Telesat Corporation — FY2021 Form 20-F
Reporting period: Fiscal year ended December 31, 2021. This is an annual report, not a standalone fourth-quarter filing; the text does not provide a clear set of Q4-only results. The combined filing presents Telesat Corporation and Telesat Partnership LP as an integrated business. Financial statements use IFRS and Canadian dollars unless noted otherwise. Telesat’s public shares began trading on Nasdaq and the TSX in November 2021 after the transaction with Loral and other shareholders closed.
Key financial results
| Metric | FY2021 | FY2020 | Change / context |
|---|---|---|---|
| Revenue | C$758.2 million | C$820.5 million | Down 7.6% |
| Operating income | C$411.9 million | C$405.3 million | Up 1.6%; includes C-band clearing gain |
| Net income, Telesat Corporation consolidated | C$157.8 million | C$245.6 million | Down C$87.8 million |
| Net income attributable to Telesat Corporation/Telesat Canada shareholders | C$103.5 million | C$245.6 million | FY2021 also included C$54.2 million attributable to non-controlling interests |
| Net income, Telesat Partnership LP | C$28.0 million | C$245.6 million | Includes C$131.0 million non-cash loss on fair-value changes in partnership units liability |
| Adjusted EBITDA | C$603.3 million | C$653.4 million | Down C$50.1 million; non-IFRS measure |
| Adjusted EBITDA margin | 79.6% | 79.6% | Stable despite lower revenue |
| Operating profit margin | 54.3% | Not stated here | Management-reported |
| Cash from operating activities | C$296.4 million | C$372.4 million | Down C$76.0 million |
| Cash used in investing activities | C$272.9 million | C$93.0 million | Higher Lightspeed spending; net of C-band proceeds |
| Cash from financing activities | C$605.2 million | Cash used C$450.2 million | FY2021 mainly reflects issuance of 2026 secured notes |
Broadcast revenue was C$390.8 million, down 5.0%; Enterprise revenue was C$354.1 million, down 9.1%; Consulting and other revenue was C$13.3 million, down 31.5%. Management cited foreign-exchange translation, reduced or non-renewed customer services, COVID-related mobility contract restructurings, and the completion of non-recurring consulting work as factors in the declines.
Debt, liquidity and capital commitments
- At year-end, total debt was C$3.795 billion before deferred financing costs and related adjustments; balance-sheet indebtedness was C$3.793 billion. Debt is predominantly U.S.-dollar denominated.
- Cash and cash equivalents were C$1.450 billion, including C$81.0 million of short-term investments. Management reported approximately US$200 million of unused revolving capacity, excluding approximately C$0.2 million of letters of credit.
- Debt comprises a US$1.553 billion Term Loan B balance, US$550 million of 6.5% senior notes due 2027, US$400 million of 4.875% senior secured notes due 2027, and US$500 million of 5.625% senior secured notes due 2026. The US$200 million revolving facility matures in 2024 and was essentially undrawn.
- Reported covenant ratios were 5.70:1.00 for total debt and 4.63:1.00 for secured debt to covenant EBITDA. The filing states Telesat was in compliance with its debt covenants; the revolving facility’s 5.75:1.00 maintenance test applies when drawings exceed 35% of the facility.
- Management said available cash, operating cash flow and revolving capacity were expected to cover normal-course requirements for at least the next 12 months, including debt service and committed Lightspeed activity, but not the capital required to commence constellation construction.
- Lightspeed capital commitments totaled C$135.2 million at year-end. FY2021 cash purchases for the program were C$279.9 million. The company reported C$1.450 billion of cash, but noted that C$979.5 million was held in unrestricted subsidiaries.
Changes, outlook and material items
- Revenue and earnings: Revenue fell 7.6%. Operating income rose modestly, but net income declined, principally due to lower revenue and higher income tax expense, partly offset by C-band proceeds. Adjusted EBITDA declined, while its margin remained 79.6%.
- Unusual items: Telesat recognized C$108.5 million of U.S. C-band accelerated clearing proceeds in 2021. C$42.9 million was received during 2021 and the remaining Phase I payment arrived in early 2022. The filing describes a further expected US$259.6 million Phase II payment, subject to meeting applicable requirements. Partnership results also include the C$131.0 million non-cash fair-value loss on exchangeable units.
- Lightspeed plans: Telesat’s proposed 298-satellite constellation was initially estimated to require approximately US$5 billion over four years after construction begins. Supplier warnings about component shortages had delayed contract finalization, export-credit-agency financing and construction, and were expected to increase program costs. Telesat said it might need additional capital or deploy fewer satellites.
- Funding remains conditional: The announced Government of Canada support totals C$1.44 billion (C$790 million loan and C$650 million preferred equity), and Quebec’s proposed C$400 million investment was described as subject to definitive agreements and other conditions. The filing said arrangements for approximately C$4 billion of program funding were in place but remained subject to conditions. Government warrants could dilute shareholders.
- Operating outlook: Management plans to increase utilization of its GEO fleet, maintain capital discipline and advance Lightspeed. No firm revenue, earnings or launch-date guidance is provided. Telesat stated that Lightspeed’s expected entry into service was delayed and that it did not expect to meet the current FCC first-round 50% deployment milestone by November 2023; an extension is not assured.
- Business risks: The top five customers generated approximately 64% of 2021 revenue and represented approximately 84% of backlog. Backlog was C$2.1 billion at year-end, excluding Lightspeed. Satellite anomalies, customer concentration, competition and capacity oversupply, spectrum access and coordination, launches, financing, supply chains, regulation, foreign exchange, interest rates and COVID-related customer distress remain significant risks.
- Contingencies: Disputed Brazilian tax assessments totaled approximately C$73 million, and Canadian transfer-pricing assessments totaled C$13 million; management reported no reserves, believing favorable outcomes were more likely than not. A further C$6.9 million Canadian R&D tax reassessment for 2016 was challenged, and a C$4.7 million reassessment for 2017 was expected to be challenged. The 2021 U.S.-listed-company transition did not include management’s internal-control assessment or auditor attestation.
- Dividends: Telesat said it did not intend to pay cash dividends in the foreseeable future, prioritizing Lightspeed, other capital investment and debt reduction.
Most important facts for investors to verify
- Whether definitive Lightspeed financing and supplier agreements have been completed, and the updated total program cost, funding gap, deployment scale and service-start timeline.
- Whether the expected Phase II U.S. C-band payment is received and whether Telesat meets its spectrum-clearing obligations.
- How much cash is accessible to the entities responsible for debt service and Lightspeed, given the significant cash held in unrestricted subsidiaries.
- Debt-covenant headroom, refinancing needs, floating-rate exposure and the effect of foreign-exchange movements on U.S.-dollar debt.
- Progress in renewing major customer contracts and any further effects from DTH subscriber declines, mobility-sector customer stress or customer concentration.
- Developments in satellite health, insurance coverage, Lightspeed spectrum coordination and FCC deployment-milestone relief.
- Outcomes of the tax disputes and reassessments, and any material indemnification obligations to PSP Investments.