Good morning, ladies and gentlemen. Welcome to the conference call to report the Q3 2022 financial results for Telesat. Our speakers today will be Dan Goldberg, President and Chief Executive Officer of Telesat and Andrew Brown, Chief Financial Officer of Telesat. I would now like to turn the meeting over to Mr. Michael Bolitho, Director of Treasury and Risk Management.
Please go ahead, Mr. Bolaito.
Thank you, and good morning. This We filed our quarterly report on Form 6 ks 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 known risks and uncertainties. For a discussion of known risks, see 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.
Okay. Thanks, Michael. Good morning, everyone. This morning, I'll share some thoughts on our results and give an update on the business. I'll then hand over to Andrew, who Drew will speak to the numbers in detail and then we'll open the call up to questions.
Q3 came in very much in line with our expectations and we continue demand and pricing perspective, and I was pleased to see our capacity utilization tick up slightly in the quarter. We disclosed last quarter that we have an anomaly on our Anika F2 satellite that reduces its station kept lifetime from 2025 to more like the end of this year. We noted that Anik F2 represents approximately 8 versus what we previously expected it to be for next year 2023. We noted also that we were working closely with our customers to evaluate and implement measures to offer them continuity of service and mitigate the adverse revenue impact on the company. I'm pleased to say that our team working hand in glove with our customers has developed a range of plans to continue to support the services now provided on Anika F2.
These plans include making changes to antennas communicating with the satellite in order to extend service, relying on other Telesat and 3rd party satellites and even purchasing an existing in orbit C band satellite from another satellite operator that's expected to be repositioned and co located with Anik F2 in the coming months. Assuming all of these things occur as planned, we now anticipate that we'll retain over 90% of the revenue we originally expected to recognize from Anik F2 next year. Although there are some additional operating expenditures associated with leasing 3rd party capacity for some of the customer requirements as well as the capital expenditures associated with purchasing the 3rd party satellite and making other investments in ground infrastructure. We'll provide a further update when we release our Q4 numbers. And I do want to applaud the combined efforts thus far of the Telesat team, our customers and other partners as everyone works hard to provide continuity of the important services supported on ANACAF-two.
Turning to Telesat Lightspeed. On our last call, I mentioned that we were in discussions with certain additional financing sources to cover the increased costs of the program and that we expected to have a better sense of where we stood on the financing around the end of this year. We noted that the contemplated financing would be at the Lightspeed unrestricted subsidiary level and would be subordinate to the ECA lenders and the Government of Canada and Quebec Investments. Since our last call, I'm pleased to say that we've made tangible progress in connection with securing this financing And in addition, have had regular and sustained engagement with the ECA lenders as we seek to finalize the financing. We remain extremely bullish about the opportunity Telesat Lightspeed gives us to grow our business.
We have a highly disruptive and robust constellation design, over $750,000,000 in contractual backlog and over $4,000,000,000 in financing arrangements and the strong support of government partners at the federal and provincial levels here in Canada. Lightspeed represents a compelling investment opportunity and although there is no assurance Lastly, I noted on our last earnings call that we repurchased in the first half of this year US160 million face value of our 6.5% unsecured notes and further that our Board had authorized us to repurchase up to an additional US100 $1,000,000 face value Intelliset debt. As we've said previously, we think our debt is trading below fair value, which is why we've repurchased it in the past and why we continue to believe that doing so makes sense for the company. And although we have the authority to repurchase up to an additional US100 $1,000,000 of debt. Given everything else that's going on at the company right now, including the discussions we're having additional Lightspeed financing.
We decided to hold off on further repurchases last quarter. We'll continue to closely monitor how the debt is trading and as required provide updates on any repurchases we might make. With that, I'll hand over to Andrew and then look forward to addressing Any questions you have.
Thank you, Dan. Good morning, everyone. I would now like to focus on highlights from this morning's press release and filings. In the Q3 of 2022, Telesat reported revenues of $180,000,000 adjusted EBITDA of $137,000,000 and generated cash from operations of $92,000,000 with $1,700,000,000 of cash on the balance sheet at quarter end. For the Q3 of 2022 compared to the same period in 2021, revenues decreased by $12,000,000 to 180,000,000 Operating expenses decreased by $4,000,000 to $56,000,000 and adjusted EBITDA decreased by $19,000,000 to $137,000,000 The adjusted EBITDA margin was 76% compared to 81.1 percent to 2021.
Between 2021 2022, changes in the U. S. Dollar exchange rate had a positive impact of $4,000,000 on revenues, a negative impact of $1,000,000 on operating expenses and a positive impact of $3,000,000 on adjusted EBITDA. But adjusted for the changes in foreign exchange rates, revenues decreased by $16,000,000 for 2022 compared to 2021. Operating expenses decreased by $5,000,000 and adjusted EBITDA decreased by $22,000,000 The revenue decrease was primarily due to on renewal of a long term agreement with a North American DTH customer and revenues from short term services provided to another satellite operator in 2021, which did not recur in 2022.
This was partially offset by higher revenues from mobility customers and the NASA Communications Services project program. The decrease in operating expenses was primarily due to lower non cash share based compensation, partially offset by higher wages. Interest expense increased by $6,000,000 in the 3rd quarter compared to the same period in 2021. The increase was due to an increase in interest rates on the U. S.
Term Loan B Facility, combined with the foreign exchange impact on the conversion of U. S. Dollar denominated debt. This was partially offset by the impact of the repurchase of senior unsecured notes in 2022. Just to note, and as discussed These notes have been retired and also represent an annual interest savings of approximately $10,400,000 In 2022, we recorded a loss from foreign exchange of $249,000,000 during the Q3 compared to a loss of $68,000,000 in the Q3 of 2021.
The loss for the 3 months ended September 30 was mainly the result of the stronger U. S. Dollar, the Canadian dollar compared to the spot rate as of June 30, 'twenty 2, with the resulting unfavorable impact on the translation of our U. S. Dollar denominated debt.
Our net loss for the Q3 2022 was $229,000,000 compared to a net loss of $52,000,000 in the prior year. The variation of $176,000,000 was principally due higher noncash foreign exchange loss compared to the same period last year. For the 1st 9 months of 2022, the cash inflows from operating activities were $1,000,000 and the cash flows generated from investing activities were $18,000,000 Included was $65,000,000 by way of receipt of the remaining Phase 1 U. S. C band clearing proceeds.
In terms of overall C band proceeds, we have received approximately US85 million and expect further proceeds of approximately $260,000,000 In terms of the capital expenditures made to date, virtually all are related to a lower Orbit constellation. Tali said, like to be. As you will also have noted in our earnings release this morning, and as Dan has mentioned, we have reiterated our increased guidance, which provided with the release of our Q2 results on August 5, 2022. Telicell expects its full year revenues to be between $740,000,000 750,000,000 Also, as we stated before, included in our revenues is our expectation that we will recognize a significant hardware sale and the provision of related services to DARPA later this year as part of the US18.3 million dollars contract. In terms of adjusted EBITDA, Telesat expects be between $545,000,000 to $560,000,000 Also as a reminder, we don't expect any adjusted EBITDA from this hardware sale as the expected expense associated with this contract is more or less equivalent and not our guidance still reflects the Canadian dollar to U.
S. Dollar exchange rate of 1.3 In respect to expected capital expenditures, we now expect our 2022 cash flows used in investing activities to in the range of US50 $1,000,000 to US75 $1,000,000 including capital expenditures to further advance our Lightspeed program Once we have got greater visibility around the construction and financing of our program, we will provide a further update on our anticipated capital expenditures for the year. To meet our expected cash requirements for the next 12 months, including interest payments and capital expenditures, we have approximately $1,700,000,000 of cash and short term investments at the end of September as well as approximately US200 $1,000,000 of borrowings available under revolving credit facility. Approximately US1.1 billion dollars in cash 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 Q3, leverage was calculated under the terms of the amended senior secured credit facilities with 6.17x to 1. Calystad has complied with all the covenants in our credit agreement and indenture. A reconciliation between our financial statements and financial covenant calculations is provided in the report we filed this morning. The 6 ks provides the unaudited interim condensed consolidating financial information in the MDA. The non guarantor subsidiaries shown are essentially the unrestricted subsidiaries of minor differences.
So that concludes our prepared remarks for this call, and I'll be
Thank you. We'll now take questions from the telephone lines. First question is from Walter Piecyk from LightShed. Please go ahead.
Yes. Hi. This is Joe on for Walt. Couple of questions, please. Is there any more color you can provide about the process of the ECAs and the Maybe are there specific parts or components that are available now that weren't before that maybe gives Thales a little better visibility.
And then second, the OpEx for LEO, appears that it was effectively flat quarter over quarter. And when should we expect that to ramp? And are any expenses for LEO being capitalized currently? And then finally, Amazon showing some progress. OneWeb has been launching.
Then there's some smaller startups that seem to be having some progress. Do you feel like Telesat is getting behind a little bit given the delays? Thank you.
All right. It's Dan. Joe, I'll try to so there's sort of a 3 part question. Let's see. So the first part was about do we have any more insight on kind of where Talos is from a Supply perspective and whatnot.
No, there nothing's changed. We've said, I think, on our last couple of calls that We did a whole lot of work with Talos and they did a whole lot of work with their supply chain over the past year to sort of update the program, update schedule, update pricing and all of The work that we did in connection with that, with Thales and that they did with their supply chain, it all still holds. We're not hearing Anything different from Talos about, yes, their expectations around supply chain schedule, Anything else? So that's that. And on the lenders, we said, I think, on our last call that we were engaged with them, that we're hoping Have a much better sense of where things stood by around the end of this year.
And that remains to be the case as well. I'd say since the last earnings call we hosted, We've had a lot of engagement with the financing sources that we've been talking to with the lenders, I should say, including with the lenders, lots of intense sessions trying to move the ball forward. So That's all taking place right now and that continues. And then on the last questions around Lightspeed. I think it was OpEx and whether things are being capitalized.
Oh, actually, you also had a question about kind of the competitive environment. So I'll answer the competitive environment one and then maybe Andrew you can talk to The LEO expense one. No, we're not seeing anything out there in terms of the competitive environment That makes us think differently about our ability to be successful with Lightspeed. Certainly, OneWeb is getting their program back on track and that they had to pause their launch campaign because of sort of Ukraine, Russian activity. So we're seeing that, but there's Nothing that they're doing or you had mentioned Amazon that we're seeing Amazon Doing that changes the way we think about our ability to be successful with Lightspeed.
I mean it is we continue to engage with the customer community very closely on Lightspeed. We continue to see a huge amount of enthusiasm from the customers about the value proposition that we'll be bringing with Lightspeed. And yes, there's nothing that we're seeing that changes our thinking about that. So Andrew, do you want to talk about that?
Yes. On the question on the OpEx. And that obviously, as you see with our high margins of almost 78%, We control the OpEx very, very tightly. And so as we're advancing our discussions with the ECA and other sort of investor support, We're very focused on hiring and OpEx and expanding. So we manage that very, very closely.
Obviously, when the program gets going, then of course, we would expect See an increase coming from that. And just in terms of the capitalization, that is typically what you would do with a capital program that you would indeed capitalized those costs. So that's where we are.
Okay. So we shouldn't like will some of the OpEx lead ahead of the actual finalized program before you actually implementing it. Will it ramp up a little more? That's what I'm trying to
Yes. We would expect it to ramp up more. I mean, we have going back until we got the delays at Thales, Obviously, with our engineering and support teams in terms of design and digging with talents, etcetera, that we indeed I'll put in the appropriate people we need to get going. But once we have the supply chain delays, then obviously, with That ramp, we actually sort of held back on as you would expect us to do. But once indeed we get going, then we will obviously where other areas that we need You don't provide support to the program.
Okay. Got it. Thanks, guys.
Thank you. The next question is from Dan DeBono from Invescor Credit Management. Please go ahead.
Hey, gentlemen. Good morning and thanks for taking the question. I'm looking at the segment information, Item 5, which is on Page 10 supplement. And I would love to get some color on the enterprise side for the quarter. I'm looking at growth rates and thinking of where we're running.
It's a pretty diverse segment. If you could talk a little bit about some of the wins and losses and how you feel about that for the next couple of quarters? That would be helpful. Thank you.
I'm looking at my colleague, John Flaherty. I'll make a start at this. I mentioned in my opening remarks that, yes, the operating environment has been, I'd say kind of on the one hand consistent with our expectations for this year, too favorable. I've been pleased that we've been able to grow the utilization of the fleet over the year. I think in particular, so far this year, we've seen strong interest, particularly from the mobility segment that would be aeronautical and maritime.
A lot of that was predictable. I mean, those were the sectors that were Kind of held back during COVID and as the restrictions And more and more people are traveling again. It was predictable that those sectors would come back, but they came back probably even stronger than we expected. I think if we have a problem kind of taking advantage of the opportunities there. It's mostly because of capacity limitations in the areas where The most demand exists.
That would be sort of key maritime routes, places like the Med, the Caribbean for the cruise market, Some of the key flight paths for the Aero segment. So Yes, I don't know. And then just thinking regionally, where we've seen Harder conditions like Africa, like Latin America, I'd say those markets continue to be Challenging, but no more challenging than they were frankly over the past couple of years. And I think particularly in Latin America, we're doing a nice job getting renewals, winning business, maintaining utilization and the like. So in any event, that's some off the top observations.
And John, I don't know if you'd add anything. No, I think you pretty much hit all the major points, Dan.
Okay. Thanks, gentlemen.
Thank you. The next question is from Brandon Karsh from Kennedy Lewis. Please go ahead.
Hi, thanks for taking the questions. I was wondering, just following up on the last question with the mobility gain. Are you seeing any significant new business wins there? Is it more just recovery or any kind of other organic expansions of existing customers
Certainly, in the first half of the year, we had capacity come back into inventory When DISH just did the partial renewal with us and we're really pleased that Almost overnight, we took that capacity and put it to work in the mobility market. There was that. And we had another big win earlier in the year with another customer that was more on the aero side. So and then as I mentioned beyond that, it's more like, I don't know, singles and doubles just given the capacity constraints that we have. Yes, that's what it feels like.
Okay, that's helpful. And with all the headlines around the potential Shaw and Rogers merger, do you anticipate any impact in your business from that on the broadcast side or elsewhere?
We don't think so. No, we don't think so.
Okay. And then on the LEO side, is it possible to provide maybe any more detail in terms of what types of financing you're looking for? Is this are you fully focused on private financing. Are you talking to government agencies about further financing? And if you're unable to secure it given market conditions over the next couple of months, Is there a point where you think that maybe you're too far behind and that this build maybe becomes untenable after already scaling it back?
So on the financing side, there are sort of 2 paths that we're active on right now. 1 is trying to complete The discussions and the financing with the export credit agencies and I mentioned that there's been a lot of activity with them over the past quarter and we're focused on driving all those negotiations to a successful conclusion. And then we mentioned on our last call that we're looking at securing some additional financing just given Some of the increases in the program costs coming from the combination of inflation and just kind of a longer schedule and the incremental costs that come with that and coupled with the fact that we had always said that we were going to need some incremental financing as part of the program. At one point, There was some consideration potentially to doing something now that we're public That was always certainly a path that we could consider in the past issuing some equity if we needed to. But given where the markets are trading right Telesat is trading right now, which we believe is below fair market value.
We're sort of less interested in that. So we mentioned on our last call that we're Looking at some other financing sources, we talked about that as being kind of at the LEO kind of subsidiary level and making sure that that was all subordinated to The ECA lenders who are very focused on being senior in the capital structure over on the LEO side, and making it subordinate to the investments that we're getting from the Government of Canada and the Government of Quebec and making sure that as we seek to secure it that it's accretive to the overall kind of company profile. And so that continues to be our focus. I mentioned that We're making progress on that front, mentioned that we're in advanced discussions right now. But I don't think we'll add anything Beyond that at this stage.
Okay. Then I guess the last part of my question that I had asked was If you're unable to see
your kind of
Yes, yes, yes. Right now, that's We're not asking ourselves those questions right now. We're very focused on closing up the financing that we need in the timeframe that we've telegraphed to everyone. So, yes, that's the focus right now. And fundamentally, We've said this consistently.
We've got a great program. We've got a great constellation. We've got an enormous amount of support from our shareholders, our Board, an enormous amount of support from our government partners here in Canada. Got a significant amount of backlog already on the constellation and are having really good discussions with the customer community. So that's our focus is finishing the financing, getting the program going and getting out there in the market with Lightspeed.
All right. That's all for me. Thank you. Thank you.
Thank you. There are no further questions at this time. I would like to turn the meeting back over to Mr. Goldberg.
Okay. Operator, Thank you very much and thank you all for joining us this morning. We look forward to chatting when we issue our Q4 and full year numbers. So thank you very much. Thank you very much.
Thank you. The conference has now ended. Please disconnect your lines at this time and thank you for your participation.