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Loral Space & Communications Inc  (NASDAQ:LORL)
Q1 2020 Earnings Call
April 30, 2020, 10:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning, ladies and gentlemen. Welcome to the conference call to report the First Quarter 2020 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 now like to turn the meeting over to Mr. Michael Bolitho, Director of Treasury and Risk Management. Please go ahead.

Michael Bolitho -- Director of Treasury and Risk Management

Thank you, and good morning. Earlier today, we issued a news release containing Telesat's consolidated financial results for the three-month period ended March 31, 2020. This news release is available on Telesat's website at www.telesat.com under the tab Investor Relations. We also filed our Quarterly Report on Form 6-K with the SEC this morning.

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 additional information about known risks, we refer you to the Risk Factors section of our Annual Report on Form 20-F for the fiscal year ended December 31, 2019, filed with the SEC on February 27th and also to the updated risk factors contained in today's Form 6-K filing. The information that we are discussing today reflects our expectations as of today and are subject to change. Except as required by securities laws, Telesat disclaims any obligation or undertaking to update or revise this information, whether as a result of new information, future events or otherwise.

I will now turn the call over to Dan Goldberg, Telesat's President and Chief Executive Officer.

Daniel S. Goldberg -- President and Chief Executive Officer

Thanks, Michael. Good morning, everyone. This morning, I'll discuss our first quarter financial results and give an update on the business. I'll then hand over to Andrew, who'll speak to the numbers in more detail, and then we'll open the call up to questions.

First quarter came in consistent with our expectations at the outset of the year. Looking at the quarter and adjusting for FX, revenue was down 5% relative to Q1 2019, OpEx was up 16%, adjusted EBITDA was down 10%, and our adjusted EBITDA margin was 79.6%, lower than the roughly 84% we had in the prior period.

The revenue decline was driven by two contracts we've discussed on prior calls, including on our last earnings call: first, the non-renewal by Shaw at the end of Q3 last year of one of its DTH contracts, which we've said has an adverse impact on annualized revenue of approximately 3%; and second, the end of the revenue amortization period of a large prepayment that we received years ago from WildBlue, now Viasat, on our Anik F2 satellite, which also has a roughly 3% top line, in this case, non-cash annualized impact.

Viasat continues to use Anik F2, and it's now on a cash-pay basis, although it's for a lower dollar amount relative to what we were amortizing previously. Revenue reductions from those contracts were offset in part by increased revenue in the quarter from equipment sales and from restoring certain services when the Intelsat 29e satellite failed last year.

OpEx was up around $6.4 million in the quarter versus Q1 last year with most of that increase coming from a higher bad debt provision we took in the quarter, some increased in-orbit insurance expense and slightly higher compensation expense. The bad debt provision was the biggest contributor and which is for a customer that provides broadband service to planes and ships, a business which obviously has been badly impacted by the collapse in commercial air travel owing to the pandemic.

About 10% of our total revenue comes from customers providing broadband to planes and ships, and we expect this will be the area where we have the most impact from COVID-19. We are seeing some increased demand from certain customers as a result of the pandemic, namely rural ISPs we serve in Canada and Alaska, who need more capacity to support the increased use of their networks at this time, but we don't expect increased revenue from them where fully mitigate reduced revenue from the aero and maritime markets.

Turning to some key metrics. Backlog at the end of Q1 was $3.2 billion, and fleet utilization was 82%. Looking at how our revenues broke down on an application basis for the quarter, broadcast and enterprise services each represented approximately 49% of total revenue, and consulting and other 2%. And on a geographic basis for Q1, North America accounted for 81% of revenue; Latin America, 8%; Europe, Middle East, Africa, 6%; and Asia, 5%.

Looking ahead, we remain strongly focused on commercializing our available in-orbit satellite capacity, maintaining our operating discipline, further developing our advanced LEO constellation and leveraging our valuable spectrum rights, all while we're doing everything we need to do to keep our employees safe and to support our customers through the pandemic.

We still aim to be in a position to make some announcements about suppliers for our LEO constellation roughly mid this year and to entering into service with LEO by the end of 2022 with full global service available in 2023. And with regard to spectrum rights, we were pleased with the final C-band order the FCC released last quarter, and we're taking steps to ensure we can timely transition our customers off the spectrum so that we can secure the US$344 million in early clearing incentive payments the FCC allocated to Telesat.

So with that, I'll hand over to Andrew, and then look forward to addressing any questions you may have.

Andrew Browne -- Chief Financial Officer

Thank you, Dan, and good morning, everyone. I would like to go with some highlights on this morning's press release and filings. Overall, as Dan has noted, Telesat had a quarter which is very much in line with our expectations at the beginning of this year; revenues of $209 million, adjusted EBITDA of $166 million and over $1.2 billion of cash on the balance sheet at quarter end.

Our adjusted EBITDA margin was driven by lower revenues and higher operating expenses. The revenue decline was driven by two contracts as disclosed on our prior calls, including on the last earnings call: first, the non-renewal by Shaw at the end of June 3 last year of one of its DTH contracts; and second, the end of the revenue amortization period of a large prepayment that we had received several years ago from WildBlue, now Viasat, on our Anik F2 satellite and indeed is non-cash.

Looking at operating expenses, we're up $6 million in the quarter versus the same quarter last year with a higher bad debt provision, some increased in-orbit insurance and slightly higher compensation expense and professional fees. Our adjusted EBITDA margin was 79.6% as compared to 84.2% in the fourth quarter of 2019.

Comparing the first quarter of 2020 with the same period in 2019, changes in the US dollar exchange rate had a negative impact of $2 million on revenues, no impact on operating expenses and a negative impact of $2 million on adjusted EBITDA. Depreciation and amortization increased by $8 million during the first quarter compared to the same period in 2019. The decrease was mainly due to the end of useful life for accounting purposes of Telesat's Anik F2 satellite in the fourth quarter of 2019.

Interest expense decreased by $10 million in the first quarter of 2020. The decrease was mainly due to the refinancing of Telesat's debt at lower interest rates in the fourth quarter of 2019.

In the first quarter of 2020, we recognized a loss of $44 million on financial instruments, reflecting lower interest rates during the quarter and consequent changes in the fair values of our interest rate swaps, the prepayment options on our senior and senior secured notes. In 2020, as the value of the US dollar increased by about 8% from the end of 2019, we recorded a loss on foreign exchange of $291 million during the first quarter, which arose from the translation of Telesat's US dollar-denominated debt into Canadian dollars.

Tax recovery for the quarter was $3.8 million. For the first quarter of 2020, cash inflows from operating activities were $109 million and cash outflows used in investing activities were $2 million. Also, as noted on our March 1st 2020 call, we continue to expect cash outflows used in investing activities in 2020 to be in the range of US$60 million to US$80 million, including capital expenditures we may make in connection with our LEO constellation partner making a full commitment with our respective suppliers.

There may be meaningful additional capex this year in connection with LEO if we enter into a definitive contractual commitment to build the constellation, which, as Dan said, we may be doing sometime mid this year. If we make such commitments, we would expect to update our capex guidance accordingly.

To meet our expected cash requirements for the next 12 months, including interest payments and capital expenditures, we've approximately $1.2 billion in cash and short-term investments at the end of quarter one as well as approximately US$200 million of borrowings available under our revolving credit facilities, approximately $536 million in cash withheld in our unrestricted subsidiaries. In addition, we continue to generate significant amounts of cash from our ongoing operating activities. Also, at the end of the quarter, Telesat has complied with all covenants in our credit agreements on indentures. A reconciliation between our financial statements and financial covenant calculation is provided in the report we filed this morning.

So, that concludes our prepared remarks for this call, and now we will be happy to answer any questions you may have.

I will now turn it back to the operator. Thank you.

Questions and Answers:

Operator

[Operator Instructions] We'll go to our first caller.

Mike Pace -- JPMorgan -- Analyst

Hi. This is Mike Pace from JPMorgan. How is everybody?

Daniel S. Goldberg -- President and Chief Executive Officer

Hey, Mike. We're good.

Mike Pace -- JPMorgan -- Analyst

So a couple for me. I guess -- thanks for the info on the aero and maritime exposure. Can you just maybe -- is this all through resellers? And I guess, regardless of that, how these contracts are written and kind of what are your expectations on getting this money over the course of the year? Are payments being put on pause in the current environment? Or in some cases, I suspect you might have to kind of wait until some other things get worked out. But if you could start there. I have a few more, I'll just do one at a time.

Daniel S. Goldberg -- President and Chief Executive Officer

Yeah. I mean -- so we've got a handful of customers and we said in the aggregate, for last year, about 10% of our total revenue for maritime and aero. And yeah, they're broadband service providers to the commercial airline industry. And for some of them, for the maritime market, principally cruise, I would say, it's where most of the activity is. And they're all in a little bit of a different situation. I mean, obviously they're all exposed to planes not flying and cruise ships not being out there. But their own arrangements with the airlines or the cruise ship industries might be different. Some of them might have take-or-pay contracts, some of them might have revenue shares. Our arrangements with our customers are all take-or-pay. And yeah -- and they're in different situations. So, I think we've pretty much heard from all of them who have come in looking for us to work with them to help them during this period, and those are conversations that are ongoing. We are reasonable, constructive people, and we've worked with these folks for a long time. So, we'll try to do something.

What impact it has on this year, it's still too early to tell candidly. We did take the debt provision -- the bad debt provision in Q1. That was the biggest contributor to the increase in OpEx. So, anyway, it's still a little bit too early to say what impact it'll have net-net. And as I mentioned in my remarks, we have seen an uptick in some business or some customers, but we don't expect that will be enough to fully mitigate the adverse impact. But it's just still a little bit too early to say where we'll land net-net.

But again, recognizing that it's 10% order of magnitude of our total revenue, some planes are still flying, some ships are still out there, so it's not like all of that's gone away. The airline industry around the world is going to get some government support, and they already are. And that will trickle down, I'm sure, to some extent, to at least some of our customers. So anyway, it's a big conversation with these folks and it'll play out, I'm guessing, in the coming weeks and months. So I hope that was helpful. I mean that's just about as accurate and candid as we can be. That's the situation.

Mike Pace -- JPMorgan -- Analyst

Yes. No. I understand. And then, can you also remind us what your exposure is to the energy sector? I believe that is a number that has come down meaningfully over the last few years. And I'm curious what...

Daniel S. Goldberg -- President and Chief Executive Officer

Yes. It's trivial. I mean it's like approximately 2%. It's just not a big part of our business, you're right, it used to be bigger, but the energy market has faced headwinds for years obviously, and our revenue from that segment has declined over years.

Mike Pace -- JPMorgan -- Analyst

Okay. Here is an easy one I guess, just to be clear, because I didn't see it in the Q or in the release, but there were no short-term satellite services revenue in the first quarter, correct? And also how...

Daniel S. Goldberg -- President and Chief Executive Officer

Yeah.

Mike Pace -- JPMorgan -- Analyst

And also how does that look throughout the cadence of 2020?

Daniel S. Goldberg -- President and Chief Executive Officer

We -- yes, usually when we have really those in the quarter, we call it out. You're right, we did not have one in Q1. Yeah, still too early to say, we've always said that revenue from that activity is lumpy, it's a little unpredictable. So nothing in -- I don't think we're going to see any of that in the first half of this year at this point. So -- and then stay tuned for second half.

Mike Pace -- JPMorgan -- Analyst

Okay. And then just kind of a big picture question, Dan. So I'm curious, every year you guys show up on January 1st with a certain percentage of your budgeted revenues booked and under contract. And I guess, typically what is that percentage on Jan 1, I recall 80-ish percent on either side or something like that, so I'd love a comment from there. And then, what are typically the sources of that difference that you still need to earn over the course of a given year?

Daniel S. Goldberg -- President and Chief Executive Officer

You're right. We show up Jan 1 every year, historically at least with on average around 80%, kind of low 80% revenue secured, which is to say it's in backlog. And then, the delta is of course contracts that come up for renewal in the year. It will be equipment sales, for instance, which are more kind of one-time events, but we almost always have some. We've got other -- some percentage of our revenues with customers that are more kind of recurring in nature. So for instance, we support some enterprise like point-of-sale networks and they're oftentimes what we call moves, adds and changes throughout the year that always generates some revenue. There are those short-term satellite services that we mentioned.

Sometimes we have one or two under -- already under contract by Jan 1. More often than not, we secure those throughout the course of the year, and then new business stuff that's in the pipeline and it's kind of new business that we closed throughout the year that would account for almost -- I'm looking at one of my colleagues, but I think that's kind of the full waterfront of where that other order of magnitude 20% comes from in any given year. And that's been -- I've now been able at Telesat for 13-plus years. It's been the case ever since I've been here, and if I had the gas, at least a few years prior to me showing up. So, I hope that was helpful.

Mike Pace -- JPMorgan -- Analyst

It is super helpful. And just last quick one. Just C-band, Canada, not US. Any conversations with regulators up there? I realize everybody is probably thinking and worrying about other things these days, but any update on that would be great. Thank you.

Daniel S. Goldberg -- President and Chief Executive Officer

Yeah, there are conversations. I mean, Canada is in much the same kind of situation as the US was in terms of the need for mid-band spectrum to support 5G rollout in Canada. The relevant regulator here is a department called ISED, Innovation -- oh, God -- used to be called Industry Canada, which is a whole lot easier.

Michael Bolitho -- Director of Treasury and Risk Management

Innovation, Science and Economic Development.

Daniel S. Goldberg -- President and Chief Executive Officer

Thank you, Michael. Innovation, Science and Economic Development. We have a great relationship with ISED, before that Industry Canada. And so, they're supposed to conduct an auction of 3,500-megahertz spectrum for 5G, supposed to be in December. There is some risk that that could slide down a little bit because of the pandemic, but my own expectation is, it will probably slide but not by very much, but we haven't heard word on that yet. But yeah, there's not enough spectrum in the 3,500-megahertz spectrum to satisfy all the spectrum requirements of the Canadian wireless carriers. ISED has already begun what in Canada is called a bit of a consultation, in the US, that'd be like a notice of proposed rule making, to identify expansion mid-band spectrum.

So, obviously C-band is adjacent to that 3,500-megahertz swap. And so, Canada follow very closely what happened in the US, and we are the largest C-band satellite user in Canada. So we've had some conversations with the department around that and some of the carriers around that, and still too early to tell how that all plays out. But, yeah, suffice to say that there's mid-band spectrum shortage in Canada. The Canadian regulators have already identified some portion of the C-band spectrum as a likely source of filling that spectrum deficit. And we've got good constructive relationships with ISED, with the carriers here, and so -- but it's still too early to tell how that all plays out.

Mike Pace -- JPMorgan -- Analyst

Thank you.

Operator

We'll go to our next question.

Matt Lapides -- ABRY Partners -- Analyst

Hey guys. Matt Lapides with ABRY. A question, can you remind us how we should think about potential LEO costs as you think about that going forward? And if you're getting closer to contracting for that mid-year, how should we think about the capital needs for that program, at least on sort of a high-level basis?

Daniel S. Goldberg -- President and Chief Executive Officer

Well, a high-level basis -- this is Dan. I'll just repeat -- so first off, I'd say we've given capex guidance for the year, which Andrew can -- he probably did reiterate and I wasn't paying attention.

Andrew Browne -- Chief Financial Officer

Yeah, between US$60 million to US$80 million.

Daniel S. Goldberg -- President and Chief Executive Officer

Yeah. Between US$60 million to US$80 million. So I think we've been clear that excludes any legal capex that would arise from us definitively committing to a manufacturer to move forward with the LEO constellation. There is some spending, including capital spending in support of LEO as we are in what is the development stage, but nothing like the capex that we would incur if and when we commit to the project. So that's kind of what we've said so far for this year.

And then, I'll just repeat what I've said before about the total capital requirements for LEO, which we've said to be some multiple billions of US dollars. We've said that once we enter into commitments with suppliers, satellite manufacturing suppliers, launch suppliers, up-ground [Phonetic] segment providers, then we give much more precise capex guidance around what the overall cost. But for the time being, it's just the US$60 million to US$80 million for this year explicitly excluding any additional capex that would come from real LEO capital commitments, and then beyond that, just kind of multiple billions of dollars of capex guidance for what the project could entail.

Matt Lapides -- ABRY Partners -- Analyst

Got it. Thanks. Appreciate that. And then, a follow-up from one of the earlier questions. Your short-term satellite services in first quarter, and it sounds like you're not expecting it in second quarter as well, can you remind us what that might have been in 1Q and 2Q of 2019?

Daniel S. Goldberg -- President and Chief Executive Officer

Does anyone recall -- we're just looking at that right now. We should have that information, what short-term satellite services revenue we recognized first half last year order of magnitude.

Andrew Browne -- Chief Financial Officer

First half last year, just over $7 million. Okay?

Matt Lapides -- ABRY Partners -- Analyst

For the first half? Got it. Okay. Thanks a lot. That's it from me.

Daniel S. Goldberg -- President and Chief Executive Officer

Appreciate it.

Matt Lapides -- ABRY Partners -- Analyst

Okay, guys. Thanks.

Operator

We'll go to our next question.

Jason Kim -- Goldman Sachs -- Analyst

Thank you. Jason Kim from Goldman. The first question for Dan, do you expect any impact from either COVID or one less restructuring to your LEO project, whether it's timing, potential financing mix tweaks to business plan, any impact you see?

Daniel S. Goldberg -- President and Chief Executive Officer

I don't think so, Jason. What do I say -- we're quite bullish on the prospects of our LEO constellation, our LEO business plan. I genuinely take my hat off to all the things that one who've achieved. We've said many times, these LEO constellations, it's heavy-lifting. There's a lot of work, technical, regulatory, commercial that's required to move one of these projects forward. And Telesat has been around for 50-plus years and has the depth of resources in all of those areas. And even for us, it's a challenge. I mean, it's a lot of work. And so, I think what -- one who've have achieved as a start-up having successfully gotten the spectrum rights and placed satellites in-orbit and having raised the financing they have, I think it's impressive.

That said, we always believe that the constellation that we were bringing was just qualitatively better. They always talked about kind of a first-gen constellation and a second-gen constellation using that parlance. We kind of just went right to gen-two, which is a very advanced constellation with terabits of capacity and optical inter-satellite lengths and digitally processed payloads and phased array antennas that can dynamically lay down the capacity where we need it.

So -- and I think that the customers, the financing sources, even the regulators are fairly sophisticated and they understood the relative strengths and weaknesses of these different constellations that are coming forward. I'd also say that we always focus on always the enterprise market, right, we're not focused on kind of direct-to-consumer broadband, which was one that's focused at least initially. And so -- and we've been engaged with the customers, the regulators, the financing sources for quite some time. And I think they always had an appreciation for how our constellation is different and how our prospects were different.

So, there's a lot of words, just to say, no, I don't think it's going to change how we think about it. I don't think it's going to change how the financing sources think about it. For sure, one thing that's impacted, we do believe that broadband planes, including commercial airlines and to ships, including the cruise ship industry, we think that that's a market that our LEO constellation will have significant competitive advantage in. And yes, that's a market that's obviously kind of on pause right now and the airlines and cruise ship companies are really suffering right now. But our constellation isn't going to be -- the global constellation won't be in service until 2023.

I believe that the aeronautical market and the cruise ship industry will have recovered to some extent, whether it will be fully back to where it was pre-COVID, whether it will be have surpassed that or whether it will be a little bit less candidly, I don't know. But I think planes will be fine and people will be traveling and ships will be out there, including cruise ships. So, maybe some of the customer pre-commitments that I would have thought that we could have gotten, we'll probably have to rethink that. But overall, I'd say, our LEO thesis remains intact notwithstanding what happened to one with -- and notwithstanding the impact that COVID is having right now, particularly on aero and maritime.

Jason Kim -- Goldman Sachs -- Analyst

Okay. That's very helpful. And then, on OpEx, are you able to quantify the bad debt provision you took in the quarter from the mobility customer? And obviously things are still fluid, but how should we think about your OpEx, excluding bad debt-related issues for rest of the year?

Daniel S. Goldberg -- President and Chief Executive Officer

Andrew, do you want to hit that?

Andrew Browne -- Chief Financial Officer

Yeah. I think, as Dan has said, that indeed we're being very prudent along with all of our customers in terms of discussing what their needs are, what their challenges are. And of course, the reciprocal of that is to do with accounts receivable. So, as Dan has outlined, it was a particular customer. We felt it was prudent just to take a provision. I would label it as a provision, it's not a write-off, so we're still discussing with that customer. We still have good expectations of getting paid. Nonetheless, I think being a prudent company, that's what we have done.

So, as we see going forward for the rest of the year and given the levels of engagement we have with our customers, at this particular point, we don't anticipate any sort of significant sort of changes or extra provisions. Obviously it's an ongoing sort of situation and crisis we're dealing with. But as I would see it today, I think we feel fairly comfortable. And I think, for the rest of our OpEx, it's very predictable sort of going forward, so I think that's what I would say.

Daniel S. Goldberg -- President and Chief Executive Officer

Yeah. Maybe I would just contribute that I think you asked -- I thought you asked, Jason, sort of -- kind of what was the order of magnitude of that bad debt provision...

Andrew Browne -- Chief Financial Officer

In total, it's $2.5 million. So out of our total $6 million increase in OpEx...

Daniel S. Goldberg -- President and Chief Executive Officer

It's about half.

Andrew Browne -- Chief Financial Officer

It's about half, yes, $2.5 million.

Jason Kim -- Goldman Sachs -- Analyst

Okay. And then, on C-band, so what are -- for US C-band, what are your funding responsibilities to clear the spectrum? Obviously these costs are expected to be reimbursed, but there is going to be a tiny mismatch on the cash flow. So just curious how to think about that for Telesat.

Daniel S. Goldberg -- President and Chief Executive Officer

Andrew, do you want to take that? For us, Jason, we've done actually a significant amount of work in terms of mapping out exactly what we need to do to clear our -- to clear the spectrum that our customers in the US are using, that overlap with the 300 megahertz that we need to clear. We don't believe that the amounts, particularly this year, are going to be, what I would call, material. To your point, we're eligible for reimbursement of those anyway. We're not in a position sitting here right now to kind of give you order of magnitude what are those costs. But given all the work that we've done and relative to our overall OpEx, and particularly looking at this year, it's not going to be material.

Andrew Browne -- Chief Financial Officer

No, it should be neutral. I think we'll get reimbursed for those expenses. So it's not going to hit [Indecipherable].

Jason Kim -- Goldman Sachs -- Analyst

Got it. And then, I'll end with a big-picture question for Dan. With the valuation multiples coming down in the sector, I'm curious to get your take on where the space is headed. Some years ago, the FSS operators traded at high single-digit multiples or maybe even low double-digits from an EBIT/EBITDA perspective. Growth was pretty stable. I think the sector also benefited from resembling infrastructure-like business models with orbital rights serving a significant barriers to entry.

Now, there has been a lot of changes to the business models and debates on some of the biggest revenue segments that are hurting the EBIT multiple. So, it's an open-ended question, but I wanted to ask that way on purpose to hear your thoughts on what's ahead for the sector and what do you think Telesat's role is going forward.

Daniel S. Goldberg -- President and Chief Executive Officer

Yeah. I mean, you're right, it's an open-ended question. But -- so what would I say? First off, I guess, start with the observation, multiples in most sectors have probably come down of late because of the pandemic, and that's certainly the case with the satellite sector. So, I'd make that preliminary observation. And then, maybe a couple of other things. I mean, I've been in this industry for a long time and I've seen multiples go up and come down and go back up again, and a lot of that has to do obviously with these larger macro issues of supply and demand. And when the telecom global burst, I remember rates crashing and multiples coming down and private equity came into the sector and all that. And so, anyway -- and so, for sure, going -- taking a wide lens on the industry, the industry was growing kind of consistently for a long time at kind of mid-single-digit rates, not massive, but growing.

In the last few years, the industry has been more contracting. There have been some headwinds. Some of those headwinds have been self-inflicted. And we've seen that before too, where the industry collectively added more capacity than was required. And that was more pronounced in some markets than others, and there was some downward pricing pressure, and at one point that got fairly cheap. That's, like it has in the past, moderated a little bit as all of a sudden the industry collectively has exercised more capex restraint, and we've seen pricing sort of flatten. But still, I'd say that the industry, particularly on the video side, faces some headwinds and you've seen a contraction in revenue from most of the operators that serve that market. Even Telesat has not been exempt from that. We saw -- one of our headwinds this year has been the Shaw contract not renewing, for instance.

And so, I mean, the market rewards growth obviously. And your question kind of gets at one of the reasons why, some years ago, we started focusing very heavily on LEO. We believe there is a massive opportunity -- a massive growth opportunity in global broadband connectivity. We believe that that market can best be served not with high throughput geo satellites but with LEO constellations provided that they're architected in the right way, they leverage the best technologies. And we think that's so important because we think that low latency is a crucial differentiator in serving that market.

So, I think that some operators -- I mean, we all have different prospects and outlooks and we've different revenue mixes and whatnot, but we ourselves believe that the operators that orient themselves to capture the burgeoning demand for global broadband connectivity will be rewarded. And the market will reward that in terms of equity and what multiples they trade at. We think that our LEO constellation is going to be a home run. We certainly think that we're going to be one of the winners and that that will get reflected in our multiple. We're not public -- our equity is not public today, derivatively we are sorting through Loral.

But anyway, Jason, that I think will happen. I would also guess that there will be some consolidation in the sector. We see periods in the past in the industry where there has been consolidation that hasn't occurred for some time. Wouldn't surprise me if, in light of the current conditions and the scale that's required to invest in the architectures of the future, if that might not drive some consolidation.

But in any event, I'd say, we saw these trends emerging years ago. I think we've been very proactive. We reserved our spectrum. I think we've designed the best LEO constellation that is in the market and on the horizon today. And so, I feel very good about our prospects. So, in any event, that's a long-winded answer to an open-ended question. So..

Jason Kim -- Goldman Sachs -- Analyst

Appreciate that. Thank you.

Operator

We'll go to our next caller.

Ned Hole -- DDJ Capital Management -- Analyst

Yeah, hi. Ned Hole for DDJ. Most of my questions have been answered. But I guess, do you have any exposure to commercial maritime or non-cruise maritime? And if so, what are you seeing there?

Daniel S. Goldberg -- President and Chief Executive Officer

Exposure to non-commercial maritime, it'd be small. I mean, we serve about the government market as well. And so, some of our capacity would be used for the coast guards of various nations, including Canada, for the navies of various nations and sure that some of our satellite capacity is being used for allied government naval activities. So, some of [Indecipherable]. Yeah, I mean there are some work vessels, including vessels that are, I don't know, probably supporting the oil industry and whatnot, but I would still consider that commercial. But when we talk about mobility representing 10% of our overall revenues sort of maritime and aero, that -- all of that maritime would be commercial, which is to say non-government, I believe. So, any maritime that's governmental, we would just lump into our government segment.

Ned Hole -- DDJ Capital Management -- Analyst

Okay. And then, sort of non-cruise, so like commercial and maritime but non-cruise maritime.

Daniel S. Goldberg -- President and Chief Executive Officer

Yeah. I'd say most -- probably most of our maritime revenues, probably more than half would be cruise related. But -- so a non-trivial minority would be other, including high-end yachts and things like that, that aren't cruise, but still the majority has got to be kind of cruise driven.

Ned Hole -- DDJ Capital Management -- Analyst

Got it. Okay. And then, you talked about other OpEx increasing $6.5 million [Indecipherable] OpEx. But what else -- what are the other deltas in the other OpEx line other than bad debt. And I think the MD&A talking about in-orbit insurance, and expect that to be [Speech Overlap].

Daniel S. Goldberg -- President and Chief Executive Officer

Yeah, yeah, yeah. I think we called all that up in our remarks. It was in in-orbit insurance. There was some increased comp expense, including some relating to pension, but we're just not talking about a whole lot of money here. Certainly insurance expense has increased for everyone in the industry that insures their fleet. So -- but I mean that's kind of everything. But it was that bad debt provision that was roughly half of the increase. Everything else was some professional fee increase, but cats and dogs kind of stuff.

Andrew Browne -- Chief Financial Officer

Yeah. And we disclosed that in the 6-K and the remarks have dealt with that as well.

Ned Hole -- DDJ Capital Management -- Analyst

Okay. All right. Thanks for the time.

Daniel S. Goldberg -- President and Chief Executive Officer

Thank you.

Operator

[Operator Instructions] We'll go to the next question.

Rory Buchalter -- Picton Mahoney -- Analyst

Yes, hi. Good morning, everyone, and hope everybody is doing well and being safe and all that. I just had a quick cleanup question. By the way, it's Rory Buchalter [Phonetic] calling from Picton Mahoney. In regards to the potential proceeds from C-band, I just want to clarify, Dan. I think you've mentioned this before, the use of proceeds of that, would you be restricted on what you could use those proceeds for, like would you have to repay first-lien debt or is there some ability to move money elsewhere based on your current interpretation?

And second of all, just an update on any of your baskets that you have. I think you had a $120 million basket and a $500 million basket up here last year. Just if you have had any availability left under any of those baskets, I'd appreciate an update. Thank you.

Michael Bolitho -- Director of Treasury and Risk Management

Okay, Rory. It's Michael Bolitho. So, we've got two baskets in the credit agreement -- or credit agreement and indentures. One of them is $500 million for unrestricted subs, there's a $150 million general basket and those are all US dollars, they are unused. We have an applicable amount basket if the leverage is under covenant, leverage is under 4.5 times. And people usually ask me about the applicable amount. For the moment, at the end of the quarter, it was roughly CAD1.8 billion, so US$1.3 billion in round numbers. And there are -- and I won't go into them on the call, we do have some flexibility with the use of the proceeds from the C-band repurposing.

Rory Buchalter -- Picton Mahoney -- Analyst

Okay. That's great. Thank you very much.

Operator

We'll go to our next question.

Analyst -- -- Analyst

Hi. This is [Indecipherable] from River House Capital. This is just a quick question around backlog. It seems the backlog has been slowly declining every year. So it's just my assumption that the revenue today is a lot from contracts signed a few years back. So I was just wondering, is there going to be a few major contracts here in the next couple of years or should we expect a decline in revenue as the future backlog continues to decrease?

Daniel S. Goldberg -- President and Chief Executive Officer

Yeah. No. Your description of kind of how it operates is absolutely accurate, and it's particularly the case for our direct-to-home satellite customers who historically have signed 15-year deals with us. And I think, at this point in time, on average, we have about -- around six years left of remaining life on those contracts. And so, yes, so we signed those contracts. We put the backlog -- we put all that future revenue in backlog at that point in time. From the time the satellite then enters into service, we just run that backlog down until probably 12 years down the road or so, we do a renewal. And then backlog pops back up again, so that historically is what's happened.

And if the future tracks historical practice, then that's what will happen again. It will be tied to whether we secure renewals in the main with those DTH customers, although we said before, there are other non-DTH customers that we've signed very long-term deals with, including Northwestel owned by Bell for all of our Telstar 19V capacity that provides broadband in the north of Canada. We did the same kind of a deal with Hughes using that same satellite to provide broadband in Latin America. We did sort of a similar deal with an Indonesian broadband provider supporting a government broadband program in Indonesia. So there are other customers that we also signed long-term contracts with that contribute to backlog. But the premise of your question is exactly right. Once you sign with those contracts, your backlog just runs down as you perform under that contract over its term. And then when you get -- if you get a renewal, then the backlog is replenished and the cycle starts again.

Analyst -- -- Analyst

Thank you.

Operator

We'll go to our next question.

Jason Kim -- Goldman Sachs -- Analyst

Thanks. Jason Kim again. Now what I'm seeing from some of these headlines about Loral potentially being in combination with Telesat, anything you can share with us in terms of what that could mean for Telesat perspective, from capital structure, anything aside from the equity ownership and then where the stock is listed?

Daniel S. Goldberg -- President and Chief Executive Officer

I'm sorry, Jason, could you just repeat the last part of your question again? It kind of faded out.

Jason Kim -- Goldman Sachs -- Analyst

Sure. Yeah, sure. Just any implication we should think about. I'm seeing headlines that Loral is in advanced talks for combination with Telesat. So I just wanted a reminder of any implications that we should think about, what that could mean for Telesat from a credit or capital structure perspective.

Daniel S. Goldberg -- President and Chief Executive Officer

Well, what would -- for sure, when we have material developments, we disclose them. And we and Loral have provided disclosure around this topic before and I should say over some number of years at this point. I think, at this point, all we can say is that that's something that continues to be explored. But until such time that there is a development that's worthy of updating our disclosure, really don't have anything more to say about it at this time. Off the top of my own head, were that to happen, and I don't know whether or not, I don't believe it would have any credit implications for any of our creditors, I'm looking at Michael Bolitho in particular as I say that.

Michael Bolitho -- Director of Treasury and Risk Management

I don't think it would. I mean, in the end, there might be a public entity in place.

Daniel S. Goldberg -- President and Chief Executive Officer

Yeah. Anyway, Jason, so I would just say no change, no update there.

Jason Kim -- Goldman Sachs -- Analyst

Thank you.

Michael Bolitho -- Director of Treasury and Risk Management

Operator, we have time for one more question.

Operator

And at this time, there are actually no further questions. I'll turn the call back to Mr. Goldberg.

Daniel S. Goldberg -- President and Chief Executive Officer

Okay. Operator, thank you very much. Thank you everyone for joining us this morning, and we look forward to speaking with you again when we release our Q2 numbers. So thank you very much.

Andrew Browne -- Chief Financial Officer

Thank you very much.

Operator

[Operator Closing Remarks]

Duration: 53 minutes

Call participants:

Michael Bolitho -- Director of Treasury and Risk Management

Daniel S. Goldberg -- President and Chief Executive Officer

Andrew Browne -- Chief Financial Officer

Mike Pace -- JPMorgan -- Analyst

Matt Lapides -- ABRY Partners -- Analyst

Jason Kim -- Goldman Sachs -- Analyst

Ned Hole -- DDJ Capital Management -- Analyst

Rory Buchalter -- Picton Mahoney -- Analyst

Analyst -- -- Analyst

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