Mr. Dan Goldberg reports

TELESAT REPORTS RESULTS FOR THE QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 2023

Telesat Corp. has released its financial results for the three-month and nine-month periods ended Sept. 30, 2023. All amounts are in Canadian dollars and reported under international financial reporting standards (IFRS) unless otherwise noted.

"I am pleased with our financial and operating performance for the third quarter and first nine months of the year," commented Dan Goldberg, Telesat's president and chief executive officer. "We remain on track to meet our guidance and, as a result of our continued disciplined execution, delivered industry-leading adjusted EBITDA [earnings before interest, taxes, depreciation and amortization] margins, high-capacity utilization, a substantial contractual backlog of $1.5-billion and a cash balance of $1.8-billion. In addition, in the third quarter and subsequent period we strengthened our financial position by repurchasing debt with a cumulative face value of $195-million (U.S.), received the remaining C-band proceeds from our U.S. spectrum clearing efforts, and successfully completed in-orbit testing of our LEO [low-Earth orbit] 3 demonstration satellite."

Mr. Goldberg added: "Certainly the big development for Telesat in the third quarter was our news regarding Telesat Lightspeed, including the announcement in August that we selected MDA to be the prime satellite contractor for Telesat Lightspeed and that the program is now fully funded -- subject to concluding definitive funding agreements -- through global service delivery, followed by our announcement in September that we entered into a contract with SpaceX for 14 Falcon 9 rockets to launch the advanced Telesat Lightspeed satellites. The Telesat and MDA teams are making strong progress on moving the Telesat Lightspeed program forward, including ramping up staff and engaging with the supply chain. We firmly believe that 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."

For the quarter ended Sept. 30, 2023, Telesat reported consolidated revenue of $175-million, a decrease of 3 per cent ($5-million) compared with the same period in 2022. When adjusted for changes in foreign exchange rates, revenue declined 4 per cent ($8-million) compared with 2022. The decrease was primarily due to lower revenue from certain South American customers.

Operating expenses for the quarter were $50-million, a decrease of $6-million from 2022. When adjusted for changes in foreign exchange rates, operating expenses decreased by $7-million compared with 2022. The decrease was primarily due to lower non-cash share-based compensation, partially offset by higher costs associated with the procurement of third party satellite capacity required to support certain customer networks that could no longer be supported on Anik F2 once it commenced inclined operations.

Adjusted EBITDA for the quarter was $133-million, a decrease of 3 per cent ($4-million) or, when adjusted for foreign exchange rates, a decrease of 5 per cent ($7-million). The adjusted EBITDA margin was 75.9 per cent, compared with 76 per cent in the same period in 2022.

For the quarter ended Sept. 30, 2023, Telesat's net loss was $3-million compared with a net loss of $229-million for the same period in the prior year. The positive variation was principally due to a positive variation in foreign exchange gain (loss) on the conversion of U.S.-dollar debt into Canadian dollars and a gain on its repurchase of debt.

For the nine-month period ended Sept. 30, 2023, Telesat reported consolidated revenue of $538-million, a decrease of 3 per cent ($14-million) compared with the same period in 2022. When adjusted for changes in foreign exchange rates, revenue declined 5 per cent ($29-million) compared with 2022. The decrease was mainly due to a reduction of revenue from one of Telesat's North American DTH customers and lower revenue from certain South American customers, partially offset by an increase in revenue from certain mobility customers.

Operating expenses for the nine-month period were $155-million, a decrease of $24-million from 2022. When adjusted for changes in foreign exchange rates, operating expenses decreased by $27-million compared with 2022. The decrease was primarily due to lower non-cash share-based compensation and lower insurance costs. This was partially offset by higher costs associated with the procurement of third party satellite capacity required when Anik F2 commenced inclined operations and higher equipment costs related to sales to Canadian government customers.

Adjusted EBITDA for the nine-month period was $410-million, a decrease of 4 per cent ($19-million) or, when adjusted for foreign exchange rates, a decrease of 7 per cent ($30-million). The adjusted EBITDA margin was 76.2 per cent, compared with 77.6 per cent in the same period in 2022.

For the nine months ended Sept. 30, 2023, Telesat's net income was $545-million compared with a net loss of $172-million for the same period in the prior year. The positive variation was principally due to U.S. C-band clearing proceeds recognized in the second quarter of 2023 combined with a positive variation in foreign exchange gain (loss) on the conversion of U.S.-dollar debt into Canadian dollars and a higher gain on the repurchase of debt.

Business highlights:

• Launch of LEO 3 demonstration satellite:
  • In July, 2023, Telesat launched its LEO 3 demonstration satellite, which has successfully completed in-orbit testing;
  • The LEO 3 satellite features Ka- and V-band payloads and will provide continuity for customer and ecosystem vendor testing campaigns following the decommissioning of Telesat's phase 1 LEO satellite.
• MDA satellite agreement:
  • Telesat announced on Aug. 11, 2023, that space technology company MDA has been contracted to build the advanced satellites for the Telesat Lightspeed LEO program. Telesat also announced that Telesat Lightspeed is now fully financed through global service delivery, taking into account the company's own equity contribution, certain vendor financing, and aggregate funding commitments from its Canadian federal and provincial government partners;
  • The finalization of the Canadian federal and provincial government funding is dependent on a number of conditions, including the conclusion of definitive agreements.
• SpaceX launch agreement:
  • On Sept. 11, 2023, Telesat announced that it had entered into a launch agreement with SpaceX for 14 launches on SpaceX's Falcon 9. These launches will carry up to 18 Lightspeed satellites per launch from SpaceX's launch facilities in California and Florida.
• C-band spectrum cleared:
  • On June 30, 2023, the Wireless Telecommunications Bureau of the U.S. Federal Communications Commission (FCC) completed its validation of Telesat's phase II certification of accelerated C-band clearing activities in the 3.7-gigahertz band and confirmed Telesat was eligible to receive its second accelerated relocation payment of $259.6-million (U.S.);
  • An amount of $344.9-million ($259.6-million (U.S.)) was recognized during the three months ended June 30, 2023, and was recorded under other operating gains (losses), net, and the payments were received in the three months ended Sept. 30, 2023.
• Debt repurchase:
  • For the three months ended Sept. 30, 2023, and subsequent period, Telesat repurchased, or agreed to repurchase, debt with a cumulative principal amount of $195.3-million (U.S.) for an aggregate cost of $137.4-million (U.S.);
    • Combined with the debt repurchases completed in 2022, Telesat has repurchased, or agreed to repurchase, a cumulative principal amount of $587-million (U.S.) for an aggregate cost of $332.7-million (U.S.).
• At Sept. 30, 2023:
  • Telesat had contracted backlog for future services of approximately $1.5-billion (excluding contractual backlog associated with Telesat Lightspeed). Fleet utilization was 86 per cent.

2023 financial outlook:

• Telesat continues to expect its full-year 2023 revenues (assuming a foreign exchange rate of $1 (U.S.) per $1.35) to be between $690-million and $710-million.
• Telesat continues to expect its adjusted EBITDA (assuming a foreign exchange rate of $1 (U.S.) per $1.35) to be between $500-million and $515-million in 2023.
• For 2023, Telesat continues to expect its cash flows used in investing activities to be in the range of $175-million to $225-million.

Telesat's quarterly report on Form 6-K for the quarter ended Sept. 30, 2023, has been filed with the United States Securities and Exchange Commission (SEC) and the Canadian securities regulatory authorities, and may be accessed on the SEC website and on the SEDAR+ website.

Conference call

Telesat has scheduled a conference call on Monday, Nov. 6, 2023, at 10:30 a.m. ET to discuss its financial results for the three-month and nine-month periods ended Sept. 30, 2023. The call will be hosted by Mr. Goldberg, president and chief executive officer, and Andrew Browne, chief financial officer, of Telesat.

Dial-in instructions

The toll-free dial-in number for the teleconference is 1-800-806-5484. Callers outside of North America should dial 1-416-340-2217. The access code is 6781821 followed by the number sign. Please allow at least 15 minutes prior to the scheduled start time to connect to the teleconference. In the event of technical issues, please dial star 0 and advise the conference call operator of the company name (Telesat) and the name of the moderator (Michael Bolitho).

Webcast

The conference call can also be accessed as a listen-in only. A replay of the webcast will be archived on Telesat's website under the investors tab.

Dial-in audio replay

A replay of the teleconference will be available one hour after the end of the call on Nov. 6, 2023, until 11:59 p.m. ET on Nov. 20, 2023. To access the replay, please call 1-800-408-3053. Callers from outside North America should dial 1-905-694-9451. The access code is 9727290 followed by the number sign.

About Telesat Corp.

Backed by a legacy of engineering excellence, reliability and industry-leading customer service, Telesat is one of the largest and most successful global satellite operators. Telesat works collaboratively with its customers to deliver critical connectivity solutions that tackle the world's most complex communications challenges, providing powerful advantages that improve their operations and drive profitable growth.

Continuously innovating to meet the connectivity demands of the future, Telesat Lightspeed, the company's low-Earth orbit satellite network, will be the first and only LEO network optimized to meet the rigorous requirements of telecom, government, maritime and aeronautical customers. Telesat Lightspeed will redefine global satellite connectivity with ubiquitous, affordable, high-capacity links with fibre-like speeds.

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