Telesat Secures $2.54B Funding for Lightspeed, Reports Strong Adjusted EBITDA in Q3 2024

Telesat, one of the world’s largest and most innovative satellite operators, announced its financial results for the three and nine-month periods ending September 30, 2024. All amounts are in Canadian dollars and reported under International Financial Reporting Standards (IFRS) unless otherwise noted.

The third quarter showed strong progress in our build-out of Telesat Lightspeed, our state-ofthe-art Low Earth Orbit (LEO) constellation. During the quarter, we concluded our funding arrangements with the governments of Canada and Quebec, securing the financial resources necessary to fund the global Telesat Lightspeed network. Telesat Lightspeed will revolutionize broadband connectivity for enterprise and government users and represents a highly compelling growth and value creation opportunity for Telesat and its stakeholders. In addition to focusing on the Telesat Lightspeed build-out, we continue to show disciplined execution in managing our existing business. We are on track to meet or exceed our 2024 guidance and generated an 80% Adjusted EBITDA margin1 in our GEO segment, with a substantial contractual backlog2 of $1.0 billion.

– Dan Goldberg, President and CEO, Telesat

For the quarter ended September 30, 2024, Telesat reported consolidated revenue of $138 million, a decrease of 20.9% ($37 million) compared to the same period in 2023. When adjusted for changes in foreign exchange rates, revenue declined 21.6% ($38 million) compared to 2023. The decrease was primarily due to a reduction of services and lower rate on the renewal of a longterm agreement with a North American direct-to-home television customer and to non-renewals and reductions on renewal of services by certain mobility and Latin American customers. Operating expenses for the quarter were $46 million, a decrease of $4 million from 2023.

The impact from foreign exchange was minimal. The decrease was primarily due to lower non-cash share-based compensation and higher capitalized engineering related to Telesat Lightspeed, partially offset by higher bad debt expense, professional fees, and increased headcount in our LEO segment. Adjusted EBITDA1 for the quarter was $96 million, a decrease of 27.5% ($37 million) or 28.6% ($38 million) when adjusted for foreign exchange rates. The Adjusted EBITDA margin1 was 69.5%, compared to 75.9% in the same period in 2023. Telesat net income for the quarter was $68 million compared to a net loss of $4 million for the same period in the prior year.

The change was primarily due to a gain associated with the impact of changes in foreign exchange rates during the quarter on the value of our US dollar denominated debt, compared with a loss in the same period in 2023. For the nine-month period ended September 30, 2024, Telesat reported consolidated revenue of $443 million, a decrease of 17.7% ($95 million) compared to the same period in 2023. When adjusted for changes in foreign exchange rates, revenue declined 18.3% ($98 million) compared to the same period in 2023.

The decrease was primarily due to a reduction of services and lower rate on the renewal of a longterm agreement with a North American direct-to-home television customer, non-renewals and reductions on renewal of services by certain mobility and Latin American customers, and lower equipment sales to Canadian government customers.

Operating expenses for the nine-month period were $149 million, a decrease of $5 million from 2023. The impact from foreign exchange was minimal. The decrease was primarily due to lower non-cash share-based compensation and higher capitalized engineering related to Telesat Lightspeed, partially offset by higher bad debt expense, professional fees, and increased headcount in our Lightspeed group. Adjusted EBITDA 1 for the nine-month period was $310 million, a decrease of 24.4% ($100 million) or 25.3% ($104 million) when adjusted for foreign exchange rates.

The Adjusted EBITDA margin1 was 70.0%, compared to 76.2% in the same period in 2023. For the nine months ended September 30, 2024, Telesat’s net income was $145 million compared to net income of $544 million for the same period in the prior year. The change was primarily due to the recognition of C-band clearing income in 2023.

The business highlights of the report are as follows:

• On September 13, 2024, Telesat announced that Telesat LEO Inc. (a wholly-owned unrestricted subsidiary) had completed funding agreements with the Government of Canada and the Government of Quebec for its highly advanced Telesat Lightspeed LEO broadband satellite constellation.
  – The loans are for a total of $2.54 billion, with $2.14 billion from the Government of Canada and $400 million from the Government of Quebec.
  – The loans carry an interest rate of 4.75% above the Canadian Overnight Repo Rate Average (CORRA), with a 15-year maturity, and interest payable in-kind during the Telesat Lightspeed construction period, followed by a 10-year sculpted amortization.
  – The Government of Canada and Government of Quebec will receive warrants to purchase 10% and 1.87%, respectively, of Telesat LEO Inc. based upon a US$3 billion equity valuation.
• At September 30, 2024:
  – Telesat had contracted backlog2 for future services of approximately $1.0 billion (excluding revenue commitments associated with Telesat Lightspeed).
  – Fleet utilization was 73.3%.
• Debt Repurchase:
  – To date in 2024, Telesat has repurchased US$262 million of debt for an aggregate price of US$119 million (including US$5 million in accrued interest). Combined with the debt repurchases completed in 2022 and 2023, Telesat has repurchased a cumulative principal amount of US$849 million for an aggregate cost of US$459 million (including US$12 million in accrued interest).