik F4 satellite. Turning to guidance. As you will also have noted in our earnings release this morning, we provided preliminary 2024 guidance. This guidance assumes the Canadian dollar to U.S. dollar exchange rate of $1.35. As Dan also mentioned, we will look forward to reporting on a segmented basis, where we will break out our Lightspeed and GEO business as we go forward. And this is really to provide transparency and understanding that everybody will be able to appreciate as both our businesses develop. Turning to '24, specifically, Telesat expects its full year revenues to be between $545 million of $565 million. And in terms of operating expenses, excluding share-based comp, we would like to point out that we have a range of $80 million to $90 million attributed to Telesat Lightspeed. And also, as mentioned, this highlights represents an increase of $40 million year-on-year. In terms of adjusted EBITDA, Telesat expects to be between $340 million to $360 million. Turning to CapEx in respect to capital expenditures for 2024 used in investing activities. We anticipate this to be in a range of $1 billion to $1.4 billion, which is practically all related to Telesat Lightspeed. Dan has also highlighted the drivers to our 2024 financial outlook in terms of revenue declines we're expecting at the GEO business, and the increase in operating expenses that are fundamentally related to Lightspeed, as I had mentioned. The drivers of that OpEx is indeed a headcount as we discussed, marketing, IT systems, professional fees and consulting. Turning to cash. To meet our expected cash requirements for the next 12 months, including interest payments and capital expenditures, we have approximately $1.7 billion of cash and short-term investments at the end of December as well as approximately USD 200 million of borrowings available under our revolving credit facility. Approximately $1.25 billion in cash was held in our unrestricted subsidiaries. In addition, we continue to generate significant amount of cash from our ongoing operating activities. At the end of the fourth quarter, the total leverage ratio, as calculated under the terms of the amended senior secured credit facilities was 5.32x. Telesat has complied with all covenants in our credit agreement and indentures. Further, including the repayment we made in 2020 of approximately $341 million of the outstanding term loan B combined with our ongoing repurchase program, our overall debt has been reduced by approximately 28%. Just a recap, we've repurchased to date a total amount of USD 587 million at an aggregate cost of $332.7 million. In addition, this also resulted in interest savings per year of around EUR 40 million. A reconciliation between our financial statements and financial covenant calculations is provided in the report we filed this morning. Our 20-F provides the unaudited interim condensed consolidated financial information in the MD&A the non-guarantor subsidiaries shown are essentially the unrestricted subsidiaries. It's minor differences. So I think that concludes our prepared remarks for the call. I'm very happy now to turn back to the operator and yes, to address any questions you may have. Thank you very much.

[Operator Instructions] The first question is from Chris Quilty from Quilty Space.

Congratulations on getting that financing stub done. It's been a long trip over the years. And somebody I can't decipher. I mean, can you remind us what was the last publicly stated position you had in terms of debt rates. I think it was around $2 billion, correct?

Yes. Chris, yes, that's about right. That would be a U.S. number. I think what we've said is -- well, Andrew, go ahead.

Yes, I'll go ahead. In fact, on our website, we have the investor presentations, we did a kind of a small roadshow in November and Toronto and New York and -- but meeting out from Page 19 just for anyone [indiscernible]. Overall, in terms of our sources and uses, we had Telesat equity of $1.6 billion. Government funding, $2.1 billion, which is your question Chris, tender financing of $300 million. And on -- just to round off in terms of our spending. Overall, we had $2.7 billion for our satellites operational expenditures of about $800 million. And we also had contingency included of roughly 14% to $400 million are contained within the overall program itself. I'll just give you a quick refresher on that.

That's great. So kind of jumped over it, but congratulations on the -- I think, the vision you put forward here with a focus on the enterprise market, and that brings up a question Starlink has obviously been hurting the maritime market and other adjacent markets. But I haven't really -- have you seen them at all target the traditional enterprise market? And can you help us understand the differentiation of what you're trying to do versus Starlink system?

Yes. Well, Chris, thanks. So let's see, yes, they're definitely having an impact in maritime. They're working hard to make inroads in aero, but it looks so far like they've had greater traction in Maritime than aero at this point. But in truth we're kind of -- we're seeing them everywhere. We see them. When you say enterprise, maybe less kind of corporate enterprise, but we are seeing them for backhaul requirements on certain networks. So that's where we're seeing them. And we said in our remarks, customers want affordable, high throughput, low latency, resilient connectivity and SpaceX by now has launched a lot of satellites, and it's a good product. But our product is differentiated for the verticals that we're focused on, which are those enterprise verticals. So we talked about telcos, mobile network operators, corporates, governments, aero, maritime, and I'd say it's a few things. One of the key things that we do, unlike a service that's kind of principally a consumer-grade focused service, we've got the ability with our customers to do a bunch of things, give them SLAs, make commitments around CIR, give our customers the ability to have their own dedicated bandwidth pools, which then they can manage, they can oversubscribe it. They can offer different service tiers. They can move their bits around across their network, which for some of them could be the entire earth. So it gives the massive flexibility, massive control over their bits, over their network. So I'd say that's a big part of the differentiation from the customer standpoint, I think from -- I don't know, the investor standpoint, what we're doing, I think, is also very capital efficient. We're able to cover the world with terabits and terabits of this very high-performing capacity with hundreds of satellites, not thousands of satellites and satellites that last north of 10 years. So gives us a long opportunity to earn the kind of returns that we need to on our invested capital. So in any event -- and look, again, I think SpaceX is moving fast and being disruptive. We don't get everything right around here to say the least. But we definitely saw the transition from GEO to LEO coming and what a powerful value proposition that is for our enterprise customers. So we've been all over that. But I'd say as good as SpaceX is and as fast as they're moving, like no one's going to own this entire market. The market is huge. It's growing fast. I'd say particularly for enterprise customers they never want to put all of their eggs in any one basket. And so in any event, we're excited to get moving and get out there as fast as we can. And as you probably picked up in my remarks this morning, we're just super focused on making big investments to get there as fast as we can.

Great. So NDA clearly has a pretty tall task ahead of them here over the next couple of years. But after listening to the Eutelsat one web call, I find myself ask me the more important question, which is -- where are you in terms of your gateway filing?

In terms of -- so are you kind of U.S. focused?

Well, no. I mean, for the global deployment, I mean, when one's had their constellation up and it's still not fully operational because they couldn't get their gateways installed due to regulation.

Yes, yes, yes. No, I've tracked all that too. So here's what I'd say a few things about gateways. One, for better or worse, we've been working on this for a long time. So we've identified. We're starting off with at a minimum, 25 landing stations around the world will all be connected up and the like. And then we'll scale our landing station infrastructure from there. And then for any given customer in any given country, we can kind of have sort of more bespoke landing stations as well with some of the flexibility that an advanced system like ours has. The other thing I'd note about Lightspeed, maybe unlike OneWeb is we've got the optical inter-satellite links on our constellation. And so what that means is you probably need -- don't mind probably, you need fewer gateways in order to still have full global coverage and connectivity and the opportunity to manage traffic around and to make sure that all of your satellites 24/7 are kind of on network and able to contribute. So -- yes, we've identified the managed stations where we need to go. I think we'll be in good shape there.

Would you be interested in buying a Starlink optical cross like?

You know what -- it's an interesting question, and I'll share with you that we haven't had any conversations with Starlink about that. There are probably pros and cons of doing something like that. Pros being SpaceX is building lots of them, and it would allow us to I mean, theoretically interconnect with their constellation, although they're flying lower than we are. So where we'd interconnect with those guys probably do that in RF rather than optical. I'm not sure that the Starlink optical link is SDA compliant. That would have to be something that we would take into consideration. There are a number of good OISL, optical inter-satellite link providers out there with heritage and the like. So anyway, stay tuned on that. We've announced a good many of our suppliers, including MDA and SpaceX. We announced [Elyria] working with us on some of the software that's going to orchestrate the constellation. And as we work with MDA and pick that kind of next level supply chain folks will learn more about the maybe different component parts of the network.

Great. Final question. Nimiq 5, was that a 1-year or a multiyear contract?

Nimiq 5...

Ending up for renewal?

Yes, yes, it's coming up for renewals. So it hasn't been renewed yet. We've started having conversations with EchoStar about it, but it was a 15-year agreement that comes up in October of this year. So stay tuned on that.

And the next question is from Mr. Arun Seshadri from BNP Paribas.

First from me, I noticed this word like in your funding conditionality, the program is fully funded to global service delivery subject to certain conditions. If you kind of outline what those conditions are, would be helpful. And then separately, on the funding plan itself, clearly strong support from the government of Canada around the $750 million reduction and being cheaper today. Can you sort of tell us how you calculate that $750 million, so we just understand the puts and takes there.

Andrew, do you want to start with that, and then I'll maybe talk about what some of the conditionality.

Yes, yes, absolutely. As you know, that we were initially dealing with sort of [indiscernible] and dealing with the export credit agencies. And I have to say the export credit agencies are not necessarily cheap, right? And they have a lot of fees, a lot of upfront fees and premiums. And so when you calculate the arrangements that we have come with the Canadian government and you do the math, basically, that it just falls out of the equation. It's $750 million cheaper.

And over to me on conditionality. I mean, so I've got to be definitely careful here, my General Counsel is sitting across the table for me. So what would I say on the conditionality that doesn't make my GCI rate. I guess I'd say the conditionality it's kind of typical stuff with any funding agreement, right? So we have to enter into definitive agreements. We've got multiple funding sources. Each funding source needs to make sure that the other one is there. And it's got -- and that in the aggregate, we have sufficient cash to fully fund the program. So it's -- it's that kind of stuff. As you can see, I'm a big believer in action speaking louder than words, we're confident we've got the financing in place that we need to move our project forward, which is why we're hiring all these people and spending all this money and entering into all these contracts. But that's when we referenced it, we've kept on a tight lease share by our legal department. And so it was mostly just to be just careful to say, yes, we still need to get those definitive agreements in place and the like.

And I would think I would just add further, that we've got contingency as we mentioned, the $400 million also within program.

Got it. That's helpful. On the original -- the $750 million plan, the reduction. So obviously, I understand, Andrew, that the export agencies are not necessarily that cheap. But just in terms of the assumptions in that $750 million, is that just kind of over the total -- the debt cost over a certain period of time -- that it's lower by? Like can you just share those assumptions in advance of the disclosure that's going to come out tonight?

I'll take that one, Andrew. I mean fundamentally, yes, like we've stared at what were our total cost of borrowings under the original plan with another vendor. And what it is now. And we took everything into account. We took into account what the total CapEx and other costs of the original program were versus the new one. We took into account what our expected cost of borrowings would be over the life of the funding commitments, right? So the increase rate any other, and this is relevant for the export credit agencies premium and stuff like that, that we have to pay. And then we compare that to what our expectations are will be our cost of borrowings for what I'll call the new and improved approach. And yes, that's not we did the $750 million savings over the course of the program. And it's my expectation that in the near term we'll provide some additional details around our funding terms and it will allow folks to kind of make their own calculations about what our cost of borrowings are.

A big risk process that we've gone through.

Got it. Understood. And then separately, can you talk about broadcast revenue. It seems like even adjusting for the run rate bell and maybe a little bit from -- for the EchoStar broadcast revenue is still a little bit lower than we would have expected. If you could give any additional color there? And then also, how much in GEO OpEx reductions are embedded in your EBITDA guidance?

I'll let Andrew take the second one. I'll start with the first one. So yes, I mean -- and I said it in my opening remarks, the expected decline in video overwhelmingly driven by one thing that's already happened, which was the renewal that we secured with Bell for Nimiq 4. Yes, sorry, just keeping my Nimiq straight. With Nimiq 4 last October. So we had nearly 3 months impact of that lower rate last year, but we got the full run rate impact of it for this year. And we said at the time, it was a significant -- significantly lower rate that we agreed with Bell to close that Nimiq 4 renewal. So that's the biggest contributor to the expected decline in broadcast this year. And then there's Echo. So we've just started conversations with Echo. Our guidance accommodates a range of different outcomes with where we end up with them from -- they don't renew anything to they renew just part of it or they renew all of it. But no matter what, our expectation is, given what's going on in the market, given the other recent renewals we got. We are expecting under any scenario, it's going to be materially less revenue from DISH on Nimiq 5 than what we've been recognizing over the past 15 years. So anyway -- and then the other broadcast customers we have that we sort of take into account when we put our projections together. But fundamentally, it's the two that I've highlighted.

Got it. Helpful. Last thing for me is how much do you plan on spending I guess, on Lightspeed before getting definitive docs from, I guess, the Canadian government on the funding. And do you -- and when you think about the OpEx side, you kind of mentioned on EBITDA for 2025, the step down would be less than '24. Any way you could quantify the OpEx within that within '25 that you can expect today.

I'll address some components of your questions indeed. I think your first question was relating to the step down in our GEO OpEx. And as you'd probably appreciate, our fixed -- our fixed costs are approximately 62%, 65%. And nonetheless, we've gone through in very detail, looking at our plans or scale of plans as Dan has gone through the investments in Lightspeed in the future. But -- so we're broader GEO cost down now approximately, I'd say, 4% or so, notwithstanding the fact that our costs are pretty well fixed. And then when you look at Lightspeed, that indeed about 65% to 70% of that increases in [indiscernible] fixed and primarily it's coming from compensation as we scale out and we hire people coming in. And then just coming back to our sort of guidance and adjusted EBITDA, $340 million to $360 million, but just to compare, if you take a look at what we said $80 million, $90 million for Lightspeed, if you actually added that back to what the adjusted EBITDA guidance is, we come to a margin of like 79% to 80%. So our costs are very, very focused. As for 2025, we probably may be, as Dan had said, I think our expectations in terms of top line, we'll not see the reductions that we're seeing now. And in OpEx, we probably wouldn't give any guidance right now, specifically for 2025. So I hope that's kind of addressed the variation of your questions.

And the next question comes from Mr. Walter Piecyk from LightShed.

This is Joe for Walt. You provide a CapEx range. I just want to kind of get a sense of what's the difference between hitting the high end versus coming in on that $1 billion low end of the range? Is there something -- like what's the limiting factor right now?

Well, I mean, our suppliers need to hit milestones in order to get money from us. So we've got a nominal schedule that they need to achieve. But if they don't hit their milestone, we aren't going to pay them. So we've built the range principally around that.

And then getting back to -- I think it was Chris' question about enterprise. If you could -- if you drill down a little further into that, just so I understand, were these customer contracts that were up for renewal and they required having LEO as part of the solution going forward. So there's going to be a nonrenewal. So how does that work with the kind of guide comes down that much.

Yes. Yes, that's exactly it, Joe. I mean we had contracts coming up for renewal. I said in my opening remarks that a big chunk of it, the biggest contributor was around Maritime, it was cruise. We've got customers that have been serving the cruise market, and they lost business to [indiscernible]. And so they didn't renew their contracts with us. That's how it works. That's what it was. That's exactly what it was. And that account for again -- that was the biggest contributor.

Okay. And then are those -- how long are those contracts generally? Like is there a chance for, let's say, the next renewal whenever that is in 2027 or 2026 or whatever, when you have something that's potentially on the horizon to be commercial with Lightspeed that you could win that business back.

Yes. Look, it's pretty it's pretty fluid. I mean the big enterprise customers are sophisticated about what's happening out there in the market. They have quite a bit of flexibility to add networks, drop networks. But we'll make some I'd say maybe kind of medium-term commitments, maybe 2 or 3 years or something like that. And I don't have full visibility exactly what they've committed to with Starlink. I know that Starlink has had a practice of oftentimes not signing long-term agreements with customers. It's almost kind of month-to-month in some ways, whether they did something differently with the cruise customers, I don't know. But suffice to say that the cruise lines and the service providers that serve them, are well aware of what we're working on with Lightspeed. They like what we can offer and the flexibility that we offer and our ability to concentrate capacity at ports and on key shipping lines. They like to have a diversity of suppliers, as I mentioned. So yes, I mean we're I hate losing any renewal. But yes, we're sure not kind of blocked out of the market on a go-forward basis.

And then my last question. On the funding, you mentioned the Canadian government. Is the provincial government -- the Quebec provincial government still involved in the funding process?

Yes. Our expectation is that Quebec will be a meaningful funding participant in our program. Quebec gets great things from this Lightspeed initiative. I'd say now more than ever that we're working with MDA when I think about the amount of investment which is going to be made in Quebec under the original plan when Quebec had agreed to certain funding commitments. Now that MDA is our prime contractor -- yes, the amount of investment in Quebec has gone up, I'd say, dramatically. So yes, our expectation is Quebec will be part -- one of our funding sources.