After steadily rising over the course of this year, Ottawa-based satellite operator Telesat’s stock price dropped on Thursday after its Q2 earnings showed a steep net loss.
The news: Telesat, which trades on the TSX and Nasdaq under the symbol $TSAT, reported $79 million in consolidated revenue for the second quarter, a 25-percent decrease from the same time last year. Its net loss for the quarter was $559 million, compared to a $76-million gain in the prior year.
Investors reacted harshly to the earnings report, sending the stock down nearly 14 percent. While a steep plunge on the day, it’s a blip in Telesat’s recent performance, as its stock is up more than 80 percent year-to-date.
Telesat blamed the drop on non-cash losses, including an increase in the fair value of financing warrants for its Lightspeed satellite subsidiary, and the weakening Canadian dollar, which increased the Canadian dollar value of its US dollar-tied debt.
From the source: On the earnings call, Telesat CEO Dan Goldberg said the value of the company’s warrants has increased by more than 50 percent thanks to it recently signing its largest-ever contract.
“That’s obviously a positive sign for the business,” Goldberg said. “It’s good news if you’re a Canadian taxpayer because the Government of Canada and the Government of Quebec have warrants in the Lightspeed project.”
The context: Warrants give the holder the right to buy or sell stock at a set price, but depending on the type of warrant, an increasing stock price means the difference must be recorded as a loss. Telesat struck large loan agreements with Canada and Quebec in 2024, granting the governments warrants for 10 percent and 1.87 percent of Telesat Lightspeed’s shares, respectively.
Since those warrants were signed, Telesat’s stock price has increased fourfold, fuelled by recent increased interest in national space capabilities.
Final thought: Including the recent signing of its large contract with the Canadian government, Telesat said its low-Earth orbit satellite backlog is $5.6 billion. Goldberg said on the earnings call that global conflict has opened an opportunity to address demand for defence and sovereign capabilities, and that he’s very bullish about Telesat’s ability to meaningfully grow its backlog by the end of next year.
Feature image courtesy Telesat.