Telesat Corporation (TSAT) Earnings

Management highlights

### Strategic Contract Wins - Secured the first contract under the Canadian government's ESCAPE program, the largest contract in Telesat's history, to provide Arctic satellite communications capability for the Canadian Armed Forces. - Signed a 5-year contract with Northwestel for rural broadband connectivity in Canada, bringing the total Telesat Lightspeed contractual backlog to $5.6 billion. - Secured an expected $189 million USD in FCC incentive payments for repurposing C-band spectrum, following successful spectrum clearing in a prior FCC proceeding. - Closed a new $120 million USD term loan for general corporate purposes, increasing financial flexibility for the legacy GEO business. ### Lightspeed Constellation Progress - Expanded the fully funded constellation size from 156 to 225 satellites via a new firm contract with MDA for 69 additional identical satellites. All 225 satellites share the same design, so no deployment delays are expected. - Already secured 14 of the 15 required Falcon 9 launch contracts, with the final agreement expected to be finalized in the near future. All launches are planned to be completed by the end of 2028. - Global commercial service launch remains on track for the first quarter of 2028, and the project maintains $500 million USD in contingency funding. - Made strong progress on ground segment development, with multiple landing stations under development across Canada, Australia, and France, with ongoing commissioning and testing. ### Legacy GEO Business Updates - Two end-of-life geosatellites (ANAC F4 and Telstar 14R) were retired during the quarter, with nearly half their traffic transferred to remaining operational satellites. The revenue impact of this retirement was already incorporated into prior guidance. - Extended a key broadcast video contract, growing the GEO segment backlog for the first time in several years and improving long-term cash flow visibility for the legacy business, while maintaining strict cost controls to offset ongoing revenue pressures. ### Corporate Financials - Consolidated Q2 2026 revenue was $79 million, adjusted EBITDA was $22 million, and net loss was $559 million. The net loss was driven by a $475 million increase in the fair value of Telesat Lightspeed warrants and foreign exchange impact on USD-denominated debt. - Interest expense totaled $50 million in Q2, down $54 million YoY due to lower term loan interest rates. $18 million in Lightspeed-related interest was capitalized, up from $8 million YoY, with $974 million outstanding on Lightspeed project financing at quarter end. - The company remains in compliance with all covenants under its existing credit agreements and indentures.

Guidance

- **Geo Segment Guidance**: Reiterated full year 2026 guidance of $300 million to $320 million in revenue and $210 million to $230 million in adjusted EBITDA (excluding debt refinancing and related litigation costs). - **Lightspeed Total Investment Guidance**: Revised 2026 total investment (including both CAPEX and OPEX) upward to $1.3 billion to $1.5 billion Canadian dollars, from the prior guidance range of $1 billion to $1.2 billion Canadian dollars. The incremental investment will be funded by pre-service milestone payments from the Government of Canada under the ESCAPE contract. - **Lightspeed Revenue and EBITDA Guidance**: Management raised the full long-term public revenue and EBITDA forecast for Lightspeed following the ESCAPE contract win and constellation expansion.

Segment performance

1. Geo Segment: Q2 2026 revenue was $78 million, a 26% ($28 million) year-over-year decline. Year-to-date 2026 revenue was $104 million, also down 26% YoY. Adjusted EBITDA for Q2 was $43 million, down $37 million YoY; after excluding $14 million in debt refinancing costs, adjusted EBITDA was $57 million, down 30% YoY. Year-to-date adjusted EBITDA (excluding refinancing costs) totaled $119 million. Satellite utilization was 60% at quarter end, and the segment backlog increased to $900 million, driven by a 5-year extension of a broadcast service contract. This segment contributes 98.7% of Telesat's total Q2 2026 consolidated revenue. 2. Lightspeed (LEO Segment): The segment backlog increased significantly to $5.6 billion, driven by the 15-year initial ESCAPE contract and a new 5-year rural broadband contract in Canada. Total investment in the program reached $336 million in the first half of 2026, with $165 million invested in Q2 alone. The segment ended Q2 with over $200 million in cash on hand, and the full project is fully funded through planned commercial launch.

Risks & headwinds

- Legacy GEO business faces ongoing year-over-year revenue pressure from contract non-renewals, lower rate renewals, and end-of-life satellite retirements. - The company faces upcoming GEO debt maturities, and there is uncertainty around the final outcome of refinancing negotiations, though management is focused on a consensual solution. - The satellite broadband market is competitive, and the company has modeled long-term downward price pressure for capacity that remains embedded in current Lightspeed forecasts. - The ESCAPE program includes follow-on work for the MEO UHF/X-band segment that still requires final definition and contract awards, creating uncertainty around the timing and size of additional revenue from this opportunity.

Analyst Q&A

• Q: What is Telesat's role in the MDA-led MEO UHF/X-band component of the ESCAPE program, and will Telesat own this capacity or be able to resell excess capacity? /

  A: The MEO constellation for UHF/X-band Arctic capability is led by MDA, with Telesat acting as a subcontractor. Under the current teaming agreement, Telesat does not expect to own the constellation, and it has not yet explored reselling excess capacity. Telesat will provide network integration, ground segment, and overall program integration expertise. Follow-on ESCAPE contracts for additional KA-band capabilities are expected next year, and the MEO work will take a couple of years to finalize, but it represents a meaningful long-term revenue opportunity for Telesat.

• Q: Why expand the Lightspeed constellation to 225 satellites immediately, rather than waiting for post-launch demand? Will the new satellites be technologically different from the initial 156? /

  A: The 69 additional satellites are identical to the original 156, so they will not delay production or deployment of the initial batch. When the frequency plan was updated to allocate 25% of spectrum for military KA-band requirements to support ESCAPE and other defense opportunities, this reduced capacity available for commercial customers. Adding the 69 extra satellites immediately restores that diverted commercial capacity for aviation, maritime, rural broadband, and enterprise verticals. Additional satellites also improve network resiliency and redundancy, and accelerating expansion aligns with the company's long-term plan to grow the constellation, which was originally planned to be funded by initial cash flow.

• Q: How did Lightspeed forecast assumptions change, outside of the shift to more government/military revenue mix? /

  A: Beyond the meaningful change in revenue mix driven by growing defense and sovereign demand from recent geopolitical shifts, management updated all underlying assumptions for pricing, uptake, and geographic distribution based on current market data. There were no wholesale changes to core pricing expectations: the company always expected a competitive market and modeled long-term downward price pressure, which remains embedded in the current plan. Some individual pricing assumptions were adjusted slightly up or down based on new market information, but no large systemic changes were made.

• Q: What is the status of launch contracts for the expanded 225-satellite Lightspeed constellation, given SpaceX's limited booking availability beyond 2028? /

  A: To launch all 225 satellites, Telesat needs 15 Falcon 9 rockets, and 14 are already under contract with SpaceX. Only one additional Falcon 9 is needed, and an agreement for this final rocket is being finalized. SpaceX has agreed to provide the rocket, and Telesat prefers Falcon 9 for its reliability and rapid cadence, which supports the goal of fast deployment. All launches for the full 225 satellites are planned to be completed by the end of 2028, in line with the commercial service target.

• Q: Is Telesat considering a Chapter 11 bankruptcy process to address upcoming GEO debt maturities? Where does the new $120 million USD term loan rank in the capital structure? /

  A: Management strongly denied that a bankruptcy process is under consideration, and the entire focus remains on reaching a consensual refinancing outcome with legacy lenders prior to maturities. Management declined to share detailed information on the new loan's ranking in the capital structure on the call, noting it was raised within a non-guarantor GEO subsidiary and the full loan agreement will be filed publicly in due course.