Telesat Q1 2026 Earnings Call - LightSpeed Progress and ESCAPE Uncertainty

Jericho, Conference Operator: Hello, everyone. Thank you for joining us, and welcome to Telesat first quarter 2026 financial results. After today’s prepared remarks, we will host a question-and-answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. I will now hand the conference over to James Ratcliffe, Vice President of Investor Relations. Please go ahead.

James Ratcliffe, Vice President of Investor Relations, Telesat Corporation: Thank you, Jericho. Good morning, everyone, and thank you for joining us today. Earlier this morning, we filed our quarterly report for the period ending March 31st, 2026, on Form 6-K 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 unknown risks and uncertainties. For a discussion of known risks, please see Telesat’s annual report and updates filed with the SEC. Telesat assumes no responsibility to update or revise these forward-looking statements. I would now like to turn the call over to Dan Goldberg, Telesat’s President and Chief Executive Officer.

Dan Goldberg, President and Chief Executive Officer, Telesat Corporation: Okay. Thanks, James, thank you all for joining us this morning. I’ll start with a few words about the business, I’ll hand the call over to Donald, who will speak to the numbers in more detail. We’ll open the call up to questions. My opening remarks this morning are relatively short since it’s been only seven weeks since we reported our full year 2025 numbers. I am pleased with our performance in the quarter, during which we made significant strides in developing and commercializing the Telesat LightSpeed constellation. The development of the satellites themselves continues to move ahead, we’re also making good progress on a number of related fronts, including user terminal and software development, I’m sorry, and the deployment of our ground station network.

Continue to expect to start full global commercial service around the end of the first quarter of 2028. I’m also pleased with the progress we’re making on the commercial front for Telesat LightSpeed. Last month, we signed a contract with Northwestel for LightSpeed service to provide broadband connectivity to communities across the territory of Nunavut in the north of Canada. We see attractive commercial opportunities across our target verticals. I’d note we’re seeing a very positive response to our incorporation of the military Ka-band capacity to Telesat LightSpeed from allied government customers who are keen to leverage the benefits of an advanced, secure, and resilient LEO satellite constellation operating on frequencies these users have long used for mission-critical operations.

A number of allied governments are currently evaluating plans to secure Mil-Ka satellite services in LEO, adding this capability to Telesat LightSpeed is both important and timely. As you know, late last year, the government of Canada announced that it selected Telesat and MDA to deliver a multi-frequency satellite network called the Enhanced Satellite Communications Project – Polar or ESCAPE to meet the communications requirements of the Canadian Armed Forces in the Arctic. Since that announcement, we’ve been engaged with the government to finalize the contractual arrangements for a significant portion of the ESCAPE program, which we anticipate will be concluded in the coming months. Recognizing, of course, that there can be no assurance an agreement will ultimately be reached.

Assuming we do finalize these arrangements and recognizing that ESCAPE is a material opportunity for the company, our intention is to update our financial projections at that time so that investors can take into account the expected impact on our business. In our GEO segment, first quarter results came in largely as we had expected, with most of the year-over-year decline coming from non-renewals and lower revenue renewals in our broadcast activities and, to a lesser extent, reductions in services for fixed broadband customers. That was partially offset by new contracts for broadband services to commercial airlines. Even though GEO is a largely fixed cost business, we remain focused on reducing costs where possible, and that effort was visible in the quarter with adjusted operating expenses, excluding costs related to our debt refinancing, down 11% year-over-year.

As noted in our release, we’re reiterating our full year 2026 guidance for GEO revenue and adjusted EBITDA and for total LEO investment. One other note regarding our GEO segment. Last month, we changed the name of our GEO operating subsidiary from Telesat Canada to Telesat GEO Inc in an effort to reduce confusion between our public entity, Telesat Corporation, and the GEO operating subsidiary. Now things should be clearer. The Telesat LightSpeed business is in our Telesat LEO subsidiary, and our legacy GEO business is in the Telesat GEO subsidiary, with both subsidiaries ultimately being wholly owned by Telesat Corporation, our publicly listed entity. Finally, I’d note that we continued to work closely with our advisors last quarter on refinancing the Telesat GEO debt that begins to mature in December of this year, something that remains a high priority for the company.

With that, I’ll hand over to Donald, who will speak to the numbers in more detail, and then we’ll open the call up to questions.

Donald, Chief Financial Officer, Telesat Corporation: Thank you, Dan, and good morning, everyone. My prepared remarks today will focus on highlights from this morning, press release and filings. In the first quarter of 2026, Telesat reported consolidated revenue of CAD 87 million and adjusted EBITDA of CAD 35 million. Consolidated net loss for the quarter was CAD 151 million, compared to CAD 51 million loss for the first quarter in 2025. The negative variation of CAD 100 million was principally due to non-cash impairments of goodwill and lower adjusted EBITDA of our GEO business. I’ll cover the performance of our GEO segment in more detail in a few minutes. Interest expense for the quarter totaled CAD 50 million, down from CAD 57 million in the first quarter of 2025, as we benefited from lower interest rate on our floating rate debt.

Interest expense on our USD-denominated debt was also positively impacted by a stronger Canadian dollar during Q1 of 2026 versus the same period in 2025. Interest relating to Telesat LightSpeed, totaling CAD 14 million during the first quarter of 2026, was capitalized to the project, compared to CAD 3.5 million for the same period last year, as the amount outstanding on the Telesat LightSpeed financing is increasing. The result of our GEO segment was in line with our expectation in Q1. We generated CAD 86 million in revenue during the period, down 26% or CAD 29 million compared to the same period last year. Most of the revenue decline was in our broadcast segment, driven by expiration of contract for service on Nimiq 4 and Anik F3 satellites in 2025 and lower capacity and rate as part of renewal of contract on Nimiq 5.

In our enterprise segment, the decline was primarily driven by lower revenue from our Xplore contract renewed in October 2025, which did not impact materially our operating cash flow as the contract was mostly prepaid at inception. These declines were partially offset by contract added in 2025 in our aviation segment. The utilization of our satellite was 55% at the end of Q1, and the backlog of our GEO segment was just below CAD 800 million at the end of March. Our adjusted EBITDA of GEO segment was CAD 55 million for the first quarter, down 37% year-over-year. The decline was primarily driven by lower revenue. Our first quarter 2026 include approximately CAD 7 million in costs related to our debt refinancing process, up approximately CAD 3 million compared to the same period last year.

Adjusting for these expense, our GEO adjusted EBITDA would have been CAD 52 million during the period. Turning to the cash and liquidity position of our GEO business segment, cash on hand at the end of Q1 was just over CAD 200 million, largely unchanged from the end of 2025. We believe the combination of this cash on hand and the cash flow generated by our GEO asset in 2026 to be sufficient to meet all the company’s obligation prior to the Telesat GEO debt maturity in December. As a result of this performance, we are reiterating our GEO business segment guidance for the year of revenue of CAD 300 million to CAD 320 million and adjusted EBITDA of CAD 210 million to CAD 230 million, excluding debt refinancing expenditure.

We invested CAD 170 million in the Telesat LightSpeed program during the first quarter of 2026, including CAD 152 million in capital expenditure and CAD 19 million in labor and other operating costs. We continue to expect full-year investment in the program to be between CAD 1 billion-CAD 1.2 billion, as we announced earlier this year. In the LEO segment, we ended the quarter with almost CAD 300 million in cash on hand. This cash, combined with CAD 1.72 billion in availability under our Telesat LightSpeed financing and $325 million from our vendor financing, is expected to be sufficient to fully fund the Telesat LightSpeed project until it achieve global commercial service around the end of Q1 2028. Our backlog for LightSpeed total approximately CAD 1.1 billion as of the end of Q1.

Note that this does not include the recently signed agreement with Northwestel. Before I conclude my prepared remarks, I would like to confirm that we are in compliance with all the covenant in our credit agreement and indenture. I’ll now turn the call back to the operator for the Q&A. Thank you very much.

Jericho, Conference Operator: We will now begin the question and answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question from the line of David McFadgen with ATB Cormark. Your line is now open. Please go ahead.

David McFadgen, Analyst, ATB Cormark: Okay. Thank you. Hi, guys. Let me just start off by asking you a little bit more about the ESCP-P program. Given the government’s, you know, committed to lend you over CAD 2 billion in capital and the government wants military Ka-band capacity, isn’t it logical or isn’t the deal gonna be that the government, the Canadian Armed Forces is gonna license a lot of the military Ka-band capacity from you off Lightspeed?

Dan Goldberg, President and Chief Executive Officer, Telesat Corporation: Good morning, David. It’s Dan. I guess the first thing I’d say is, you know, I don’t in my own mind, connect the CAD 2 billion loan to future business with the Government of Canada. The Government of Canada, you know, whether that’s Department of Defense or other government satellite users, they’re always going to choose the solution that represents the best value prop for them and the taxpayer. I mean, that’s just what I’ve seen in my years doing business with them. It is the case that one of the ESCAPE requirements is for military Ka-band capacity in the Arctic. The other requirements are for UHF and X-band capacity in the Arctic.

It is the case that, as we said on our last call, we’ve incorporated Mil-Ka, Telesat LightSpeed, and it serves the globe, including the Arctic. It could be a good fit for the government, but, you know, we can’t get out ahead of this process. As I mentioned in my remarks, we’re engaged with the government now on getting the contractual arrangements in place for the overall program, stay tuned. What I also did say, though, is, look, it is a material contract for Telesat.

If and when we conclude, the arrangements with the government for ESCAPE, and again, our expectation is that’ll happen later this year, we will organize an investor call, and update our financial projections so that everyone can appreciate the impact it’s gonna have on the business. Anyway, that’s something that we’re committed to do.

David McFadgen, Analyst, ATB Cormark: Okay. Just to follow up on that, I mean, I was kind of surprised you say that because if you’re licensing or you’re allocating 25% of the network to Mil-Ka, then you’re losing that commercial opportunity, right, on the 25% you’re giving to Mil-Ka. I would’ve thought that the TAM or the forecast would kind of be the same, but you’re kind of implying that the forecast will actually be higher. Is that what you’re implying?

Dan Goldberg, President and Chief Executive Officer, Telesat Corporation: Well, I’d say, stay tuned. We do believe that the market that the Mil-Ka addresses is a very large market. As I again noted in my remarks, there are a number of governments around the world right now that are evaluating how to get a military Ka-band capability in LEO. We’re out there engaging with a lot of those folks now. Look, we think that ESCAPE, again, assuming we close the contract, will be meaningfully accretive to the company and our business plan and our outlook. Once those arrangements are done, yeah, we wanna get that out there and share it with the market.

Jericho, Conference Operator: Our next question comes from Edison Yu with Deutsche Bank. Your line is now open. Please go ahead.

Edison Yu, Analyst, Deutsche Bank: Hey, good morning, everyone. Thanks for taking our questions. Wanted to just clarify when you say an update on financial projections, is that basically you’re gonna give a update to those numbers you gave back in 2023, where you had, you know, like this Lightspeed, annual revenue, EBITDA? Is that what you mean that you’re gonna provide an update when you say that?

Dan Goldberg, President and Chief Executive Officer, Telesat Corporation: I’d say two things, Edison, and thanks for the question. One, we’ll update our guidance for the year to the extent that ESCAPE is impactful on the numbers for this year. That’s number one. Number two, to the extent that Lightspeed is used in connection with ESCAPE, yes, the financial projections that we have already made available to the market for Lightspeed, we would update those to the extent that the ESCAPE project incorporates a Lightspeed capability.

Edison Yu, Analyst, Deutsche Bank: Understood. Then follow up, just higher level, you know, if I think back to actually that same presentation on the TAM, so more high level. You obviously, you had this huge piece, I think it was 320 billion of enterprise, and I think the government part was actually a very, very small piece of that. I guess if we look at the situation now, would you say that that government piece, just from a TAM perspective, regardless if you add or subtract anything on your own, do you think that TAM is actually substantially bigger than you thought, you know, 2.5 years ago?

Dan Goldberg, President and Chief Executive Officer, Telesat Corporation: Yeah, I’d say a couple things about that. I can’t remember, just ’cause I don’t have that material in front of me. I can’t remember what we had estimated the government sort of defense TAM to be. For sure, I’d bet almost anything because that was done probably 24 months ago or something like that. For sure, I gotta believe that TAM will be meaningfully higher. You know, when we update our numbers, we’ll also be able to talk to investors about our expectation in terms of how the future revenue is going to be distributed across the various applications: government, aero, maritime, fixed broadband. My recollection is that the current plan has our kind of government defense revenues around 15% in the out years of that forecast.

My expectation is when we update it, given what we’re seeing in the market, given the change to military Ka-band for Lightspeed, that those government defense revenues will be a much more meaningful portion of our projected Lightspeed revenues, in light of the changes that we’re seeing and the addition of Mil-Ka to the network.

Thank you very much.

Thank you.

Jericho, Conference Operator: Again, if you would like to ask a question, please press star one to raise your hand. Our next question comes from Chris Quilty with Quilty Space. Your line is now open. Please go ahead.

Chris Quilty, Analyst, Quilty Space: Thank you. Dan, what are your thoughts on the Globalstar Amazon tie-up? Are you impacted in any way, directly or indirectly?

Dan Goldberg, President and Chief Executive Officer, Telesat Corporation: I don’t think it, I mean, we certainly watched it with interest and it, you know, there were certainly a lot of rumors in the market before the deal was announced. It’s more tangential, obviously, to what we do. We certainly weren’t surprised by it. And it certainly puts Amazon, you know, kind of more on that same trajectory in terms of focus as, you know, the moves that Starlink has made with their recent spectrum purchases. But I don’t think it’s something that really has a direct impact on our business, Chris.

Chris Quilty, Analyst, Quilty Space: Fair enough, I’d agree. The other thing I wanted to dial into was your terminal strategy. You know, we’ve seen some activity in the market. ALL.SPACE was just acquired by York Space Systems and, you know, Stellar Blu Solutions by Gilat Satellite Networks before that. When you look at your strategy in terms of using either Telesat supplied modules and then having ODMs to manufacture them, do you feel like you’re in the right place now given the timing of the constellation? We’ve seen, you know, challenges certainly with OneWeb and their launch of having terminals available, timeliness.

Dan Goldberg, President and Chief Executive Officer, Telesat Corporation: Yeah, it’s a great question. I mean, frankly, there’s a very long answer, but I’ll try to give you the short answer. The short answer is I think we’re in an excellent spot right now. Frankly, I think having gone after OneWeb, for instance, we’ve probably captured some of the hard work that they had to do having, you know, come out a little bit earlier. Maybe just a couple of things. You know, the terminal strategy is overwhelmingly flat panel antennas for the user. Number one, the different verticals that we’re serving will, for the most part, have different flavors of those flat panel antennas.

You know, maritime, aero, and then there’ll be different antennas for commercial aero and for commercial jets. The government users will have a range of antennas, and some of those might be hardened to look after their requirements. Of course, there’ll be terminals for kind of terrestrial, you know, fixed broadband connectivity. What we’ve announced to date, we’ve announced cooperation with Intellian, and Intellian has done, you know, back to OneWeb. They’ve done good work already establishing a very capable factory line for producing flat panel antennas for the OneWeb constellation, and we’ve obviously been working with them to adapt the products for Ka-band. We’ve announced something with Kymeta, and they’re a very innovative provider as well. Farcast.

You know, we’ve made an investment in Farcast, and so have others like Gogo and Lockheed Martin. They’ve got a very innovative technology where they interleave the transmit and receive capabilities, which allows for a smaller form factor. They’re making great progress. All to say, you mentioned ALL.SPACE. You know, what’s interesting about them is the government users are quite familiar with them, and they’ve got capabilities. Everything that I talked about just up until now has all been about a Ka-band, including Mil-Ka, in many instances. The ALL.SPACE antennas can do a range of frequencies, which some of the government users will prioritize for certain of their applications. Anyway, all to say, yeah, we feel good about it.

Again, our strategy is we’ll work with a couple of the antenna manufacturers, and our focus is to try to get the volumes up as high as possible because the higher the volumes are, the lower the unit cost. For the flat panel antennas. It’s also the case that, you know, the network’s open, and so government users, for instance, if they have their own, you know, desired user terminals, we can certify those to operate on the network as well. They’re not in kind of a closed ecosystem where we limit their choices in terms of who they can work with.

Chris Quilty, Analyst, Quilty Space: Gotcha. Final question, I know you said the gateway build out is sort of on track, but I think in the past you had talked about, you know, potentially looking at ways to bring in third-party financing for the ground segment. Can you give a update on that?

Dan Goldberg, President and Chief Executive Officer, Telesat Corporation: I’ll just say that, you know, our the base case plan that we’re executing on is that we fund our gateway rollout, and the financing that we have in place is sufficient to fund the landing stations around the world to support the network. That’s the base case and that’s what we’ve been doing up until now, and we’ve announced some of the gateways in Canada, in Europe, in Australia, and we’ve got more in the pipeline. It is the case that we would consider, working, you know, with a third-party company to change the model a little bit where they would fund some of that, and we would just simply become a customer.

I mean, it’s already the case that all of us, whether that’s OneWeb or SpaceX or Amazon, all of us are using, to some extent, third-party sites, right? Whether we, you know, own whether these companies own the antennas at that site, you know, that’s one thing, but it’s almost always the case that all of us building out these global gateways are working with third parties at some level to host antennas, to host racks of equipment, and whatnot. The next question is, would we go a step further and actually work with a third party who would fund, you know, some of those components, the antennas and whatnot? I’d say that’s something that’s still under consideration.

We would only do it, you know, obviously, if we had confidence that a third party could deliver the capabilities at the level in terms of reliability, security, resiliency that we require for the network, number one. Two, if it’s, you know, obviously, somebody that has to have, you know, a strong financial, wherewithal, and then somebody that can meet other considerations around sovereignty, security, you know, that sort of perspective. That’s where we are right now. To date, it’s been just as originally, conceived. We’re doing it on our own right now.

Jericho, Conference Operator: Our next question comes from James Ratcliffe with New Street Research. Your line is now open. Please go ahead.

James Ratcliffe, Analyst, New Street Research: Yes, thank you very much. Yeah, Dan, I had questions interest about the kind of growth build up for Lightspeed, kind of outside of Canada and outside of the military opportunity. I’d just be really interested to hear you talk about kind of when you go out and start speaking to customers, how are you seeing the kind of competitive dynamic with other offerings out in the market from people like Starlink, kind of Amazon Leo, TeraWave. What feedback are you picking up in the market about the competitive dynamics? Thank you.

Dan Goldberg, President and Chief Executive Officer, Telesat Corporation: No, thanks. Maybe a couple of things. For sure, you know, Starlink is, you know, at this point, far ahead of everyone else in terms of having a highly capable LEO network that’s serving these various verticals, you know, in many the same ones that we’re focused on, plus they do obviously B2C as well. More out there in the market, you know, I’d say they’ve become, in many instances, a benchmark for the users in these different verticals, and I think it’s a great network and that they have a great service. The market is competitive. Amazon Leo is coming. They’re out there in the market promoting their services and their capabilities.

They’re not as far along as Starlink in terms of service readiness, but they’re, you know, we’re seeing and hearing them out in the market, and they want an important Aero deal, you know, within the last quarter. They want an opportunity with Delta. I’d say TeraWave, that’s not, you know, really a network that we’re hearing a lot about at this moment in time out there in the market. I’d say the good news about Starlink being out there is they’ve demonstrated how impactful an advanced LEO network is, and as a result, there is significant receptivity to having other players in the market, more competition and whatnot.

I’d say, you know, beyond that, what we’re hearing is, you know, look, and we know this, in order to be successful, we’re gonna need to compete on some mix of quality of service, price, and customer support going forward. There are some other features, you know, in our network. We’re out there offering a Layer 2 service that, you know, is absolutely compatible with the mobile network operators and the telcos standards in terms of metro, you know, MEF standards, and the like. We’ve developed our APIs in a way that makes it very seamless for the telcos and the mobile network operators to integrate our capability kind of with their network backbone and whatnot.

What we are hearing is a significant amount of receptivity to Telesat LightSpeed, provided that it is cost competitive and we can meet all these service capabilities that they are looking for. I will say maybe one other thing is because we are not a B2C provider as well, we are not seen as a competitor in these markets. I think when some of the operators show up, they are oftentimes competing with the incumbent operators in these different countries. They are taking rural broadband subs. Their direct-to-device networks might end up competing for mobile network subscribers as well. That is not our posture when we come into these markets. We are really looking to be a supplier to the incumbent operators and just trying to help them be more competitive in what is a very dynamic, fast-moving market.

James Ratcliffe, Analyst, New Street Research: Great. Yeah, that’s great color. Thank you.

Dan Goldberg, President and Chief Executive Officer, Telesat Corporation: Yeah, I’d say that deal that we announced with Northwestel last month is, you know, an indication of how Lightspeed can offer a service that’s transformative for rural broadband users, but working with a long-standing telco that’s been operating, you know, in that case, in the market of Nunavut for decades. We think it’s a model that works.

James Ratcliffe, Analyst, New Street Research: Great. Thank you, Dan.

Jericho, Conference Operator: There are no further questions at this time. I will now turn the call back to Dan Goldberg for closing remarks.

Dan Goldberg, President and Chief Executive Officer, Telesat Corporation: Okay. Well, thank you, operator, and thank you all for joining us this morning. We look forward to speaking with you again when we issue our second quarter numbers. Thanks again.

Jericho, Conference Operator: This concludes today’s call. Thank you for attending. You may now disconnect.