Telesat Corp. Q3 FY2026 earnings call

• Strategic Validation & Defense Focus: The August agreement with Canada's Defense Investment Agency (ESCape program), valued at $2.7 billion including options, validates Telesat's Lightspeed network capabilities. This is Telesat's first ESCape contract, with more anticipated for Arctic satellite communications and other sovereign needs globally, particularly given heightened interest from allies due to conflicts like Ukraine.
• Lightspeed Program Progress & Schedule Update: MDA is progressing the first two 'pathfinder' satellites. To mitigate tight launch vehicle markets, Telesat plans to piggyback these on a third-party Falcon 9 rocket expected in mid-2027. Full global service is now targeted for the end of Q2 2028, a three-month delay from the previous Q1 2028 target. However, high-latitude service for the Canadian military and northern rural broadband will still commence by the end of Q1 2028.
• GEO Business Performance: The GEO business performed largely as expected, despite structural declines in video distribution and broadband markets. Management remains focused on cost discipline and customer service. The backlog stands at ~$800 million.
• Debt Refinancing: Management is actively engaged in good faith negotiations with GEO debt holders to refinance debt maturing later in the year. They are evaluating various alternatives to reach a fair outcome for all stakeholders but provided limited detail on specific options during the call.
• Liquidity & Cash Flow: Consolidated cash and equivalents were $814 million. Telesat received $510 million in milestone payments under the ESCape agreement in Q3, with ~$1.5 billion more due upon reaching deployment benchmarks. An additional $1.5 billion was available under the Lightspeed financing facility.

The company operates two main segments: GEO (Geostationary) and LEO (Low Earth Orbit/Lightspeed).

GEO Segment:

• Q3 2026 Revenue: $79 million, a decrease of 21% ($22 million) compared to the same period in 2025. This decline was driven by the non-renewal of a broadcast contract, reduced capacity for another broadcast customer, reduced service to a North American fixed broadband customer, and the retirement of certain satellites.
• Q3 2026 Adjusted EBITDA: $36 million, down 43% ($27 million) year-over-year. Excluding refinancing costs, Adjusted EBITDA would have been $61 million with a margin of 78%.
• YTD 2026 Revenue: $243 million, down 24% ($79 million).
• YTD 2026 Adjusted EBITDA: $135 million. Excluding refinancing costs, this would have been $180 million with a margin of 74%.
• Satellite Utilization: Approximately 59% as of September 30, 2026.
• Backlog: Approximately $800 million.
• Contribution: The GEO segment accounted for approximately 98% of total consolidated revenue in Q3 2026 ($79 million out of $81 million).

LEO Segment (Lightspeed):

• Q3 2026 Investment: $360 million ($344 million CapEx, $24 million OpEx).
• YTD 2026 Investment: $705 million ($641 million CapEx, $64 million OpEx).
• Backlog: Approximately $5.6 billion as of September 30, 2026.
• Note: No specific revenue or EBITDA figures are reported for the LEO segment separately in the financial highlights, as it is still in the development/deployment phase.

• GEO Segment Guidance Reiterated: For the full year 2026, Telesat reiterates GEO revenue guidance of $300–$320 million and Adjusted EBITDA guidance of $210–$230 million, excluding non-recurring debt refinancing costs.
• LEO Spending Guidance Revised Downward: Due to actual CAPEX and OPEX spending in the first nine months and Q4 forecasts, full-year Lightspeed spending is now expected to be between $1.1 billion and $1.3 billion. This is below the previous guidance range of $1.3–$1.5 billion.
• Global Service Timeline: Full global service for Lightspeed is now expected around the end of Q2 2028 (previously end of Q1 2028). Commercial service in higher latitudes is still targeted for the end of Q1 2028.

• Financial Risks: Significant net losses reported ($157 million in Q3, $867 million YTD), partly due to $90 million ($577 million YTD) in losses from the increase in fair value of Lightspeed financing warrants. High interest expenses ($55 million in Q3, $155 million YTD) also impact results. The company faces near-term debt maturity for GEO obligations.
• Operational & Technical Risks: Potential delays in satellite manufacturing (MDA progress) and launch logistics could impact timelines. The success of the Lightspeed program depends on the successful testing and integration of pathfinder satellites and subsequent operational satellites.
• Market & Contractual Risks: Structural decline in traditional GEO video and broadband markets continues to pressure revenue. While the ESCape contract provides significant backstop, future revenue depends on securing additional sovereign and commercial contracts, which can be slow and uncertain. User terminal availability and performance are critical for commercial adoption.
• Regulatory & Compliance Risks: Must comply with laws and regulatory frameworks in all operating jurisdictions, including lawful intercept requirements and government licensing terms. Sovereign contracts involve complex government-to-government or provider-to-government arrangements that require careful navigation.

Q: Analyst asked if potential equity issuance is being considered as part of the debt refinancing alternatives and sought updates on the timing of additional defense/sovereign LEO contracts. / A: CEO stated it is premature to speculate on equity issuance or specific refinancing details, emphasizing that addressing the refi is a key priority through advisor-led engagements. Regarding LEO contracts, he noted the sovereign pipeline is compelling, especially post-Ukraine developments, and expects meaningful opportunities to close mostly in 2027, though government procurement timelines are inherently difficult to predict precisely.

Q: Analyst asked about Telesat's approach to terms of service and sovereignty control compared to competitors like SpaceX, particularly referencing incidents in Ukraine, and queried future launch capacity beyond current Falcon 9 contracts. / A: CEO clarified Telesat operates under strict legal and regulatory compliance, with systems built for lawful intercept and service suspension. Sovereign customers like Canada coordinate closely on usage. On launches, they have secured 14 Falcon 9 rockets and are finalizing a 15th for their initial 225 satellites. For future growth, they anticipate Starship availability for third parties after prioritizing SpaceX's own and US government missions, alongside other ramping providers.

Q: Analyst sought clarification on the reasons for the three-month delay in global service to Q2 2028 and confirmed if there are financial penalties for missing the Q1 2028 high-latitude service target. / A: CEO explained the delay is tied to the mid-2027 launch slot for the two pathfinder satellites and the subsequent testing period. He confirmed there are no financial penalties for missing the Q1 2028 high-latitude service date; it simply delays revenue recognition. He reiterated that high-latitude service for the ESCape program and rural broadband will still launch as planned at the end of Q1 2028, with global coverage following in Q2 2028.

Q: Analyst asked about the conversion rate of the $5.6 billion LEO backlog into revenue, specifically regarding 'take-or-pay' structures and user terminal roadmaps. / A: CFO/CEO clarified that nearly all backlog is 'take-or-pay.' The ESCape contract involves significant upfront cash payments but flat revenue recognition over 15 years. The Viasat contract ramps up. Regarding terminals, Telesat is developing a family of antennas in parallel, including flat panels for enterprise/maritime, parabolic for high-capacity remote areas, aeronautical for planes/bizjets, and ruggedized defense units, all expected to be available when services launch.

Q: Analyst inquired about the impact of recent geopolitical events (e.g., SpaceX restrictions in Ukraine) on Telesat's engagement with European and other allied governments, and how sovereign contracts are structured (direct vs. via providers). / A: CEO acknowledged that modern warfare dynamics and events like those in Ukraine have increased global momentum for secure, resilient LEO networks. Governments recognize space as a key sovereign capability. He outlined multiple contracting models: direct service to allied governments, service via trusted local providers, or government-to-government arrangements, often mixing these approaches. He emphasized Telesat's decades of experience in serving sovereign clients.